Nigeria’s economy grew by 4.2 per cent in the first half of 2026, while increased revenues gave states greater room to expand infrastructure spending, according to the World Bank’s latest Nigeria Development
Update.
Aggregate state revenues also rose by about 93 per cent in real terms over the period, while expenditure increased by about 92 per cent.
The report, titled “Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities,” said growth improved from 3.9 per cent in the corresponding period of 2025 and 3.5 per cent in 2024.
Services accounted for much of the expansion, supported by a stronger contribution from agriculture. The improvement helped stabilise the poverty rate for the first time since 2019, although elevated inflation continued to erode household purchasing power.
The World Bank said Nigeria’s economic performance had strengthened across growth, public finances and the external position, but stressed that sustained reforms and better public services were necessary to spread the benefits.
Between 2023 and 2025, gross federation revenues increased by 69 per cent in real terms, largely reflecting exchange-rate reforms, the removal of the petrol subsidy and stronger revenue administration.
States recorded the largest increase in federation revenue flows. Beyond higher statutory allocations, they benefited from refunds, the settlement of longstanding federal obligations, dedicated intervention funds and stronger Value Added Tax collections.
The additional resources supported higher capital spending, whose share of total state expenditure rose from 46 per cent to 61 per cent. Transport infrastructure recorded the largest increase, alongside substantial spending growth in housing, agriculture and other investments intended to support economic expansion.
However, spending on education, health and social protection grew more slowly than spending on economic infrastructure.
Education’s share of total expenditure fell from 14.9 per cent in 2021 to 12.1 per cent in 2025, while health spending remained broadly stable at around seven per cent. Social protection’s share increased from 1.4 per cent to 4.4 per cent over the same period.
World Bank Country Director for Nigeria, Mathew Verghis, said the revenue gains presented an opportunity to improve essential services and support job creation.
“The bold macroeconomic reforms have substantially increased fiscal revenues at the state level, providing a unique opportunity to improve infrastructure, education, healthcare, and water services, which are critical to creating more and better jobs,” Verghis said.
“Strengthening spending efficiency, accountability, and service delivery will be essential to ensuring that public resources improve the lives of Nigerians.”
The report also highlighted the mixed impact of the Middle East conflict on Nigeria’s economy.
Higher oil prices strengthened export earnings, helping the current account surplus rise to $12 billion, equivalent to 7.1 per cent of GDP, in the first half of 2026. This compared with $8.6 billion, or 6.7 per cent of GDP, a year earlier.
Oil price increases also lifted fiscal revenues, although existing commitments under forward oil sales and oil-backed financing arrangements limited the gains.
Gross external reserves exceeded $54 billion in September, supported largely by foreign portfolio inflows, while reforms improved the functioning of the foreign exchange market.
However, higher fuel prices following the onset of the conflict, alongside lean-season food price pressures, slowed progress in reducing inflation.
Headline inflation had fallen from 27.6 per cent in January 2025 to 15.2 per cent in December of that year, supported by tight monetary policy and reduced exchange-rate volatility.
The World Bank projected average economic growth of 4.4 per cent between 2026 and 2028, with inflation expected to ease gradually to about 12 per cent by 2028 and poverty beginning to decline.
It said stronger spending efficiency, improved internally generated revenue and greater accountability at the state level would be essential to translating higher public revenues into better living standards.
