Nigeria’s economy grew by 4.2 per cent in the first half of 2026, while state governments recorded a 93 per cent increase in revenue 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, found that increased public revenue had enabled states to expand capital investment, particularly in transport infrastructure, housing and agriculture. However, the findings also showed that education received a smaller share of state expenditure despite the overall increase in available funds.
The World Bank said Nigeria’s real gross domestic product (GDP) growth improved from 3.9 per cent in the first half of 2025 and 3.5 per cent in the corresponding period of 2024 to 4.2 per cent in the first six months of 2026. Services remained the principal driver of growth, supported by a stronger contribution from agriculture.
The figures indicate an improvement in economic activity, although the growth rate alone does not establish that households have experienced a corresponding increase in purchasing power or living standards. The bank noted that inflation remained elevated and continued to put pressure on household finances.
The increase in state revenue was particularly pronounced. Aggregate revenue across the states rose by approximately 93 per cent in real terms between 2023 and 2025, while expenditure increased by 92 per cent. These figures are adjusted for inflation using 2019 prices, meaning they represent an increase in purchasing power rather than simply higher naira amounts.
The World Bank attributed the improved revenue position partly to reforms introduced since 2023, including the removal of the petrol subsidy, foreign-exchange reforms and stronger revenue administration. Higher statutory allocations from the Federation Account also contributed, alongside VAT collections, refunds and the settlement of outstanding federal obligations to states.
The additional resources appear to have influenced spending priorities. Capital expenditure accounted for 61 per cent of total state spending in 2025, compared with 46 per cent previously. Transport infrastructure recorded the largest increase, while spending on housing, agriculture and other economic investments also expanded.
However, the report raised questions about the balance between infrastructure investment and social services. Education’s share of total state expenditure fell from 14.9 per cent in 2021 to 12.1 per cent in 2025. Health spending remained broadly stable at around seven per cent, while social protection’s share increased from 1.4 per cent to 4.4 per cent.
The figures concern the proportion of budgets allocated to these sectors; they do not necessarily mean that the absolute amount spent on education declined. The World Bank said spending on education, health and social protection increased in absolute terms, but grew more slowly than spending on economic infrastructure.
The findings put renewed emphasis on how state governments manage the additional funds available to them. The World Bank said higher revenues offer an opportunity to improve roads, schools, healthcare facilities, water supply and other public services, but warned that the benefits would depend on how efficiently the money is spent.
Mathew Verghis, the World Bank’s Country Director for Nigeria, said improved accountability and public-service delivery would be essential to ensuring that increased government revenue translates into better living conditions and more employment opportunities.
The report also highlighted improvements in Nigeria’s external position. The country’s current-account surplus reached $12 billion, equivalent to 7.1 per cent of GDP, in the first half of 2026, compared with $8.6 billion, or 6.7 per cent of GDP, in the same period a year earlier. Gross external reserves also exceeded $54 billion in September, supported partly by foreign portfolio investment inflows.
Higher global oil prices contributed to increased export earnings and government revenue, although the World Bank noted that existing commitments under forward oil sales and oil-backed financing arrangements limited some of the fiscal gains. Meanwhile, higher fuel costs and seasonal food-price pressures slowed the progress made in reducing inflation, leaving households exposed to continued cost-of-living pressures.
The bank projects that Nigeria’s economy will grow by an average of 4.4 per cent annually between 2026 and 2028. It expects inflation to decline gradually towards 12 per cent by 2028, with poverty beginning to fall if reforms continue and public-service delivery improves. These are projections, not guaranteed outcomes.
The latest assessment builds on the World Bank’s earlier warnings that economic stabilisation has yet to translate fully into improved living standards for many Nigerians. TheDailyNewsHub previously reported on the bank’s concerns about the persistence of poverty despite economic reforms in its article, “Poverty threatens 79% of Nigerians despite reforms – World Bank”.
The October report’s central message is that increased public revenue creates room for development, but the results will ultimately depend on whether governments convert the additional resources into effective infrastructure, stronger human capital, better public services and sustainable job creation.