The World Bank has warned that increased government spending by Nigerian states ahead of the next election cycle could worsen the country’s fiscal position, with the consolidated fiscal deficit projected to rise in 2026.
The bank forecasts that Nigeria’s consolidated fiscal deficit will increase from 3.1 per cent of gross domestic product (GDP) in 2025 to 3.5 per cent in 2026, despite higher oil revenues and increased government allocations.
The projection raises concerns about the pressure on public finances as governments across the country contend with competing spending demands.
A consolidated fiscal deficit occurs when a government’s total expenditure exceeds its revenue. In Nigeria, the measure combines the finances of the federal, state and local governments to provide an overview of the public sector’s financial position.
The World Bank’s warning highlights the potential risks associated with increased spending by state governments during the pre-election period, when political activities and demands for public projects could put additional pressure on government budgets.
Although higher oil revenues and increased allocations could provide additional resources for governments, the projected rise in the deficit suggests that these gains may not be sufficient to offset growing expenditure.
A widening fiscal deficit could increase borrowing requirements and place further pressure on public debt management, depending on how governments finance the shortfall.
The projection also underscores the importance of prudent fiscal management, particularly as governments seek to balance infrastructure development, public services and other spending commitments against available revenue.
Nigeria’s ability to manage expenditure and strengthen revenue generation will remain critical to maintaining fiscal stability as the country approaches another election cycle.
Source: TheCable, citing the World Bank.
