Increased pre-election spending could erode Nigeria’s reform gains – World Bank

The organisation advised that Nigeria’s fiscal policy must treat increased oil revenues as a temporary surge and avoid over spending on elections.

The World Bank has warned Nigeria about increased pre-election spending, saying it could undermine gains from recent fiscal reforms and higher oil revenues.

The bank issued the advice in its recently released Nigeria Development Update, cautioning the country to be prudent with its reforms gains to withstand external shocks.

In the report, the bank acknowledged that Nigeria’s economy strengthened in early 2026, driven by gains from recent stabilisation reforms, but insisted that poverty has yet to decline in the country.

It further advised that Nigeria’s fiscal policy must treat increased oil revenues as a temporary surge and avoid overspending on elections.

“Preserving recent stabilization gains will require a disciplined and well-calibrated policy response to manage the effects of the Middle East conflict.

“Fiscal policy should treat higher oil revenues as a temporary windfall, prioritizing the rebuilding of buffers over permanent spending increases, particularly in the run-up to elections.

“As stabilization gains are consolidated, continued policy discipline will be critical amid pre-election pressures and heightened global uncertainty,” the bank stated.

The World Bank explained that further pressures on commodity prices could result in using the revenue gains to support vulnerable households, advising tight monetary policy to contain inflation and absorb external shocks.

“If inflationary pressures intensify, part of the revenue gains could be used to support vulnerable households through targeted, time-bound cash transfers, while avoiding inefficient price controls or generalized subsidies.

“Monetary policy needs to remain tight to contain inflation, and exchange rate flexibility should be maintained to absorb external shocks, with interventions limited to smoothing excessive volatility,” the World Bank said.

PREMIUM TIMES earlier reported the bank’s projection that rising global oil prices could push Nigeria’s headline inflation up by about 3.1 percentage points, driven largely by transport and other energy-related costs.

To contain possible inflation, the bank advised the government to reduce trade tariffs on food, remove import surcharges, and restore competition in Premium Motor Spirit (PMS) markets.

“Easing supply-side constraints by reducing selected trade tariffs on food and key inputs, removing import surcharges, and restoring competition in the PMS market would also help moderate inflation,” the report stated.

The World Bank said clear and consistent policy communication will be essential to anchor expectations and sustain confidence amid an uncertain global environment.

Borrowing rates

In the development update report, the World Bank charged the Central Bank of Nigeria (CBN) to further reduce borrowing rates, saying efforts to reduce inflation will help focus on managing naira liquidity.

It added that the measures would help improve credit allocation, lower borrowing costs, and support the country’s economic growth.

“Lower inflation also creates scope to improve the effectiveness of monetary policy, including by gradually reducing banks’ cash reserve requirements, narrowing the gap between the Central Bank of Nigeria’s (CBN) lending and deposit facilities’ rates, and focusing open market operations on managing naira liquidity through short-term CBN bills.

“Reduced exchange rate volatility and positive real yields further create room to gradually allow banks to hold long net open FX positions and clarify the intervention framework, which would foster more organic exchange rate stability and reduce reliance on FPI and CBN FX flows.”

The World Bank stated that translating recent stabilisation gains into faster, sustained, and more inclusive growth will also depend on strengthening the business environment and efficiently investing in infrastructure and human capital.