Nigeria’s economy is projected to expand by 4.2 percent in 2026, even as global tensions and rising energy prices continue to place upward pressure on inflation, according to the World Bank.
The projection comes amid heightened uncertainty linked to the ongoing Iran-related geopolitical conflict, which has contributed to volatility in global oil markets and increased fuel costs worldwide.
Brandspur Banking News Desk reports that the World Bank noted that Nigeria’s economic activity has remained broadly resilient in the first half of 2026, supported by continued expansion in key sectors despite inflationary headwinds.
The institution explained that higher global oil prices, partly driven by geopolitical disruptions, have begun to filter into domestic costs, particularly transportation, food, and production inputs.
Fiseha Haile, the World Bank’s Lead Economist for Nigeria, stated that while the external shock has pushed prices upward, overall business activity in the country has continued to grow at a steady pace.
According to him, the impact of the global conflict on Nigeria’s growth has been relatively contained so far, though inflationary pressure remains a significant concern for households and businesses.
Nigeria’s recent macroeconomic reforms, including fuel subsidy removal, exchange rate adjustments, and fiscal restructuring under the current administration, were cited as key factors supporting economic stability.
Despite inflation easing earlier in the year to 15.06 percent from about 33 percent in late 2024, the World Bank noted that renewed fuel price increases have reversed some of the gains.
Fuel costs have reportedly risen by more than 50 percent during the period of global tension, intensifying pressure on consumer spending and production costs across sectors.
The report further stated that easing fuel import restrictions could help moderate inflation and improve price stability in the short term.
However, the World Bank cautioned that persistently high inflation remains a major risk to household income levels and poverty reduction efforts in Nigeria.
On the external front, Nigeria’s foreign reserves have improved, supported by stronger inflows and reduced currency volatility, though global financial tightening continues to pose risks to capital inflows and remittances.
Fiscal indicators also showed improvement, with the budget deficit declining to 3.1 percent of GDP in 2025, reflecting stronger revenue performance and ongoing fiscal reforms.
The debt-to-GDP ratio also recorded a decline for the first time in a decade, attributed to improved fiscal discipline and exchange rate adjustments.
The World Bank advised the government to maintain tight monetary policy, avoid broad subsidy reinstatements, and save excess oil revenue to strengthen fiscal buffers against future shocks.
Beyond macroeconomic stability, the institution highlighted persistent structural challenges, particularly in human capital development, including gaps in healthcare, nutrition, sanitation, and education outcomes.
It emphasized that long-term growth sustainability will depend on coordinated investments in early childhood development and social infrastructure.
While Nigeria’s near-term outlook remains positive, the World Bank stressed that the balance between oil-driven revenue gains and inflationary pressures will determine the country’s economic trajectory in 2026.
