Save oil windfall for rainy day-World Bank urges Nigeria

The World Bank has prescribed some policy responses for Nigeria in the wake of the ongoing conflict in the Middle East, including fiscal discipline, rebuilding fiscal buffers, and saving from the oil windfall for the rainy day.

The outbreak of the conflict, which pitted Iran against the United States of America and Israel, had seen oil prices shoot above $100 per barrel, higher than Nigeria’s budgeted benchmark price of $64.85.

Presenting the April 2026 edition of Nigeria Development Update (NDU), titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development,” in Abuja, Tuesday, World Bank Lead Economist for Nigeria, Fiseha Haile, stated that the country’s gross revenues had increased due to economic reforms.

Haile added that more revenues were expected from higher oil prices linked to the Middle East conflict.

He said the NDU report recommended a cocktail of policy responses for Nigeria to manage the oil windfall and reduce inflationary pressures stemming from the Middle East conflict.

Such policy responses bordered on fiscal discipline, monetary and foreign exchange (FX) policy, and what the report described as market functioning.

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On fiscal discipline, Haile said the World Bank admonished Nigeria to save for the rainy day, rebuild fiscal buffers, and adopt targeted social protection, not blanket subsidies.

Regarding monetary and FX interventions, the bank urged the Central Bank of Nigeria (CBN) to keep an appropriate monetary policy, anchor inflation expectations, absorb shocks, limit interventions, and ensure FX flexibility, while providing clear, consistent signals to anchor expectations.

The report also called on the Nigerian authorities to restore competition in the supply of premium motor spirit (PMS) or petrol by reopening imports, and to reduce pump prices.

The World Bank equally called for the easing of supply constraints, and a reduction in tariffs, as well as lifting of import bans on certain items (including on intermediate inputs).

The April NDU, the first for 2026 of the usually comprehensive, twice yearly, thematic reports of the World Bank on the country, acknowledged that Nigeria had made meaningful progress in restoring macroeconomic stability.

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But Haile stated, “Inflation is still elevated and under increasing ⁠pressure, and that poses risks to incomes and poverty reduction.”

He equally pointed to the fact that Nigeria’s external buffers had improved, as foreign exchange reserves rose and volatility eased.

However, tighter global financing conditions still threatened inflows, borrowing costs, and remittances, the report stated.

Nigeria’s fiscal deficit widened slightly to 3.1 per cent of GDP in 2025, but remained lower than in pre-reform years, Haile said, adding that the debt to GDP ratio fell for the first time in a decade, buoyed by stronger fiscal performance and exchange rate valuation gains.