The World Bank has revised Nigeria's economic growth forecast downward to 4.1 percent for 2026, a 30-basis-point reduction from the earlier projection of 4.4 percent, citing persistent structural weaknesses that continue to undermine the country's ability to capitalise on higher crude oil prices.
Structural Challenges Persist
In its latest World Economic Prospects report, the World Bank acknowledged that Nigeria could benefit from the surge in global crude prices, which have risen by over 40 percent since the beginning of March. However, the bank expressed concern that longstanding structural constraints—including power shortages, poor infrastructure, and a weak business environment—would limit the positive impact of the oil windfall.
Despite a series of economic reforms introduced by the current administration—such as exchange-rate liberalisation, improvements in public financial management, and other business-enabling measures—the economy remains burdened by inadequate power supply and infrastructure deficits. These issues have made the private sector less attractive to investors and rendered local production regionally uncompetitive, opening the door to imports from countries like China.
Growth Outlook for 2027 and 2028
The World Bank also downgraded Nigeria's growth projection for next year by 0.2 percentage points. The economy is now expected to expand by 4.2 percent in 2027 and 4.3 percent in 2028. The bank noted that the pace of growth would remain modest, constrained by the same structural factors.
Sub-Saharan Africa Outlook
Nigeria's downgrade mirrors the broader trend in Sub-Saharan Africa (SSA), which continues to grapple with structural challenges that have held back the region for decades. The World Bank trimmed SSA's growth forecast for 2026 by the same margin as Nigeria's, projecting regional growth at 4 percent this year and 4.4 percent in 2027.
Ethiopia, which recorded over 7 percent growth last year, is expected to remain the growth driver for the region. The bank upgraded Ethiopia's 2026 growth forecast by 0.9 percentage points to 8 percent.
Global Growth Drag from Geopolitical Tensions
The World Bank warned that escalating geopolitical tensions, particularly the conflict in the Middle East, could hamper global growth this year. The bank revised its January global growth projection downward by 0.1 percentage point to 2.5 percent, noting that this would be the slowest pace since the COVID-19 pandemic, when production was locked down and energy prices hit historic lows.
The disruption is largely driven by the closure of the Strait of Hormuz, a critical energy transit route, which has sharply curtailed oil supplies and heightened uncertainty across commodity markets. As a result, Brent crude oil prices are expected to average $94 per barrel in 2026—a 36 percent increase from 2025 levels—assuming supply disruptions begin easing from July.
Food and Inflation Risks
Fertiliser prices are also forecast to rise significantly, raising concerns over food inflation, particularly in import-dependent economies across Sub-Saharan Africa. The combined effect of higher energy and food costs is expected to push global inflation to 4 percent this year, up from 3.3 percent in the previous year.
Oil Sector Constraints
Nigeria's crude oil production has been stifled by divestment in the sector and theft. Only last month, production managed to break the 1.5 million barrels per day (mbpd) ceiling, but this remains far below the budget projection of over 2 mbpd. Although higher oil prices could provide some support for government revenues and export earnings, persistent inflationary pressures, import dependence, foreign-exchange vulnerabilities, and elevated debt-servicing obligations are expected to limit the extent to which the economy can leverage the commodity price upswing.
The World Bank acknowledged that the reforms undertaken by the Federal Government have strengthened macroeconomic fundamentals and improved investor confidence. However, the benefits are being increasingly offset by external shocks stemming from the Middle East conflict, leaving Nigeria's overall growth trajectory weaker than anticipated at the start of the year.
