• Portfolio investments hit $12.2bn, dwarfs $2.2bn direct funding inflows
•Lender identifies overlapping funds cycles as key weak point
•Calls for higher expenditure forecast, credible funds calendar
Emmanuel Addeh in Abuja
Nigeria’s exterior accounts misplaced the advantage of a considerable influx of overseas change in the primary half of 2026, as unexplained transactions totalling $12.4 billion worn out a lot of the mixed beneficial properties from the nation’s present account surplus and internet monetary inflows, the World Bank has mentioned.
The unexplained outflows, recorded as internet errors and omissions in the stability of funds, probably mirrored, in half, oil export proceeds that weren’t repatriated into the nation, based on the financial institution’s newest evaluation of the Nigerian financial system.
The growth highlighted a persistent weak point in Nigeria’s overseas change market, the place restricted repatriation of export earnings and low Foreign Direct Investment (FDI) have left the nation more and more depending on short-term portfolio investments to help overseas change provide and construct exterior reserves.
However, the worldwide lender didn’t say the $12.4 billion represented stolen funds or lacking oil income. The determine solely mirrored a discrepancy between recorded exterior transactions and monetary flows that might not be totally reconciled. It due to this fact requires additional clarification from the federal government.
According to the World Bank, the hole probably mirrored, in half, oil export proceeds that weren’t repatriated. Such proceeds could also be retained in offshore accounts or used to fulfill present obligations, together with repayments underneath oil-backed financing preparations, fairly than returned to Nigeria by the home overseas change market.
“In precept, each present account surpluses and internet monetary inflows ought to help reserve accumulation, however giant internet errors and omissions of $12.4 billion in H1 2026 offset a lot of their mixed whole, probably reflecting in half oil export proceeds that weren’t repatriated.
“As a result, FPI (Foreign Portfolio Investment) has been a major driver of the continued rise in gross international reserves, which increased from $45.5 billion at end-2025 to $53.8 billion at end-August 2026,” the World Bank doc titled: “Beyond the Federal Purse: How Higher Revenues Shaped State Priorities”, acknowledged.
The World Bank additionally recognized oil pledges as one of many elements limiting the repatriation of export earnings, though it didn’t set up how a lot of the $12.4 billion discrepancy was attributable to such preparations.
The discrepancy nonetheless raises questions in regards to the transparency and reconciliation of Nigeria’s export earnings, notably in the oil sector, the place overseas change receipts are important to order accumulation and change price stability.
Other attainable explanations for internet errors and omissions embrace incomplete reporting, variations in the timing of transactions and gaps in the recording of cross-border monetary flows.
Besides, the World Bank report confirmed that Nigeria’s present account surplus rose to $12 billion, equal to 7 per cent of Gross Domestic Product (GDP), in the primary half of 2026, in contrast with $5.5 billion in the second half of 2025 and $8.6 billion in the corresponding interval of 2025.
However, the nation recorded internet portfolio funding inflows of $12.2 billion through the interval, an 80.8 per cent enhance over the second half of 2025, whereas direct funding liabilities fell by 15 per cent to $2.2 billion.
The financial institution famous that, in precept, the present account surplus and internet monetary inflows ought to have supported a stronger accumulation of overseas reserves, however the $12.4 billion internet errors and omissions determine offset a lot of their mixed contribution.
Nigeria’s gross worldwide reserves nonetheless elevated from $45.5 billion on the finish of 2025 to $53.8 billion on the finish of August 2026, supported largely by portfolio funding inflows.
The World Bank, nonetheless, cautioned that the absence of a more moderen internet reserves estimate past the $34.8 billion reported on the finish of 2025 restricted its means to evaluate the nation’s usable exterior reserve buffers.
The rising reliance on portfolio investments additionally exposes the financial system to sudden capital outflows at any time when world monetary circumstances deteriorate or buyers develop into much less keen to carry property in rising markets.
Between January and August 2026, overseas portfolio funding accounted for 45 per cent of gross inflows by the Nigerian Foreign Exchange Market, nearly totally in fixed-income devices, together with investments attracted by excessive home yields and relative change price stability.
The financial institution noticed that though the functioning of the overseas change market had improved markedly since 2024, the provision of overseas change continued to rely closely on short-term overseas portfolio funding.
It mentioned overseas direct funding remained low, whereas the repatriation of export proceeds was nonetheless restricted, partly due to oil pledges.
According to the report, the Central Bank of Nigeria (CBN) had launched reforms aimed toward enhancing the operation of the overseas change market, together with integrating bureaux de develop into the official market by a centralised platform, standardising due diligence necessities and eradicating restrictions that beforehand constrained worldwide oil firms from transferring their export proceeds overseas.
Other measures included granting unfettered entry to domiciliary account balances, simplifying remittance procedures and elevating the advance-payment restrict for imports.
According to the financial institution, these reforms might encourage extra steady overseas funding by enhancing the predictability and convertibility of the overseas change regime.
It additionally really helpful progressively permitting banks to carry internet open overseas change positions and enhancing the transparency of the CBN’s intervention framework to deepen the market and cut back change price volatility.
The World Bank mentioned sustained macroeconomic stabilisation and structural reforms able to enhancing funding returns and decreasing dangers can be needed to draw extra sturdy overseas change inflows.
Beyond the exterior sector, the report warned that rising expenditure pressures might erode the federal authorities’s improved fiscal place and widen Nigeria’s consolidated fiscal deficit to about 3.5 per cent of GDP in 2026.
The warning comes regardless of an enchancment in federal authorities income in the primary half of the yr, supported by greater distributable oil revenues, stronger company tax collections and elevated impartial revenues.
According to the report, federal income rose to N6.2 trillion, equal to 2.5 per cent of GDP, in the primary half of 2026, from N3.6 trillion, or 1.6 per cent of GDP, in the corresponding interval of 2025.
The enhance, it careworn, helped slim the federal fiscal deficit to N9.9 trillion, or 4 per cent of GDP, from N11 trillion, equal to five per cent of GDP, a yr earlier.
However, the World Bank cautioned that the advance must be interpreted fastidiously as a result of reported federal capital spending remained unusually low.
Capital expenditure fell to N700 billion, representing 0.3 per cent of GDP, in the primary half of 2026, in contrast with one per cent of GDP in the corresponding interval of 2025.
At the identical time, curiosity funds rose to N7.7 trillion, or 3.1 per cent of GDP, from N5.6 trillion, equal to 2.5 per cent of GDP, reflecting persistently excessive home borrowing prices.
Personnel expenditure additionally elevated to N4.2 trillion from N3.7 trillion following wage changes.
The financial institution warned that the mix of recurrent expenditure obligations, excessive debt-service prices and the attainable acceleration of capital spending later in the yr might put extra stress on public funds.
It additionally recognized overlapping funds cycles, weak alignment between permitted allocations and implementation capability, and delays in expenditure reporting as persistent challenges undermining funds credibility.
At the federation stage, the report confirmed that gross Federation Account revenues rose in nominal phrases to N18.9 trillion in the primary half of 2026 from N17.7 trillion a yr earlier, though they declined as a share of GDP to 7.6 per cent from eight per cent.
Besides, distributions to the three tiers of presidency elevated to N10.5 trillion from N7.6 trillion, supported partly by decrease deductions from Federation Account revenues, the report acknowledged.
The World Bank attributed the discount in deductions partly to a February 2026 govt order that eradicated the Nigerian National Petroleum Company Limited (NNPC) administration price and Frontier Exploration Fund (FEF) deductions and redirected gas-flaring penalties to the Federation Account.
But regardless of the advance in income distribution and the narrower federal deficit, the financial institution maintained that greater spending pressures had been more likely to widen the consolidated fiscal deficit for the complete yr.
It referred to as for higher expenditure planning, a extra credible funds calendar and well timed, complete and persistently categorized fiscal reporting to strengthen funds execution and enhance public monetary administration.
