morganable economy watch
The agriculture sector recorded a notable improvement, expanding by 4.39 per cent in the second quarter, compared with 2.82 per cent in the same period of the previous year
KaNo—
The World Bank has raised its economic growth forecast for Nigeria in 2026 to 4.3 per cent, citing improving macroeconomic stability, stronger investor confidence and a gradual recovery in private investment.
The projection was contained in the World Bank’s October 2026 Africa Economic Update, titled “Building AI Readiness,” released on Tuesday.
The latest forecast represents an improvement from the 4.0 per cent growth estimated for 2025. The global lender also projected that Nigeria’s economy would expand by 4.4 per cent annually in 2027 and 2028.
The World Bank said, “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.”
It attributed the stronger outlook to greater macroeconomic stability, strengthening investor confidence and a gradual recovery in private investment.
The revised projection followed stronger-than-expected economic performance recorded in the second quarter of 2026, when Nigeria’s real Gross Domestic Product grew by 4.43 per cent year-on-year.
The second-quarter performance was higher than the 4.23 per cent recorded in the corresponding quarter of 2025, according to the figures contained in the report.
The agriculture sector recorded a notable improvement, expanding by 4.39 per cent in the second quarter, compared with 2.82 per cent in the same period of the previous year.
The services sector also remained a major contributor to economic activity, growing by 4.6 per cent during the period.
Real oil GDP increased by 7.3 per cent, although the sector contributed only 0.2 percentage points to the overall GDP growth.
However, the industrial sector recorded a significant slowdown, with growth falling to 4.0 per cent from 7.5 per cent in the second quarter of 2025.
The uneven performance across sectors suggests that while the economy is gradually strengthening, growth remains dependent on sectors such as services, agriculture and other non-oil activities.
The World Bank identified financial services, information and communications technology and real estate as some of the major drivers of economic activity, supported by digitalisation and resilient domestic demand.
It also projected a recovery in agricultural activity in 2026 but warned that growth in the industrial sector could weaken because of softer oil production and subdued manufacturing activity.
Despite the improved growth outlook, the World Bank warned that Nigeria faces significant risks, particularly as the country approaches the 2027 general elections.
The institution cautioned that increased government spending ahead of the elections could undermine the progress made through recent economic reforms.
“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 said.
It added that these factors could weaken reform momentum and undermine the social consensus required to sustain the country’s ongoing macroeconomic adjustment.
Nigeria has implemented several major economic reforms since 2023, including the removal of petrol subsidies, foreign exchange market reforms, fiscal consolidation measures and efforts to increase domestic revenue.
However, the reforms have also increased economic pressure on households, with elevated transportation, food and energy costs contributing to a difficult cost-of-living environment.
The World Bank said sustaining politically difficult reforms could become more challenging as the 2027 elections approach, particularly if households do not see significant improvements in their living standards.
The bank noted that governments across sub-Saharan Africa had implemented difficult measures, including fuel subsidy removal, exchange-rate liberalisation, fiscal consolidation and efforts to strengthen domestic revenue mobilisation.
According to the institution, reform momentum could become increasingly difficult to sustain during periods of intense political competition.
It warned that the challenge was not limited to a temporary slowdown in reforms, saying public support could decline if painful economic measures failed to deliver visible improvements in living standards within a reasonable period.
Such a development, it said, could reduce the willingness of governments and citizens to support similar reforms in the future while increasing pressure for populist economic policies.
The World Bank nevertheless expects inflation in Nigeria to continue declining as the effects of monetary tightening, exchange-rate stabilisation and improved supply conditions become more pronounced.
It projected that inflation would 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 stated.
However, the bank cautioned that faster economic growth would not automatically translate into substantial improvements in living standards.
It said the pace of poverty reduction remained weak because growth in income per person continued to lag behind overall economic expansion.
The institution also warned that poverty reduction could be constrained by elevated fuel prices linked to the conflict in the Middle East, which could place additional pressure on low-income households.
Consequently, improved headline economic indicators may not immediately translate into better living conditions for millions of Nigerians, particularly if wages, employment opportunities and household incomes fail to keep pace with the cost of living.
The World Bank further warned governments against fiscal slippages as political pressures intensify.
It said elevated debt-service obligations continued to limit fiscal space, while inflation remained vulnerable to exchange-rate depreciation, food-price shocks and loose fiscal policy.
The bank stressed that preserving central bank independence and avoiding monetary financing of government deficits would be critical to keeping inflation expectations anchored as African countries approach election cycles amid renewed global economic uncertainty.
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, had earlier assured that the apex bank was prepared to manage excess liquidity as Nigeria approaches another election cycle.
Speaking at a press briefing following the 307th meeting of the CBN’s Monetary Policy Committee in Abuja, Cardoso said the bank had studied previous election cycles and developed different scenarios to respond to potential economic pressures.
He said the CBN would monitor currency in circulation, banking system liquidity, monetary aggregates and foreign exchange demand.
“We are ready,” he said, adding that the bank would proactively deploy appropriate instruments to mop up excess liquidity.
The World Bank’s latest projection places Nigeria among African economies whose growth outlook has been revised upwards, reflecting the effects of economic reforms and improvements in macroeconomic management.
At the regional level, the World Bank also 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.
The improved regional and Nigerian outlook, however, remains dependent on the ability of governments to maintain economic reforms, strengthen fiscal management and protect vulnerable households while navigating political and global economic pressures.
For Nigeria, the approach of the 2027 elections is therefore expected to test the government’s commitment to maintaining reforms that have begun to improve macroeconomic stability but continue to impose significant short-term costs on households and businesses.
