By Iroyin Yoruba Television
The World Bank has projected that Nigeria's economy will grow by an average of 4.4 per cent annually between 2026 and 2028, while inflation and poverty are expected to gradually decline if the government sustains its economic reforms and improves the delivery of public services.
The projection was contained in the latest Nigeria Development Update released on Thursday, October 8, 2026, as the international financial institution assessed Nigeria's economic performance, public finances, state-level spending and the effects of ongoing reforms.
The World Bank said Nigeria's economy had remained resilient despite significant external pressures, recording real gross domestic product growth of 4.2 per cent in the first half of 2026.
That performance represents an improvement from growth rates of 3.9 per cent and 3.5 per cent recorded during the corresponding periods of 2025 and 2024 respectively.
According to the World Bank, services remained a major driver of economic growth, while agriculture also made a stronger contribution.
The stronger growth performance suggests that economic activity has continued to expand despite the pressures facing households and businesses.
However, the World Bank cautioned that economic growth alone will not automatically translate into improved living standards.
The institution said sustaining reform momentum, improving public-service delivery and creating conditions for private-sector investment and job creation would be essential if the benefits of stronger economic performance are to reach more Nigerians.
The latest assessment provides a mixed picture of the Nigerian economy.
On one hand, growth has strengthened, public revenues have increased and the country's external position has improved.
On the other hand, inflation remains elevated and continues to affect household purchasing power, while higher food and transportation costs are putting pressure on families.
The World Bank said the recovery in growth had helped stabilise Nigeria's poverty rate for the first time since 2019.
The development is significant because Nigeria's economic reforms have been accompanied by considerable adjustments in prices, exchange rates and the cost of living.
For households, the benefits of stronger macroeconomic indicators may take time to become visible in everyday life.
Economic growth can increase national output without immediately translating into higher household incomes, particularly when inflation remains high.
The World Bank therefore emphasised the importance of ensuring that increased public revenues are converted into better services, infrastructure and opportunities.
A major focus of the new Nigeria Development Update is the way higher government revenues have affected spending priorities at the state level.
The World Bank found that gross federation revenues increased by 69 per cent in real terms between 2023 and 2025.
The increase was attributed largely to exchange-rate reforms, the removal of the petrol subsidy and improvements in revenue administration.
States recorded the largest increase in federation revenue flows during the period.
The increase came through higher statutory allocations as well as refunds, settlement of longstanding federal obligations, dedicated intervention funds and stronger value-added tax collections.
The stronger revenue position has given state governments greater fiscal space.
According to the World Bank, aggregate state revenues increased by about 93 per cent in real terms between 2023 and 2025, measured using 2019 constant prices.
State expenditures also increased by about 92 per cent during the same period.
The figures indicate that states have been able to expand their spending as government revenues improved.
However, the World Bank's assessment also raises questions about how effectively those additional resources are being used.
Capital spending increased substantially, with its share of total state expenditure rising from 46 per cent to 61 per cent.
Transport infrastructure accounted for the largest increase in spending, while states also increased investment in housing, agriculture and other areas capable of supporting economic activity.
Spending on health, education and social protection also increased, although the growth in those areas was slower than the increase in spending on economic infrastructure.
The World Bank said education's share of total state expenditure declined from 14.9 per cent in 2021 to 12.1 per cent in 2025.
Health spending remained broadly stable at around 7 per cent, while social protection's share increased from 1.4 per cent to 4.4 per cent.
The figures demonstrate the different priorities states have adopted as additional revenues became available.
The World Bank said the increased fiscal space represents an opportunity for states to invest more effectively in infrastructure, education, healthcare, water services and other areas that can support the creation of jobs and improve living conditions.
However, the institution stressed that higher revenue alone is not sufficient.
States also need stronger expenditure management, accountability and service delivery.
If additional government revenue is not translated into effective public services, households may see limited improvement despite stronger government finances.
The World Bank therefore identified spending efficiency and accountability as important next steps for state governments.
Nigeria's economic outlook has also been affected by developments in international oil markets.
The conflict in the Middle East has contributed to higher oil prices, which have produced both positive and negative effects for Nigeria.
Higher oil prices have strengthened export earnings and contributed to a larger current-account surplus.
Nigeria's current-account surplus rose to $12 billion, equivalent to 7.1 per cent of GDP, in the first half of 2026.
That compares with $8.6 billion, or 6.7 per cent of GDP, during the corresponding period of the previous year.
Higher oil prices have also boosted government revenues.
However, the benefit has been moderated by existing oil pre-commitments associated with forward sales and oil-backed financing arrangements.
The increase in oil prices has also created pressure on domestic fuel costs.
The World Bank said higher fuel prices following the escalation of the Middle East conflict, combined with seasonal food-price pressures, temporarily slowed the disinflation process that had been underway since early 2025.
Inflation had fallen sharply from 27.6 per cent in January 2025 to 15.2 per cent in December 2025.
That improvement was supported by tighter monetary policy and reduced exchange-rate volatility.
However, the subsequent increase in energy costs and food prices has made further progress more difficult.
The World Bank said inflation remains elevated and continues to weigh on household purchasing power.
This means that even with stronger economic growth, many Nigerians may continue to feel financial pressure.
The difference between macroeconomic improvement and household experience remains one of the key challenges facing policymakers.
A stronger currency, higher reserves and increased government revenue can improve economic stability, but families still need affordable food, transportation, housing, healthcare and other essential services.
The World Bank therefore stressed the importance of making the benefits of economic reforms more widely shared.
Nigeria's external position has also strengthened.
Gross external reserves rose above $54 billion in September, supported in significant part by foreign portfolio inflows.
The stronger reserve position provides additional foreign-exchange buffers and can contribute to greater stability in the currency market.
The World Bank said ongoing reforms had also improved the functioning of the foreign-exchange market.
Foreign-exchange stability is important for businesses because large currency fluctuations can increase the cost of imported goods, machinery, raw materials and other inputs.
Greater stability can make business planning easier and reduce some of the uncertainty associated with foreign-exchange transactions.
However, Nigeria remains exposed to international financial and commodity-market developments.
Oil continues to play an important role in government revenues and foreign-exchange earnings, meaning changes in global energy prices can have significant consequences for the economy.
The World Bank's projection of average annual growth of 4.4 per cent through 2028 therefore depends partly on continued reform implementation and the country's ability to manage external shocks.
The institution also expects inflation to gradually decline to about 12 per cent by 2028.
If achieved, lower inflation could provide significant relief for households and businesses.
Lower inflation would mean that prices are increasing more slowly, although it would not necessarily mean that the prices of goods and services return to previous levels.
For households that have experienced several years of elevated prices, the distinction is important.
The government's challenge will therefore be to combine lower inflation with stronger economic growth, increased employment and improvements in household incomes.
The World Bank said poverty is also expected to begin gradually declining if reforms are sustained and living standards improve.
The relationship between economic growth and poverty reduction depends heavily on the quality and distribution of growth.
Growth that generates jobs and expands opportunities for small businesses and households is more likely to produce broad-based benefits.
The World Bank therefore emphasised private-sector-led growth and job creation as important components of Nigeria's economic outlook.
Private businesses require reliable infrastructure, predictable regulations, access to finance, functioning markets and stable macroeconomic conditions.
State governments also have an important role to play because infrastructure and public services can affect the cost of doing business.
The World Bank's findings on state spending therefore have implications for private investment.
Improved transport infrastructure can reduce logistics costs, while reliable water, healthcare and education services can strengthen human capital.
Agricultural investment can also improve productivity and strengthen food supply.
The institution said states had already increased spending on several of these areas, but emphasised that better spending efficiency and service delivery would be necessary.
Another important aspect of the report is the need to strengthen internally generated revenue.
Although states have benefited from higher federation allocations, improving internally generated revenue can make their finances more sustainable.
The World Bank said states have made significant efforts to improve fiscal reporting and transparency and expand internally generated revenue.
Continued improvement in these areas could reduce excessive dependence on federal transfers and give state governments more predictable resources for development programmes.
The report therefore presents Nigeria's current economic situation as one of progress combined with significant remaining challenges.
The economy is growing faster than it did during the corresponding periods of the previous two years.
Public revenues have increased, foreign reserves have strengthened and the external position has improved.
Yet inflation remains a major concern, household purchasing power is still under pressure and the benefits of higher government revenue have not automatically translated into equally strong improvements in all public services.
The World Bank's message is that maintaining reform momentum will be critical.
Economic reforms can create the conditions for greater stability, but their long-term success depends on implementation and on whether the resulting fiscal and economic gains are used effectively.
For Nigeria's state governments, the increase in revenue represents an opportunity to invest in infrastructure and human development.
For the Federal Government, the challenge is to maintain macroeconomic stability while addressing the pressures faced by households and businesses.
For private businesses, improved foreign-exchange conditions and stronger economic growth could create opportunities for investment if other constraints are also addressed.
For households, however, the most important indicators remain prices, employment, income and access to essential services.
The World Bank's latest forecast provides a more optimistic medium-term outlook for Nigeria, but it also makes clear that economic progress will need to be sustained and translated into tangible improvements in living standards.
The projected 4.4 per cent average growth through 2028 is therefore not a guarantee.
It depends on continued policy implementation, improved governance, effective public spending and the creation of conditions that encourage private investment and employment.
The institution's assessment also highlights the importance of avoiding complacency.
Higher oil revenues can strengthen public finances, but dependence on commodity prices remains a vulnerability.
Likewise, stronger foreign-exchange reserves provide protection against external shocks but do not eliminate the need for sound economic management.
Nigeria's economic performance in the coming years will depend on whether recent gains can be sustained while the country broadens its sources of growth.
The services sector, agriculture, manufacturing and other non-oil activities will remain important to reducing excessive dependence on petroleum revenues.
A broader economic base can provide more employment opportunities and make government revenues less vulnerable to fluctuations in international oil prices.
The World Bank has consequently called for reforms that support private-sector-led growth and job creation.
The institution also stressed the importance of public-service delivery.
Higher revenue should ultimately result in better roads, schools, hospitals, water systems and other services if economic reforms are to improve the daily lives of Nigerians.
As Nigeria moves toward 2027 and beyond, the ability of federal and state governments to convert increased fiscal resources into measurable improvements will be a major factor in determining whether the current economic recovery becomes more broadly felt.
The latest World Bank assessment therefore presents both an improved outlook and a continuing warning.
Nigeria has made measurable progress in growth, public revenues and external stability, but significant pressure remains on households.
The projected average growth of 4.4 per cent between 2026 and 2028 offers an opportunity to strengthen the economy further.
Realising that opportunity will require sustained reforms, disciplined public spending, stronger institutions, improved service delivery and continued efforts to create jobs.
For Nigerians, the ultimate measure of the economic recovery will be whether these improvements translate into greater purchasing power, more employment opportunities and better access to essential public services.
The World Bank's latest report suggests that the foundations for stronger growth are emerging, but maintaining those gains and ensuring that they are widely shared will remain the central economic challenge for Nigeria over the next several years.