Food, transport costs threatening gains of Nigeria’s economic reforms –World Bank

By Chinwendu Obienyi

Nigeria’s fragile economic recovery is yet to translate into meaningful relief for millions of households as soaring food, transport and energy costs continue to erode the benefits of recent government reforms, the World Bank warned on Thursday.

While reforms aimed at stabilising the economy have improved growth, strengthened external reserves and eased inflation, the World Bank said the gains remain threatened by persistent cost-of-living pressures that are hitting poor and vulnerable Nigerians hardest.

Speaking at the launch of the latest Nigeria Development Update (NDU) in Abuja, World Bank Country Director for Nigeria, Mathew Verghis, said the country had made important progress in restoring macroeconomic stability but still faced the difficult task of ensuring that the recovery translated into better living conditions for households.

According to the report, Nigeria’s economy expanded in the second quarter of 2026, with real GDP growth reaching 0.5 per cent, as the post-reform recovery continued. Headline inflation also eased to 15.4 per cent in August, after a temporary acceleration earlier in the year linked partly to geopolitical tensions in the Middle East.

“The uptick in growth has allowed the poverty rate to stabilise after a continuous rise since 2019,” Verghis said, adding that the country’s external position had improved while foreign exchange markets remained resilient.

However, he warned that the improvement in headline economic indicators should not obscure the pressures still confronting ordinary Nigerians.

Global conflicts, elevated international food and fertiliser prices and higher domestic energy and transportation costs, he said, have created a difficult environment in which gains from economic reforms could be undermined by rising household expenses.

The policy challenge, therefore, is to safeguard the gains from stronger oil receipts and protect vulnerable Nigerians from burning price pressures,” Verghis said.

The warning comes against the backdrop of the government’s far-reaching reforms since 2023, including the removal of the petrol subsidy, exchange-rate reforms and efforts to improve tax collection and government revenues.

While these measures have helped strengthen public finances and improve some macroeconomic indicators, their immediate impact on household purchasing power has remained painful, particularly for low-income families whose incomes have struggled to keep pace with the cost of basic necessities.

The World Bank’s latest assessment therefore presents Nigeria’s recovery as a race between improving economic fundamentals and the ability of households to withstand the continuing rise in the cost of living.

A major focus of the report is also the fiscal position of Nigeria’s 36 states, which have benefited from increased federation revenues following the reforms.

The World Bank noted that states had used the additional resources to expand transport infrastructure, reduce domestic debt and moderately increase spending on education and healthcare. However, it warned that fundamental weaknesses in state finances remain a major threat to sustainable development.

Federation transfers accounted for 65 per cent of aggregate state revenues between 2021 and 2025, rising above 75 per cent in more than half of the states in 2025.

At the same time, internally generated revenue remains narrowly based and insufficient to cover recurrent expenditure in all but two states, the report said.

This means that the spending capacity of most state governments remains heavily dependent on federally shared revenues and, ultimately, developments in the oil market.

Verghis said states therefore remain vulnerable to fluctuations in oil prices and federation revenues, making stronger internally generated revenues essential for protecting public services during periods of economic shock.

“States are central to public service delivery in Nigeria. They carry primary or shared responsibility for education, healthcare, roads, agriculture and power.

“Their fiscal capacity and how they manage public resources have far-reaching implications for Nigeria’s development future”, he said.

The World Bank acknowledged progress in fiscal transparency, noting that states have increasingly published audited financial statements, debt reports and budget implementation data.

But it urged state governments to go beyond transparency and ensure that increased revenues translate into visible improvements in public services.

The bank called for stronger budget predictability, improved cash and commitment controls, tighter public investment management and deeper efforts to expand internally generated revenue.

For Nigeria, the challenge now extends beyond achieving higher GDP growth or reducing inflation. The World Bank’s message is that the success of the reform programme will ultimately be judged by whether ordinary Nigerians can feel its benefits in their daily lives.

As food, transport and energy costs continue to consume a large share of household incomes, protecting vulnerable Nigerians while sustaining macroeconomic reforms will remain one of the biggest tests of the country’s economic recovery.