High transport, food costs eroding economic reform gains for Nigerian households – World Bank warns

…says states IGR insufficient to cover basic operating costs

Soaring food and transportation costs are rapidly neutralising the benefits of recent economic reforms for millions of Nigerian households, leaving low-income families increasingly vulnerable, the World Bank has warned.

Speaking at the launch of the latest Nigeria Development Update (NDU), in Abuja on Thursday, Mathew Verghis, World Bank Country Director for Nigeria, noted that while structural reforms have strengthened the nation’s economic fundamentals, immediate cost-of-living pressures continue to weigh heavily on most household.

According to the update, Nigeria’s economy expanded in the second quarter of 2026, with real GDP growth reaching 0.5 percent as the steady post-reform recovery continued to gain momentum. Headline inflation also eased to 15.4 percent in August after a temporary spike earlier in the year caused by Middle East geopolitical tensions.

“The uptick in growth has allowed the poverty rate to stabilise after a continuous rise since 2019,” Verghis said. “The external position has also improved, while foreign exchange markets remain resilient.”

He however noted that global headwinds including Middle East conflicts and elevated international food and fertilizer prices have presented a double-edged sword.

Verghis explained that while higher crude oil prices and improved domestic food output boosted exports and public revenues, these gains were partially offset by rising domestic energy, transport, and food costs.

“The policy challenge, therefore, is to safeguard the gains from stronger oil receipts and protect vulnerable Nigerians from burning price pressures,” Verghis stressed.

A major focus of the latest report is the fiscal health of Nigeria’s 36 states, which have seen a significant windfall following the 2023 macroeconomic reforms, including exchange rate unification, the removal of the Premium Motor Spirit (PMS) subsidy, and improved tax collection.

The World Bank country director noted that even though states have used the influx of funds to expand transport infrastructure, lower domestic debt, and moderately increase outlays for education and health, structural fiscal weaknesses persist across state governments.

He explained that federation transfers still accounted for 65 percent of aggregate state revenues between 2021 and 2025, and over 75 percent in more than half of the states in 2025, while Internally Generated Revenue (IGR) remains narrowly based and insufficient to cover recurrent operational expenditures in all but two states.

Verghis emphasised that because IGR remain low, the spending capacity of most states remains directly exposed to global oil shocks and federated revenue fluctuations.

“The spending capacity of most states, therefore, remains exposed to fluctuations in the federally shared revenues. Moreover, internally, IGRs have been narrowly raised and insufficient to cover the current expenditure.

“States are central to public service delivery in Nigeria, they carry primary or shared responsibility for education, healthcare, roads, agriculture, and power. Their fiscal capacity and how they manage public resources have far-reaching implications for Nigeria’s development future,” he added.

While praising states for major strides in fiscal transparency, including the routine publication of audited financial statements, debt reports, and budget implementation data, the World Bank urged state leaders to convert higher budget allocations into tangible public services.

The Bank, however, stressed the need for more strengthened budget predictability, improved cash and commitment controls, tight public investment management, and deepened internal revenue generation.

Reaffirming the institution’s commitment to supporting state and federal initiatives, Verghis added that sustaining and deepening recent fiscal gains will require strong growth in internally generated revenues. “The World Bank stands ready to work alongside partners to help Nigeria unlock its immense potential and ensure growth creates better opportunities, especially for the poorest and most vulnerable.”(BusinessDay)