Nigeria’s Recovery Gains Pace as Higher State Revenues Put Public Services in Focus

Real GDP grew by 4.2% in the first half of 2026, compared with 3.9% during the same period in 2025 and 3.5% in 2024, driven mainly by services and a stronger contribution from agriculture.

Nigeria's economy is growing faster, and government revenues have strengthened, creating an opportunity to improve roads, schools, healthcare and other services that shape everyday life. The World Bank's latest Nigeria Development Update, Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities, examines whether the additional money reaching state governments is translating into spending that can improve living standards, as inflation continues to squeeze household budgets.

Real GDP grew by 4.2% in the first half of 2026, compared with 3.9% during the same period in 2025 and 3.5% in 2024, driven mainly by services and a stronger contribution from agriculture. The acceleration helped stabilize the poverty rate for the first time since 2019, marking a change after years of deterioration. Sustaining reforms and spreading the benefits of growth remain central to turning that stabilization into a lasting reduction in poverty.

Higher Oil Earnings Bring Gains and Household Pressure

The Middle East conflict has produced mixed results for Nigeria, with higher oil prices lifting export earnings and expanding the current account surplus to $12 billion, equivalent to 7.1% of GDP, in the first half of 2026. That compares with $8.6 billion, or 6.7% of GDP, a year earlier. Government revenues benefited, although oil already committed through forward sales and oil-backed financing arrangements limited the gains. Gross external reserves exceeded $54 billion in September, supported largely by foreign portfolio inflows, and reforms improved the functioning of the foreign exchange market.

For households, higher fuel prices have interrupted the progress toward lower inflation that began in early 2025. Headline inflation fell from 27.6% in January 2025 to 15.2% in December, helped by tight monetary policy and reduced exchange rate volatility. Fuel price increases following the conflict and seasonal food price pressures slowed further improvement, leaving families facing persistent pressure on their purchasing power despite the stronger national economic figures.

States Receive More Money and Prioritize Infrastructure

Gross federation revenues increased by 69% in real terms between 2023 and 2025, largely reflecting exchange rate reforms, petrol subsidy removal and stronger revenue administration. States recorded the largest increase in federation revenue flows, receiving higher statutory allocations, refunds, settlements of longstanding federal obligations, dedicated intervention funds and stronger VAT receipts. Aggregate state revenues rose about 93% in real terms, measured at constant 2019 prices, and expenditure increased roughly 92% over the same period.

States expanded infrastructure investment and strengthened their fiscal positions, with capital spending rising from 46% to 61% of total expenditure. Transport infrastructure recorded the largest increase, accompanied by substantial spending increases in housing, agriculture and other investments supporting growth. Health, education and social protection spending increased substantially in absolute terms but grew more slowly than economic infrastructure spending, raising questions about how states can balance construction projects with investment in people and essential services.

Better Services Will Determine What Recovery Delivers

Education's share of state expenditure fell from 14.9% in 2021 to 12.1% in 2025, health's share remained near 7%, and social protection's share increased from 1.4% to 4.4%. World Bank Country Director for Nigeria Mathew Verghis said higher revenues offer an opportunity to improve infrastructure, education, healthcare and water services that support better jobs. He stressed that spending efficiency, accountability and effective service delivery will determine whether those resources improve Nigerians' lives. States have strengthened fiscal reporting, transparency and internally generated revenue, with further improvements in spending efficiency and local revenue collection identified as important next steps.

The report projects average economic growth of 4.4% between 2026 and 2028, inflation gradually declining to about 12% by 2028 and poverty beginning to fall. Delivering those improvements will require continued macroeconomic reforms, stronger public services and conditions that allow private businesses to invest and create jobs, giving more households a meaningful share in the recovery.