The World Bank has called on the Nigerian government to sustain the pace of ongoing economic reforms by strengthening fiscal discipline, maintaining monetary tightening, and ensuring greater transparency in public financial management.
In its latest Nigeria Development Update (NDU) released on Wednesday, the global lender commended Nigeria for its “substantial progress in stabilisation” since 2023 but warned that the early gains could be reversed if reforms are not consistently implemented and well-communicated.
The October 2025 edition of the report, titled “From Policy to People: Bringing the Reform Gains Home,” emphasised the importance of moving from policy intent to tangible results that improve the lives of ordinary Nigerians.
World Bank Highlights Fiscal and Monetary Priorities
According to the World Bank, Nigeria’s fiscal and monetary authorities must act in concert to consolidate the country’s fragile recovery.
It advised the Central Bank of Nigeria (CBN) to maintain a tight monetary stance by ensuring positive real interest rates and avoiding the monetisation of fiscal deficits.
“Maintain reliance on the Monetary Policy Rate to control naira liquidity, complemented by open market operations and standing facilities,” the World Bank recommended.
“Publish monthly statements of assets and liabilities, particularly to demonstrate the non-monetisation of fiscal deficits.”
The institution also urged the CBN to sustain flexibility in the foreign exchange market, describing it as an essential “shock absorber” for the Nigerian economy.
It said maintaining a transparent and predictable FX policy would help anchor investor confidence and prevent speculative attacks on the naira.
World Bank Calls for Broader Revenue Mobilisation
On fiscal reforms, the World Bank noted that Nigeria’s revenue-to-GDP ratio remains among the lowest in the world, despite recent tax and subsidy reforms.
It urged the government to expand its non-oil revenue base by modernising tax administration and introducing digital tools to reduce leakages.
The bank recommended implementing e-invoicing systems, strengthening tax audits, and introducing modern property tax frameworks at the state level.
It further advised the federal government to increase health-related levies and gradually raise the Value Added Tax (VAT) rate to align with ECOWAS regional standards.
The World Bank also called for the completion of pending federal audits from 2022 to 2024 and the publication of audit results to enhance fiscal transparency.
It suggested a forensic review of the Nigerian National Petroleum Company Limited (NNPCL) and updates to public procurement laws to reduce wastage.
Maintaining Deregulation and Cost-Reflective Tariffs
Another key recommendation from the World Bank is the full deregulation of the petroleum sector to sustain competitiveness and attract private investment.
The report advised the government to clear outstanding electricity subsidy arrears and implement a cost-reflective tariff system that includes targeted subsidies for vulnerable households.
“The deregulation of the petroleum sector should be maintained to ensure competitiveness,” the report stated.
It also urged the government to adopt realistic budget assumptions, cut non-essential spending such as vehicle purchases and overseas training, and reduce ad-hoc deductions at the Federation Accounts Allocation Committee (FAAC) to ensure subnational fiscal stability.
Revenue Retention and Transparency Concerns
In one of its most striking observations, the World Bank criticised the current structure in which Nigerian revenue-generating agencies retain significant portions of collected funds.
It cited the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as examples of agencies whose self-retention practices have eroded budget transparency.
According to the report, the FIRS retains four per cent of all non-oil gross revenues, the NCS keeps seven per cent of customs and excise revenues, while the NUPRC retains four per cent of royalties from upstream petroleum operations.
This model, the World Bank warned, is “fiscally inefficient and opaque” compared to peer countries like Kenya and Ghana, where revenue agencies are funded through appropriations subject to parliamentary oversight.
“The current Nigerian system, where multiple agencies draw directly from revenue collections, undermines transparency and budget discipline,” the report said.
World Bank on Exchange Rate Stability and Inflation
The World Bank further assessed Nigeria’s foreign exchange management, noting improvements in liquidity and transparency since the unification of exchange rates and clearing of FX backlogs.
However, it cautioned that the naira’s long-term stability remains vulnerable due to Nigeria’s narrow export base and dependence on volatile capital inflows.
It urged the government to prioritise attracting sustainable inflows through non-oil exports, remittances, and increased local production.
“The government must focus on attracting longer-term foreign exchange inflows and diversifying the export base,” the World Bank said.
The report commended the CBN’s recent policy shift, particularly its decision to allow gradual currency adjustment during oil price fluctuations in 2025, which demonstrated “greater policy maturity and resilience.”
Outlook: Sustaining Reforms for Inclusive Growth
By mid-2025, Nigeria’s current account balance had posted a six per cent surplus of GDP, boosted by higher export volumes and the resumption of local refining.
Despite these gains, inflationary pressures remain elevated, while remittance inflows have declined slightly due to global economic headwinds.
The World Bank concluded that for Nigeria’s reforms to yield lasting results, policymakers must remain committed to transparency, credible communication, and institutional accountability.
It warned that any policy reversal could undermine investor confidence and delay recovery gains.
“Disciplined implementation, transparent reporting, and the strengthening of public institutions are critical to converting reform momentum into lasting prosperity,” the World Bank advised.
