The World Bank has urged the Nigerian government to adopt better fiscal management of the nation’s revenue by moving the profits from the removal of the fuel subsidy to the Federation Account, noting that despite removing the subsidy completely in 2024, the government just began transferring to the account in January 2025. In its Nigeria
The World Bank has urged the Nigerian government to adopt better fiscal management of the nation’s revenue by moving the profits from the removal of the fuel subsidy to the Federation Account, noting that despite removing the subsidy completely in 2024, the government just began transferring to the account in January 2025.
In its Nigeria Development Update (NDU), a biannual report that addresses Nigeria’s economic progress and performance index, titled “Building Momentum for Inclusive Growth,” the World Bank said the country must pay more attention to fiscal responsibility in spending its expenses.
This follows the removal of the fuel subsidy by President Bola Tinubu during his inauguration on May 29th, 2023. In subsequent remarks, the president stated that the purpose of removing the fuel subsidy was to strengthen the country’s economy by using the funds generated from this action to implement developmental projects.
According to the report, the Nigerian National Petroleum Company Limited (NNPC), which is responsible for the country’s oil and gas, has not been consistent with the transparent transfer of funds to the Federation account. The report also explains that the organisation decided to use any remaining net arrears rather than remitting the entire amount, and it is essential for sound fiscal management to channel the full benefits of subsidy reform to the Federation.
“First, it is essential to ensure that the full revenue gains from the removal of the PMS subsidy—estimated at 2.6 per cent of GDP in 2024—are transferred to the Federation. Despite the subsidy being fully removed in October 2024, NNPCL started transferring the revenue gains to the Federation only in January 2025
“Since then, it has been sending only half of these gains to the Federation, using the other half to pay off past debts. It is very important to clear any remaining debts and ensure that the full benefits of subsidy reform go to the Federation for good financial management. Additionally, closely watching how the 2025 budget is carried out is crucial because it has very high revenue expectations and could lead to a bigger budget shortfall than expected.”
“The budget aims to boost capital spending, and this must be done sustainably, within the broader objective of fiscal consolidation to complement monetary policy and achieve an overall policy mix that maintains fiscal discipline and brings down inflation. Third, sustained efforts to enhance expenditure efficiency and transparency are crucial for maximising developmental outcomes.
“This responsibility lies not only with the federal government but especially with states, which now receive more revenue (N13.8 trillion in 2024) than the federal government (₦12.3 trillion). Risks to the outlook are largely tilted to the downside. Domestically, these include political considerations as the 2027 general elections draw closer and potential social tensions that could weaken reform impetus and jeopardise recent advances and unfavourable weather shocks,” the report says.
The World Bank also praised the country’s economic development, noting that since the publication of its most recent report in October 2024, economic developments in Nigeria have been broadly positive, but the country must consolidate macroeconomic stability and ignite inclusive growth through deeper, broader structural reform.
The report also pointed out the potential impacts of the 2027 general elections on the country’s economy. “These include political considerations as the 2027 general elections draw closer and potential social tensions which could weaken reform impetus and jeopardise recent advances; unfavourable weather shocks; rising insecurity in farming areas; and setbacks in oil production “Globally, negative impacts of international trade and geopolitical shifts could also weigh on the outlook. Heightened uncertainty could tighten financial conditions as well as lower oil prices and, accordingly, oil exports and revenues.”
Responding to the report, the Coordinating Minister of Economy, Mr Wale Edun, has expressed his commendation for the World Bank for its support for the country, as he reaffirmed the country’s commitment to private-sector-led growth.
A statement released by Mohammed Manga, the director of information and public relations for the minister of economy, maintained that investment that grows the economy, creates high-quality jobs, and lifts Nigerians out of poverty explains further, stating, “As Nigeria builds momentum for inclusive growth, the government’s commitment to private-sector-led development and the World Bank’s support underscore a promising future for the country’s economy. With sustained investment and prudent policy decisions, Nigeria is poised to unlock its vast potential and drive sustainable growth.”
