World Bank: Nigeria’s Reforms Boost Stability, But Living Standards Lag

Nigeria’s economy is showing clear signs of stabilization following a series of bold policy reforms, according to the latest Nigeria Development Update (NDU) released by the World Bank. The report, titled “From Policy to People: Bringing the Reform Gains Home,” commends the Nigerian government for taking critical steps to restore macroeconomic stability and improve fiscal discipline, but warns that economic progress has yet to meaningfully improve living standards for millions of citizens.

The NDU highlights improvements in growth, fiscal health, and external balances but underscores persistent challenges such as high food inflation, widespread poverty, and weak social protection systems that continue to constrain inclusive development.

Economic Growth Strengthens as Reforms Take Hold

According to the World Bank report, Nigeria’s gross domestic product (GDP) grew by 3.9% year-on-year in the first half of 2025, compared to 3.5% during the same period in 2024. This growth was driven by a robust performance in the services and non-oil sectors, as well as moderate gains in agriculture and oil production, following years of disruptions in the petroleum industry.

The country’s external position also improved markedly, with foreign reserves surpassing $42 billion and the current account surplus rising to 6.1% of GDP, buoyed by higher non-oil exports and reduced oil imports. Meanwhile, the fiscal deficit remains contained at 2.6% of GDP, and public debt is projected to decline from 42.9% to 39.8% of GDP—the first reduction in more than a decade.

The report attributes these gains to reforms in foreign exchange management, subsidy rationalization, and fiscal consolidation, which have begun to restore investor confidence and reduce distortions in the economy.

Persistent Poverty and Soaring Food Prices

Despite the improving macroeconomic indicators, the World Bank warns that many Nigerians are not yet feeling the benefits. Inflation—particularly food inflation—remains alarmingly high, eroding purchasing power and pushing vulnerable households deeper into hardship.

The report notes that poor households, which spend up to 70% of their income on food, have seen the cost of a basic food basket rise fivefold between 2019 and 2024. This surge has been driven by a combination of currency depreciation, insecurity in food-producing regions, inadequate storage and transport infrastructure, and restrictive trade policies.

“Macroeconomic stability alone is not enough,” said Mathew Verghis, World Bank Country Director for Nigeria. “The true measure of success will be how these reforms improve the daily lives of Nigerians—especially the poor and vulnerable.”

Three Urgent Priorities for Inclusive Growth

To ensure the benefits of stabilization reach ordinary Nigerians, the World Bank identifies three critical priorities for the government and its partners:

1. Tackling Food Inflation: Nigeria must remove trade barriers such as import bans and excessive tariffs that distort food supply, while investing in agricultural productivity through better seeds, fertilizer access, irrigation, and logistics. Enhancing transport, storage, and cold-chain infrastructure will be essential to stabilize prices and prevent post-harvest losses.

2. Improving Public Spending Efficiency: The report calls for greater fiscal transparency and accountability, emphasizing the need to strengthen Federation Account (FAAC) governance and reduce leakages. It recommends the creation of a national fiscal pact that aligns spending priorities with development goals—particularly in health, education, and infrastructure.

3. Expanding Social Protection Systems: To protect the poorest Nigerians, the World Bank urges the institutionalization of regular, domestically financed cash transfers and the development of a shock-responsive safety net that can cushion households during economic crises or natural disasters.

Inflation and Food Insecurity Remain the “Biggest Tax on the Poor”

The NDU highlights that while inflation is expected to gradually ease, it will likely remain elevated through 2026, posing continued risks to welfare and consumption. “Food inflation is the biggest tax on the poor,” said Samer Matta, World Bank Senior Economist for Nigeria. “Tackling it requires coordinated action on monetary policy, trade, and agricultural value chains.”

Persistent insecurity in farming regions, power shortages, and inadequate transport infrastructure continue to hinder food production and distribution—problems the report says must be addressed urgently to avoid deepening social discontent.

Outlook: From Stabilization to Shared Prosperity

The World Bank projects Nigeria’s economy to grow 4.2% in 2025, accelerating modestly to 4.4% by 2027, driven primarily by services, agriculture, and non-oil industries. However, the pace of job creation and poverty reduction will depend on whether reforms translate into productive investments, lower inflation, and improved governance.

While the report acknowledges the bold fiscal and monetary reforms implemented since 2023—such as exchange rate unification, subsidy reform, and tighter monetary policy—it stresses that their social dividends must be delivered swiftly to maintain public confidence.

A Call for Sustained Reform and Human-Centered Policies

The NDU concludes that Nigeria’s journey from stabilization to shared prosperity hinges on the government’s ability to bridge the gap between policy and people. The World Bank emphasizes that reforms must be inclusive, transparent, and sustained—ensuring that gains in growth and fiscal health translate into better livelihoods, education, and healthcare for citizens.

As Verghis put it, “The Nigerian government has taken bold steps to stabilize the economy, and these efforts are beginning to yield results. The next phase must focus on ensuring that every Nigerian—particularly the poor and vulnerable—feels the impact of these reforms in their daily lives.”