Nigeria’s debt-to-GDP ratio will drop to 39.8% — World Bank

World Bank has projected that Nigeria’s public debt is expected to decline for the first time in over a decade from 42.9 to 39.8% of Gross Domestic Product (GDP), and on the fiscal side, federal deficit is expected to remain at 2.6% of GDP in 2025, despite lower oil prices.

This is contained in the latest Nigeria Development Update (NDU) released by the World Bank on Wednesday.

The World Bank said, “The country’s external position has strengthened, with foreign reserves exceeding $42 billion and the current account surplus rising to 6.1% of GDP, supported by higher non-oil exports and lower oil imports.

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“On the fiscal side, despite lower oil prices, the federal deficit is projected at 2.6% of GDP in 2025, broadly unchanged from 2024, while public debt is expected to decline for the first time in over a decade from 42.9 to 39.8% of GDP”.

It noted that Nigeria has taken important steps toward stabilizing its economy through recent policy reforms, but more needs to be done to ensure these gains translate into better living standards for its citizens.

Titled “From Policy to People: Bringing the Reform Gains Home,” the report notes progress in economic growth, domestic revenue mobilization, monetary policy, and external balances while underscoring persistent challenges such as high food inflation, widespread poverty, and structural barriers that constrain inclusive growth.

According to the NDU, Nigeria’s economy expanded by 3.9% year-on-year in the first half of 2025, up from 3.5% in the same period of 2024.

Growth was driven by strong performance in services and non-oil industries, alongside improvements in oil production and agriculture.

However, the report cautions that these macroeconomic gains have yet to translate into tangible improvements in people’s lives.

Many households continue to face hardship, with poverty and food insecurity remaining high.

Food inflation remains a major concern: poor households, who spend up to 70% of their income on food, have seen the cost of a basic food basket rise fivefold between 2019 and 2024.

The NDU notes that while current reforms are addressing long-standing policy distortions, sustained progress in livelihoods will depend on continued efforts to reduce inflation, foster inclusive growth, strengthen public services, and expand support for the most vulnerable.

Mathew Verghis, World Bank Country Director for Nigeria, said, “The Nigerian government has taken bold steps to stabilize the economy, and these efforts are beginning to yield results. But macroeconomic stability alone is not enough. The true measure of success will be how these reforms improve the daily lives of Nigerians—especially the poor and vulnerable.”

To help bridge the gap between macroeconomic progress and improved welfare, the report identifies three urgent priorities.

“Tackling food inflation by removing trade barriers such as import bans and excessive duties, while addressing structural bottlenecks in seeds, input supply, security, logistics, and infrastructure (including transport, power, storage, and cold chains).

“Improving the efficiency of public spending through greater fiscal transparency, stronger discipline in Federation Account (FAAC) deductions, and a national pact to align fiscal policy with development objectives, especially human capital investments.

“Expanding and institutionalizing social protection, including regular, domestically financed cash transfers for the ultra-poor and a shock-responsive safety net system to help households manage crises.”

The NDU states that the outlook for Nigeria’s economy remains cautiously optimistic, as growth is projected to accelerate modestly from 4.2% in 2025 to 4.4% in 2027, driven by services and supported by agriculture and the non-oil industry.

Inflation is expected to gradually ease but remain elevated, requiring sustained monetary discipline and structural reforms to tackle food prices, the “biggest tax on the poor,” said Samer Matta, the World Bank’s Senior Economist for Nigeria.