The World Bank has called on the Federal Government of Nigeria to sustain the pace of its ongoing economic reforms by tightening fiscal and monetary policies, improving transparency in public finances, and consolidating gains from key measures such as fuel subsidy removal and foreign exchange unification.

In its latest Nigeria Development Update released on Wednesday, the global financial institution acknowledged Nigeria’s substantial stabilisation progress since 2023 but cautioned that early gains could be reversed without disciplined implementation, clear communication, and stronger institutional accountability.

The October 2025 edition of the report, titled ‘From Policy to People: Bringing the Reform Gains Home,’ presents fiscal, monetary, and structural recommendations to ensure that Nigeria’s fragile recovery transitions into sustainable and inclusive growth.

The World Bank urged the Central Bank of Nigeria (CBN) to sustain a tight monetary stance by maintaining positive real interest rates and avoiding the monetisation of fiscal deficits.

“Maintain reliance on the Monetary Policy Rate to control naira liquidity, complemented by open market operations and standing facilities,” the report recommended. “Publish monthly statements of assets and liabilities, particularly to indicate no monetisation of fiscal deficits.”

It further encouraged the CBN to preserve flexibility in the foreign exchange market, describing it as a shock absorber essential for Nigeria’s resilience to global economic fluctuations.

“Implement and communicate a clear exchange rate policy and a systematic framework for FX intervention,” it added.

On the fiscal side, the World Bank urged Nigeria to strengthen non-oil revenue mobilisation by modernising tax administration and closing leakages.

It recommended measures such as e-invoicing, enhanced tax audits, and the introduction of modern property tax systems at the state level.

To expand the nation’s revenue base, the bank advised raising health-related taxes and gradually increasing Value Added Tax (VAT) to align with ECOWAS standards.

It also called for clearing pending federal audit backlogs (2022–2024) to boost fiscal transparency, as well as conducting a forensic audit of the Nigerian National Petroleum Company Limited (NNPCL) and revising public procurement and auditing laws.

“The deregulation of the petroleum sector should be maintained to ensure competitiveness,” the report stated, while also recommending that the government finance electricity subsidy arrears and adopt a cost-reflective tariff with targeted subsidies for low-income households.

The World Bank also advised the government to enhance budget credibility by exercising fiscal discipline.

It urged Nigeria to “adopt realistic budget assumptions, cut non-essential spending such as vehicle purchases and training, and reduce ad-hoc deductions at FAAC to ensure subnational fiscal stability.”

This recommendation aligns with President Bola Tinubu’s directive in August to halt the practice of revenue-generating agencies deducting operational costs at source a system the government described as opaque and unsustainable.

The report criticised the excessive revenue retention by key agencies such as the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and Niger Delta Development Commission (NDDC), noting that their autonomy had grown disproportionately compared to peers in other African nations.

According to the report, the FIRS retains 4% of all non-oil gross revenues, including VAT, corporate income tax, and electronic money transfer levies.

The NCS retains 7% of customs and excise collections and 2% of VAT revenues, while the RMAFC receives 0.5% of non-oil revenues. The NUPRC retains 4% of royalties, and the NDDC takes 3% of gross VAT revenues.

More significantly, the NNPCL and the Frontier Exploration Fund are entitled to 30% of Production Sharing Contract revenues, a system the World Bank described as “fiscally inefficient and opaque.”

In contrast, the report noted that peer countries maintain leaner structures for example, Kenya’s Revenue Authority receives only 1–2% of approved annual targets, with an additional 3% only if it exceeds them, while agencies in Uganda, Ghana, and South Africa are funded directly through parliamentary appropriations, ensuring stronger oversight.

“The current Nigerian system, where multiple agencies draw directly from revenue collections, undermines transparency and budget discipline,” the World Bank warned.

On Nigeria’s foreign exchange market, the report acknowledged that recent reforms have improved liquidity and transparency but noted that the naira remains vulnerable due to the country’s narrow export base and reliance on short-term capital inflows.

It called for a shift toward long-term and sustainable inflows from oil, remittances, and especially non-oil exports. “The government must focus on attracting longer-term foreign exchange inflows and diversifying the export base,” it said.

The report praised reforms such as exchange rate unification, FX backlog clearance, and interbank market digitisation for restoring investor confidence.

It also cited the CBN’s decision to allow the naira to depreciate modestly during oil price volatility in April 2025 as evidence of improved flexibility and policy maturity.

By mid-2025, Nigeria’s current account balance had improved, posting a 6% surplus of GDP in the first quarter, driven by higher exports, reduced fuel imports, and resumed local refining.

However, remittance inflows slightly declined due to global economic headwinds.

Despite the progress, the World Bank cautioned that inflationary pressures and interest rate gaps with the United States could erode competitiveness if not managed effectively.

It urged the CBN to communicate its FX intervention policies consistently and manage foreign reserves prudently to sustain confidence.

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