The World Bank has upgraded Nigeria’s economic growth projection for 2026 to 4.3 percent, attributing the upward revision to improving macroeconomic conditions, rising investor confidence, and a steady revival in private sector investments.
But the bank warned that increased government spending ahead of the 2027 general elections could weaken the momentum of economic reforms and undermine efforts to stabilise the economy.
The projections are contained in the World Bank’s October 2026 Africa Economic Update, which also forecasts Nigeria’s economy will grow by 4.4 per cent annually in 2027 and 2028, 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 upgraded outlook follows stronger-than-expected economic performance in the second quarter of 2026, when Nigeria’s real Gross Domestic Product grew by 4.43 per cent year-on-year, compared with 4.23 per cent in the same period of 2025.
Agriculture grew by 4.39 per cent, up from 2.82 per cent a year earlier, while services expanded by 4.6 per cent.
Real oil GDP increased by 7.3 per cent, although the sector contributed only 0.2 percentage points to overall growth.
Industrial growth, however, slowed to 4.0 per cent from 7.5 per cent in the second quarter of 2025, highlighting uneven performance across the economy.
The World Bank identified financial services, information and communications technology and real estate among the key drivers of growth, supported by digitalisation and resilient domestic demand.
It expects agricultural activity to continue recovering, although it projected weaker momentum in the industrial sector because of softer growth in oil production and manufacturing.
Election spending poses risk
Despite the improved outlook, the World Bank warned that rising government expenditure as the 2027 elections approach could threaten the reform momentum achieved in recent years.
The bank listed rising pre-election spending alongside tighter global financial conditions, the prolonged Middle East conflict, insecurity, climate-related shocks and disruptions to oil production among the major downside risks to Nigeria’s outlook.
“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.
The bank warned that these pressures could weaken reform momentum and erode the public support needed to sustain macroeconomic adjustments.
It noted that difficult reforms, including fuel subsidy removal, exchange-rate liberalisation, fiscal consolidation and efforts to strengthen domestic revenue mobilisation, could become harder to sustain during periods of intense political competition.
The World Bank said the risk was particularly significant because households are still dealing with high living costs.
It warned that if painful reforms fail to deliver visible improvements in living standards within a reasonable period, public support for further reforms could weaken, potentially increasing pressure for populist economic policies.
Inflation Expected To Fall
The World Bank expects Nigeria’s inflation rate to continue declining following monetary tightening, exchange-rate stabilisation and improvements in supply conditions.
It projects 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 bank said.
However, it cautioned that faster economic growth alone may not be enough to significantly improve living standards because growth in income per person continues to lag overall economic expansion.
The bank said poverty reduction could also be constrained by elevated fuel prices associated with the conflict in the Middle East, which could place additional pressure on low-income households.
It urged the government to avoid fiscal slippages as political pressures intensify, noting that elevated debt-service obligations continue to constrain fiscal space.
The World Bank also stressed the importance of preserving central bank independence and avoiding monetary financing of government deficits to keep inflation expectations anchored.
CBN Ready For election pressures
The warning comes as Nigeria approaches the 2027 election cycle and follows a series of economic reforms implemented since 2023, including the removal of petrol subsidies, foreign exchange reforms and measures to increase government revenue.
TVC News Online reported that Central Bank of Nigeria Governor, Olayemi Cardoso, expressing the readiness of the apex bank to manage potential liquidity pressures associated with the election cycle.
“We are ready,” Cardoso said after the 307th meeting of the Monetary Policy Committee in Abuja.
He said the CBN had analysed previous election cycles and developed scenarios to guide its response.
“We will proactively deploy any tools and instruments to mop up any excess liquidity,” Cardoso said, adding that the bank would monitor currency in circulation, banking-system liquidity, monetary aggregates and foreign exchange demand.
Africa Outlook Upgraded
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.
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.
However, the bank said African economies must do more to translate economic growth into broad-based improvements in living standards.
It identified sustained reforms, greater private investment, improved infrastructure, stronger human capital and higher productivity as critical to achieving inclusive growth.
The bank also urged African countries to accelerate the adoption of artificial intelligence and other digital technologies to raise productivity and create new employment opportunities.
For Nigeria, it projected the 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 oil prices normalise and import demand recovers.
The bank said Nigeria’s position as an oil exporter could provide some protection against the global energy shock, although the country’s ability to withstand wider economic pressures would depend on the strength of its policy buffers and institutions.
What You Should Know
The World Bank’s latest report shows that Nigeria’s economy is expected to perform better in 2026, supported by recovering agriculture, services, and increased private investments. However, the international financial institution has raised red flags over the potential surge in government spending as politicians prepare for the 2027 elections.
- Positive Impact: Better economic growth and falling inflation rates could eventually boost household purchasing power, making basic goods and services more affordable for average citizens over time.
- Potential Concerns: Heavy political spending during election periods often triggers inflation, disrupts currency stability, and threatens the success of ongoing economic reforms like subsidy removal and exchange-rate policies.
