Don’t Spend Windfall, World Bank Advises Nigeria Government

The World Bank or the “Bank” has advised the Nigeria government not to spend the windfall or excess revenue from the spike in crude oil price following geopolitical tensions in the Middle East.

Following the airstrikes by the United States and Israel on Iran facilities that led the closure of the Strait of Hormuz, a sea where 20-25 percent of global oil tankers pass, crude oil prices have risen above $100/per barrel, which is well above Nigeria’s 2026 budget benchmark of $64.85/per barrel.

This increment in price is expected to bolster the revenue of a country where over 60 percent of the population of 200 million live in poverty and transformative reforms have exacerbated the already anemic position of the impecunious consumers who are despondent.

Of course, the government of Africa’s largest oil producer is notorious for fiscal recklessness such as frivolous spending and corruption, which is significantly responsible for high poverty rates. And perhaps more worrisome is that policymakers are oblivious that crude oil price is volatile and that the tide changes quickly.

It will be recalled that the last time the country enjoyed such oil windfall was during the gulf war of early nineties when the United States locked horns with Iraq. However, monies or gains from skyrocketing crude oil prices were misappropriated and siphoned by a ravenous government.

The Bank’s fiscal message are as follows:

• Building reserve to cushion against future crash in price: The Bank recommends rebuilding reserves to cushion against future commodity price.
• Windfall revenue channeled towards vulnerable households: With the vast majority of the population living below the World Bank’s $1.90 per person per day, windfall revenues must be targeted at the most vulnerable and structured with defined sunset clauses.
• Blanket fuel and food subsidies will undermine reforms credibility: Broad price controls or blanket fuel and food subsidies would undermine the reform credibility built since 2023 and create fiscal rigidities that are difficult to unwind.

“Nigeria’s 2023–2025 fiscal improvement was driven by revenue reform, not expenditure discipline; if the windfall is absorbed by spending expansion rather than buffer-building, the consolidated fiscal deficit could widen materially from its current 3.1% of GDP, with direct implications for domestic borrowing costs and sovereign credit risk,” summed the Bank.

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