World Bank Urges Nigerian Government to Deepen Reforms and Enforce Fiscal Discipline for Economic Stability

The World Bank has advised the Nigerian government to sustain its ongoing economic reforms and adopt stricter fiscal discipline to ensure long-term stability, enhance investor confidence, and reduce macroeconomic vulnerabilities. The global financial institution emphasized that Nigeria’s economy, while showing signs of gradual recovery, remains fragile due to persistent inflation, a weak fiscal framework, and heavy dependence on oil revenues.

According to the latest assessment from the World Bank’s Nigeria Development Update (NDU) report, the government’s reform agenda—particularly the removal of fuel subsidies, foreign exchange unification, and efforts to boost non-oil revenue—has laid the groundwork for more sustainable growth. However, the report noted that the success of these measures depends largely on the government’s ability to strengthen fiscal management, control spending, and improve transparency in public finance.

The World Bank commended the Federal Government for making bold decisions aimed at stabilizing the economy, including steps taken by the Central Bank of Nigeria (CBN) to unify the exchange rate system and curb speculative activities in the foreign exchange market. It, however, warned that the benefits of these reforms could be undermined if fiscal leakages, inefficiencies in public spending, and inadequate social protection measures persist.

It further stressed that fiscal discipline is critical in managing the country’s rising debt levels, which have continued to increase despite recent revenue improvements. The report projected that without stronger fiscal controls, Nigeria’s debt service costs could crowd out capital investments and essential social spending. The Bank urged the government to prioritize revenue diversification and adopt a data-driven approach to budgeting and expenditure monitoring.

Speaking on the state of inflation, the World Bank highlighted that price pressures have remained high, driven by food costs, energy expenses, and currency depreciation. It recommended targeted policy interventions to protect vulnerable households and stimulate agricultural productivity, which would help reduce food inflation—a key driver of Nigeria’s overall inflation rate.

The report also advised the government to enhance coordination between fiscal and monetary authorities to achieve price stability and foster a conducive environment for private sector-led growth. It stated that inconsistent policy implementation and overlapping mandates among government institutions often weaken reform outcomes and discourage foreign direct investment.

In its recommendations, the World Bank called for the acceleration of key structural reforms, including the digitalization of tax administration, reduction of tax exemptions, and broadening of the tax base to increase revenue collection efficiency. It also encouraged the government to strengthen anti-corruption frameworks, improve governance, and ensure that public funds are directed toward growth-oriented sectors such as infrastructure, education, healthcare, and energy.

The report noted that Nigeria’s fiscal deficit remains one of the highest in Africa, largely due to overdependence on oil revenues, limited tax compliance, and high recurrent expenditure. To address this, the Bank suggested that Nigeria implement expenditure rationalization, plug revenue leakages, and improve the performance of state-owned enterprises, particularly in the oil and power sectors.

World Bank Country Director for Nigeria, Shubham Chaudhuri, reiterated the institution’s commitment to supporting Nigeria’s reform efforts. He acknowledged that the government has shown determination in implementing difficult but necessary policies, but urged that reform momentum must not slow down. According to him, “Reforms must be consistent, transparent, and inclusive. The focus should be on ensuring that fiscal consolidation efforts do not disproportionately impact the poor and vulnerable.”

Chaudhuri also underscored the importance of improving public sector efficiency, noting that the successful execution of Nigeria’s Medium-Term Expenditure Framework (MTEF) would help reduce waste and improve accountability. He added that the country must prioritize efficiency in capital projects and reduce duplication of government functions that lead to inflated administrative costs.

The World Bank further called for reforms in the energy sector, particularly in electricity generation and distribution. It emphasized that reliable and affordable power supply is central to Nigeria’s economic competitiveness and industrial growth. The Bank noted that energy subsidies and inefficiencies continue to strain public finances and limit investment in renewable energy sources.

In addition, the institution advised the Nigerian government to expand social safety nets to cushion the impact of economic reforms on low-income households. It recommended that part of the savings from fuel subsidy removal be redirected to targeted social programs, including conditional cash transfers, education support, and healthcare funding for the poor.

The World Bank’s analysis also pointed out the need for stronger collaboration between the federal and state governments in driving fiscal reforms. It noted that states play a crucial role in revenue generation and expenditure management, and therefore must align their fiscal policies with national economic priorities to achieve sustainable growth.

Experts within the financial sector have backed the World Bank’s recommendations, stressing that fiscal discipline and transparency are essential to restoring investor confidence and stabilizing Nigeria’s macroeconomic environment. They believe that with consistent reforms, Nigeria can attract more foreign investment, strengthen its non-oil sectors, and achieve inclusive growth.

The Bank also commended the Nigerian government for progress made in public finance reforms, such as the automation of the Treasury Single Account (TSA) and the implementation of the Integrated Payroll and Personnel Information System (IPPIS). It, however, emphasized that further reforms are required to improve efficiency and eliminate loopholes that encourage corruption and mismanagement of public resources.

In conclusion, the World Bank reiterated its support for Nigeria’s economic transformation agenda and pledged continued technical and financial assistance to the government. It expressed optimism that with strong political will, effective implementation of fiscal reforms, and greater accountability, Nigeria could achieve macroeconomic stability, reduce poverty, and position itself for sustainable growth over the next decade.

The global lender’s latest message reinforces a broader call for Nigeria to move beyond dependence on oil revenues and embrace disciplined fiscal management as the foundation for long-term prosperity.