Nigeria states gain from higher revenues as World Bank flags spending priorities

Traders Union
All News
Financial Institutions
Nigeria state revenues and spending

Highlights

Nigeria's real GDP grows by 4.2% in H1 2026, up from 3.9% in 2025 and 3.5% in 2024, driven by services and agriculture.
Gross federation revenues rise 69% and aggregate state revenues grow 93% in real terms between 2023 and 2025, spurring a shift to infrastructure-led spending.
State capital expenditure rises to 61% of total by 2025, while education's share falls to 12.1%, health stabilizes at 7%, and social protection increases to 4.4%.

Growth rebound and state revenue shift

As reported by the World Bank, Nigeria’s latest Nigeria Development Update says real GDP grows by 4.2% in the first half of 2026, up from 3.9% and 3.5% in the corresponding periods of 2025 and 2024. Services drive much of the expansion, while agriculture also makes a stronger contribution, helping stabilize the poverty rate for the first time since 2019.

The report says the conflict in the Middle East is having mixed effects on the economy. Higher oil prices are supporting export earnings and lifting the current account surplus to $12 billion, or 7.1% of GDP, in the first half of 2026, from $8.6 billion, or 6.7% of GDP, a year earlier, while gross external reserves rise above $54 billion in September with support from foreign portfolio inflows and foreign exchange reforms.

At the same time, inflation remains elevated and continues to weigh on household purchasing power. After falling from 27.6% in January 2025 to 15.2% in December 2025, headline inflation slows its disinflation trend as higher fuel costs linked to the Middle East conflict and lean season food price pressures feed through the economy.

Infrastructure spending rises faster than social sectors

The update’s special focus examines how higher public revenues are changing state finances between 2023 and 2025. Gross federation revenues increase by 69% in real terms over that period, driven largely by exchange-rate reforms, the removal of the petrol subsidy and stronger revenue administration, with states receiving the biggest boost through higher statutory allocations, refunds, intervention funds and stronger VAT collections.

Aggregate state revenues rise by about 93% in real terms between 2023 and 2025, while expenditures increase by about 92%. Capital spending expands and its share of total expenditure climbs to 61% from 46%, led by transport infrastructure as well as higher spending on housing, agriculture and other growth-related investments.

Spending on health, education and social protection also increases, but at a slower pace than economic infrastructure. Education’s share of total expenditure falls to 12.1% in 2025 from 14.9% in 2021, health spending stays broadly stable at around 7%, and social protection’s share rises to 4.4% from 1.4%.

Mathew Verghis, World Bank country director for Nigeria, says the increase in state-level fiscal revenues creates an opportunity to improve infrastructure, education, healthcare and water services, but adds that stronger spending efficiency, accountability and service delivery are needed to ensure public resources improve living standards. The report also says states are making progress on fiscal reporting, transparency and internally generated revenue, while projecting average economic growth of 4.4% between 2026 and 2028, a gradual decline in inflation to about 12% by 2028, and a gradual easing in poverty.

Our earlier coverage of Nigeria’s bank recapitalisation drive explained how lenders were boosting Tier 1 capital and climbing in Africa’s Top 100 rankings, strengthening resilience despite a challenging domestic backdrop. We also noted that capital raising via the local market, including NGX-led platforms, was helping banks meet tougher regulatory requirements and improve their capacity to finance growth.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.