The World Bank has raised its 2026 growth forecast for Nigeria to 4.3 per cent, citing improving macroeconomic stability, recovering investor confidence and a gradual revival in private investment, but warned that rising government spending ahead of the 2027 elections could weaken the momentum of recent economic reforms.
The projection was contained in the bank’s October 2026 Africa Economic Update, titled Building AI Readiness, released on Tuesday. The report also raised Nigeria’s growth forecast for 2027 and 2028 to 4.4 per cent annually, compared with an estimated 4.0 per cent expansion in 2025.
“Economic activity in Nigeria is projected to strengthen from 4.0 percent in 2025 to 4.3 percent in 2026, before edging up to 4.4 percent annually in 2027–28,” the bank said.
The global lender attributed the expected improvement to greater macroeconomic stability, strengthening investor confidence and a gradual recovery in private investment.
The upgraded forecast follows stronger-than-expected economic performance in the second quarter of 2026, when Nigeria’s real Gross Domestic Product expanded by 4.43 per cent year-on-year, compared with 4.23 per cent in the corresponding period of 2025.
Agriculture expanded by 4.39 per cent, up from 2.82 per cent a year earlier, while services grew by 4.6 per cent. Real oil GDP rose by 7.3 per cent, although the sector contributed only 0.2 percentage points to overall growth.
Industrial growth, however, slowed sharply to 4.0 per cent from 7.5 per cent in the second quarter of 2025, highlighting uneven growth across sectors.
The World Bank identified financial services, information and communications technology and real estate as major growth drivers, supported by digitalisation and resilient domestic demand. Agricultural activity is also expected to recover in 2026, although the bank projected weaker momentum in the industrial sector because of softer growth in oil production and manufacturing.
Despite the improved outlook, the World Bank warned that rising government spending ahead of Nigeria’s 2027 general elections could undermine efforts to stabilise the economy and weaken the momentum of reforms.
Highlighting risks to Nigeria’s outlook, the Washington-based institution said, “Nevertheless, the outlook remains subject to significant downside risks, including tighter global financial conditions, a prolonged conflict in the Middle East, insecurity, climate-related shocks, disruptions to oil production, and rising pre-election spending ahead of the 2027 elections.”
It added, “These factors could weaken reform momentum and erode the social consensus needed to sustain ongoing macroeconomic adjustment efforts.”
The warning comes as Nigeria approaches the 2027 election cycle following a series of major economic reforms implemented by the Federal Government since 2023, including the removal of petrol subsidies, foreign exchange market reforms and efforts to raise government revenue.
The World Bank noted that sustaining politically difficult reforms could become harder as elections approach, particularly when households are still struggling with high living costs.
It said several governments across sub-Saharan Africa had recently undertaken difficult measures, including “fuel subsidy removal, exchange rate liberalisation, fiscal consolidation, and efforts to strengthen domestic revenue mobilization.”
According to the bank, reform momentum could become harder to sustain ahead of elections or during periods of intense political competition. It warned that the danger went beyond a temporary slowdown in reforms, noting that public backing could weaken if painful measures failed to produce visible improvements in living standards within a reasonable period.
The bank said this could reduce the willingness of both governments and citizens to support similar reforms in the future and potentially increase pressure for populist economic policies.
The World Bank also expects Nigeria’s inflation rate to maintain a downward trajectory following monetary tightening, exchange-rate stabilisation and improving supply conditions.
It projected inflation to fall from 23.0 per cent in 2025 to 15.7 per cent in 2026 and further to 12.2 per cent by 2028. “Lower inflation is expected to support household purchasing power and contribute to a gradual reduction in poverty,” the report said.
However, the bank cautioned that faster economic growth alone may not be enough to significantly improve living standards, as the pace at which poverty is declining remains weak because growth in income per person continues to trail overall economic expansion.
It said poverty reduction could remain constrained by elevated fuel prices associated with the conflict in the Middle East, which have placed a bigger burden on low-income households.
This means that even as headline economic indicators improve, households continue to feel pressure from high living costs, particularly where wage growth and employment opportunities fail to keep pace with inflation and other expenses.
The bank also warned governments against fiscal slippages as political pressures increase, saying elevated debt-service obligations continued to restrict fiscal space while inflation remained vulnerable to exchange-rate depreciation, food-price shocks and loose fiscal policy.
It stressed that preserving central bank independence and avoiding monetary financing of government deficits would remain critical to keeping inflation expectations anchored as African economies navigate approaching election cycles and renewed global economic uncertainty.
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, earlier said the CBN was prepared to contain excess liquidity as Nigeria approaches another election cycle.
“We are ready,” he said during a press briefing at the end of the 307th meeting of the CBN’s Monetary Policy Committee in Abuja, explaining that the bank had analysed previous election cycles and developed different scenarios.
He said the CBN would monitor currency in circulation, banking system liquidity, monetary aggregates and foreign exchange demand. “We will proactively deploy any tools and instruments to mop up any excess liquidity,” Cardoso said. “We will not allow ourselves to be caught unaware in any form.”
Meanwhile, the World Bank said Nigeria was among the African economies whose growth outlook had been revised upwards, reflecting the effects of economic reforms and improvements in macroeconomic management.
More broadly, the World Bank raised its growth projection for sub-Saharan Africa to 4.3 per cent in 2026, up from 4.1 per cent in 2025 and 0.3 percentage points higher than its April projection.
Nigeria was among nearly three-quarters of countries in the region whose 2026 growth forecasts were upgraded. World Bank Chief Economist for Africa, Andrew Dabalen, said the region had demonstrated resilience despite a challenging global environment, including higher energy prices linked to disruptions arising from the Iran conflict.
However, the bank cautioned that the region must do more to convert economic expansion into broad-based improvements in living standards.
The World Bank said sustained reforms, increased private investment, improved infrastructure, stronger human capital and higher productivity would be critical to turning macroeconomic stability into meaningful gains for households.
It also urged African economies to accelerate the adoption of artificial intelligence and other digital technologies as a way of raising productivity and creating new employment opportunities.
It said the continent would need to exploit emerging technologies while simultaneously addressing persistent gaps in infrastructure, skills and access to digital services.
The bank projected Nigeria’s current-account surplus to widen from 4.8 per cent of GDP in 2025 to 6.0 per cent in 2026 before narrowing to 3.4 per cent by 2028 as crude prices normalise and import demand recovers.
It also noted that Nigeria, as an oil exporter, was less directly exposed to the global energy shock than many African economies, although its capacity to withstand wider economic effects would depend on the strength of its policy buffers and institutions.
Higher crude oil prices could provide some relief by strengthening Nigeria’s fiscal and external accounts, although the benefits could be partly eroded by volatile capital flows.
Source: punchng.com
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