Nigeria’s economy expanded by 4.2% in the first half of 2026, while state government revenues increased by 93% in real terms between 2023 and 2025, according to the World Bank’s latest Nigeria Development Update released on October 8, 2026. The report, titled Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities, attributed the economic improvement largely to growth in the services sector and a stronger contribution from agriculture. According to Reuters, the World Bank said reforms introduced since 2023, including the removal of the petrol subsidy, foreign exchange adjustments and stronger revenue administration, had improved public finances and expanded the resources available to state governments. Nigeria’s first-half growth also exceeded the 3.9% recorded in the corresponding period of 2025 and the 3.5% achieved in the first half of 2024, signalling an improvement in economic activity.
The increase in state revenues has translated into higher public expenditure, with aggregate state spending rising by approximately 92% in real terms between 2023 and 2025. The World Bank reported that capital expenditure’s share of total state spending increased from 46% to 61%, with transport infrastructure accounting for the largest increase, alongside additional investment in housing and agriculture. However, the report highlighted an imbalance in spending priorities, noting that education’s share of total expenditure declined from 14.9% in 2021 to 12.1% in 2025, while health spending remained broadly stable at around 7%. Social protection spending increased from 1.4% to 4.4% over the same period. In its coverage of the findings, BusinessDay highlighted concerns that states were directing a larger proportion of additional resources towards physical infrastructure than human capital development. World Bank Country Director for Nigeria, Mathew Verghis, said improved spending efficiency, accountability and service delivery would be critical to ensuring that increased public revenues deliver better outcomes for citizens.
Looking ahead, the World Bank projects that Nigeria’s economy will grow by an average of 4.4% annually between 2026 and 2028, with inflation expected to decline gradually towards 12% by 2028 and poverty beginning to ease. The country’s external position has also strengthened, with the current account surplus reaching $12 billion, equivalent to 7.1% of GDP, in the first half of 2026, compared with $8.6 billion a year earlier. Gross external reserves exceeded $54 billion in September, supported partly by foreign portfolio inflows, according to the bank. Nevertheless, higher fuel prices and seasonal food pressures have slowed the decline in inflation, leaving households and businesses exposed to persistent cost pressures. ChannelsTv reported that Finance Minister Taiwo Oyedele credited recent reforms with helping stabilise the economy, while emphasising the need for private sector-led growth and job creation. For Nigeria, the central challenge is now to convert stronger economic indicators and increased government revenues into productive employment, improved public services and sustainable gains in living standards.
