Making Reforms Count for Most Nigerians
Postscript by Waziri Adio
It is still hard for most Nigerians to accept that the economy is in a better place. This is understandable. The economic reforms initiated by the President Bola Tinubu administration have decimated the purchasing power of a sizeable number of Nigerians. Even when prices are stabilising, and falling in a few instances, most basic items still cost double or triple what they went for just a little over two years ago. Expecting all Nigerians to start celebrating about emerging macro-economic stability may amount to urging them to deny the raw evidence from their everyday lives. That will not only be unrealistic but also unreasonable.
Yet two things can be true simultaneously. There is evidence that the necessary but painful reforms have started to yield some fruits at the macro level. These gains are manifesting in terms of growth in GDP rate, external reserves, trade surplus and government revenues; reduced volatility of exchange rates; and decline in fiscal deficit and inflation rate. Foreign portfolio investors and some Nigerians, especially the well-heeled, are also making a killing from the stock market and other investment vehicles. But the gains are not manifesting yet, or quickly enough, in the lives of most Nigerians, who are still going through the concentrated pains of adjustment.
The onus is on the government to ensure that growth and stability are more durable and, more importantly, that they translate to improved living conditions for most Nigerians. Economic growth without widespread improvement in welfare is inadequate at all times, but especially when policy interventions have led to widespread immiseration. When it comes down to it, the only yardstick that a majority of Nigerians will use to appraise the administration is the personal, as no one pays bills with GDP and related figures. Therefore, the urgent task before the managers of the economy is to create a convergence between macro gains and micro benefits or at least to narrow the yawning gap. This will involve some deliberate actions that will be potentially more difficult to execute and measure than the first generation of economic reforms.
The World Bank, through its latest Nigeria Development Update (NDU), has conducted another timely health check on the Nigerian economy and offered some actionable prescriptions. Presented at a well-attended ceremony in Abuja midweek, the October 2025 NDU is appropriately titled: “From Policy to People—Bringing the Reform Gains Home.” Indeed, policies have to be primarily about people’s welfare to make sense. The best argument for painful reforms is that the needed adjustments would eventually lead to marked reliefs for citizens. That is also the best insurance for such reforms. But when the reliefs fail to materialise or the pains linger, both the argument and the insurance become suspect.
In two sentences, the October 2025 NDU succinctly captured the duality and precarity of the country’s current economic reality: “Nigeria has made substantial progress on macroeconomic stabilisation… However, stabilisation gains have yet to substantially improve Nigerians’ livelihoods.” There you have it. As I have submitted previously, these two realities sit cheek-by-jowl, and there is no point denying either.
Many things caught my eye in the World Bank report, but I will dwell on just three that coincide with some of the points some of us have been making.
The first point is the indisputable fact that Federation revenue has ballooned on account of the Tinubu reforms. According to the World Bank, the gross Federation revenue for the first eight months of the year grew from N10.24 trillion in 2023 to N26.98 trillion in 2025. Despite a dip in oil prices, the Federation earned more than two and a half of the size of its revenue of just two years ago. This is not surprising. Petrol subsidy removal and Naira depreciation alone should bring more money to the table for the three tiers of government.
This buoyancy has rubbed off positively on fiscal deficit (4.2% of GDP in 2023 to projected 2.6% in 2025), debt-to-GDP (projected to decline from 49.2% in 2024 to 39.8% in 2025), debt service to revenue (projected to fall from above 80% in 2023 to slightly above 40% in 2025). In plain language, governments across tiers have had more money to play with and a greater fiscal headspace. The extra cash, the report adds, has made it easier for the governments to accommodate the extra spending necessitated by increase in minimum wage, interest payments by the Federal Government, and capital spending by the states.
But the picture is more nuanced. FG’s interest expense is projected to grow from 2.2% of GDP in 2024 to 2.9% in 2025, which might be an intimation of a worsening relationship between FG’s revenue and debt service. It is also noteworthy that deductions from gross FAAC revenue have been growing in both absolute and percentage terms. The report shows that FAAC deductions in the first eight months grew from N3.31 trillion in 2023 to N11.22 trillion in 2025, representing 32% and 42% of gross revenue respectively. The bulk of these deductions go to states as refunds and interventions. However, a substantial portion also goes to a few federal agencies as collection costs and earmarks, a point we will return to shortly.
The states are in the best fiscal position that they have ever been. A report by Agora Policy in July this year showed that the states overtook the FG as recipients of allocations from FAAC in 2024, with the states getting 37% of the distributable revenue against FG’s share of 35%. This has never happened before. But this is not the full picture, as the actual gap between FG and states is bigger. A re-allocation of the deductions to their ultimate beneficiaries by Agora Policy shows that in May 2025 the states received 50% of gross FAAC revenue compared to FG’s 35%. The paper explained how and why this happened.
The World Bank indicates that states are splurging their improved revenue on infrastructure, which ordinarily is not a bad thing (just that this could be at the expense of spending on health, education and poverty alleviation—areas that directly impact on citizens’ welfare). States’ capital spending is projected to rise to 2.7% of GDP in 2025 up from 1.2% in 2023. This is impressive. But it is worthy of note that, until last month, states were receiving N250 billion monthly as part of FAAC deductions. This is categorised as interventions to states for infrastructure and security, which is balanced with an equal amount received as interventions by the FG for security (N150 billion for non-regular allowances and N100 billion for the military). On account of our federal structure and the sensitive nature of security, oversight over these interventions is likely to be thin. It is conceivable that the World Bank depended on data from states’ budget implementation reports for capital spending at the subnational level. This is fair enough, but may mask the real reasons for the spike in states’ capex.
In any case, the extra revenue and spending across the board have not made a positive dent on the poverty numbers. The contrary has happened: poverty has worsened. In 2025, the percentage of Nigerians living in poverty is projected to increase to 139 million (or 61% of the population) from 81 million (or 40% of the population) in 2019. (By the way, this is the income poverty data, not the one on multi-dimensional poverty that was put at 133 million people in 2022.) The jump in income poverty is attributed to previous policy missteps and internal and global shocks, but accentuated by recent adjustments. There is also a marked increase in the number and percentage of the ultra-poor, defined as those “unable to meet basic caloric needs even if all income is spent on food.” The dissonance of rising poverty in the midst of historically high revenue and expenditure should keep policymakers up all night.
The data on poverty has crept under the skin of some government officials. But it makes perfect sense that more people would have been dragged into poverty on account of the massive depreciation of the Naira and high inflation, especially food inflation. Getting unduly defensive is of little utility here. The productive thing to do is to take the appropriate lesson: that there is serious and urgent work to be done.
The NDU rightly devotes ample space to the issue of high food prices, and this is my second key takeaway from the report. Food inflation is a major pain-point for most Nigerians, especially the poor, whose tribe is rapidly expanding. High food inflation should be the deepest source of worry for our policymakers. It puts the reforms, the administration and the country at serious risk. Having a growing army of people struggling to feed themselves is a tinderbox, awaiting a spark. We need to do whatever is necessary to make food available and affordable to most Nigerians. In fact, we need to have a national consensus that no Nigerian should ever go to bed hungry, then follow up with the appropriate and diligently executed policy measures.
We mouth commitment to food security often, but our food and fiscal policies have either been inadequate or totally wrongheaded, especially the ones devoted to prioritising farmers’ welfare over consumers’ welfare. In the name of incentivising local production, we ban importation of or put high tariffs on food items that we don’t produce enough of or have no comparative advantage in. This logically results in supply shortfall and higher prices, and guaranteed surplus cornered by the local producers or those licensed to import at the expense of the rest of the populace. Basically, we punish our people with high food prices, including farmers who are also consumers because no one can realistically grow everything they eat.
The NDU has some telling stats on this suboptimal approach. The first set of data shows that food inflation is consistently higher in Nigeria than in Benin, Cameroon, Chad and Niger, our immediate neighbours. Worse: food inflation has risen over five times faster in Nigeria since 2010 than in neighbouring countries. The second data shows that food inflation affects the poor more than the rich, which makes plenty sense since the poor spend most of their incomes on food and since the number of the ultra-poor has been rising. The World Bank calculated a weighted average of the prices of eight food items: rice, palm oil, groundnut oil, white beans, bread, beef, maize flour, and yam. These are “food items most consumed by the poor.” Interestingly and sadly, the average price for this basket (called CPI-FP) increased fivefold between 2020 and 2024, and faster than overall food inflation and headline inflation. “Prices of essential food items have risen even more than total food inflation,” the NDU grimly states.
The World Bank believes that removing import restrictions on food items alone could lift 1.3 million people out of poverty. It made other medium to long term prescriptions for tackling the existential crisis of food inflation and food insecurity in Nigeria. These include tackling the structural constraints to domestic productivity and supply, improving agricultural infrastructure, addressing insecurity, strengthening land tenure, and improving coordination and climate resilience. All of these will take time to germinate and bear fruit. But government needs to provide immediate relief on prices of basic food items here and now. This could mean government taking a cut on the revenue it earns on duties and tariffs on food imports.
The last major item that caught my eye in the World Bank report is the issue of collection costs and revenue earmarks for a few federal agencies. Agora Policy and I have written more than a bit about this strange practice. According to the NDU, the FAAC deductions that went to FIRS, Customs, NUPRC, NMDPRA and NEDC rose from N871 billion in 2023 to N1.79 trillion in 2024, an increase of 105% from one year to the other. The deductions were for costs of collection, refunds and transfers to the five agencies. Having looked at the figures intimately, I can confirm for free that the more than doubling of deductions in favour of these agencies was more of a windfall from Naira depreciation than from extra effort by them. The NDU reveals that these five agencies received deductions higher than the revenues of most states. In 2024, only three states had revenues higher than the FAAC deductions for just FIRS: Lagos, Delta and Akwa Ibom. You may want to read that again, and slowly too.
The NDU further indicates that the N1.79 trillion received by the five agencies surpassed the budgetary allocations to federal ministries with mandates related to poverty alleviation such as education (N1.59 trillion), health and social welfare (N1.34 trillion) and humanitarian affairs and poverty alleviation (N263 billion). Using the example of Ghana, Kenya, South Africa and Uganda, the World Bank reinforces the fact that the allocation to Nigeria’s revenue agencies is outrageously high and that granting a fixed percentage of revenue collected or of revenue handles to some government agencies is not a universal practice. In most countries, including African countries, revenue agencies are funded according to their established needs, not through a fixed percentage that they will always find ways to exhaust. The case has been well-made about how the practice of collection cost and revenue retention leads to gross misallocation of scarce resources and enables waste, opacity and even graft.
The Federal Executive Council (FEC), chaired by President Tinubu, on 13th August this year approved for a comprehensive review to be undertaken on collection costs and revenue retention practices. The review is targeted at “increasing public savings, boosting spending efficiency, and providing more resources to finance growth.” This is long overdue. It is indeed heartening that the World Bank has added its voice to this important issue and has demonstrated how these deductions hamper the capacity of the current government to bring home the gains of its painful but necessary reforms to the Nigerian people. I expect the overly-resourced, well-connected and politically-savvy agencies to push back with all the means at their disposal. But it appears the Overton window has shifted on this issue. It is only a matter of when, not if; and also, of how far the decisionmakers are ready to go.
