Nigeria’s economy is expected to remain on a growth path in 2026, but the ongoing war involving Iran is driving up fuel prices and inflation, threatening household incomes and slowing efforts to reduce poverty, according to the World Bank.
Presenting the bank’s latest assessment in Abuja, World Bank lead economist for Nigeria Fiseha Haile said economic activity had so far remained resilient despite external shocks from the conflict, with businesses continuing to expand in the first months of the year. But he warned that rising energy costs were already feeding into inflation and weighing on consumer welfare.
“Overall business activity has been expanding over the past few months, suggesting the impact on growth has been relatively contained. But the shock is still being felt through higher inflation,” Haile said, referring to the impact of the US/Israel-Iran conflict on global energy prices and supply conditions.
The World Bank forecasts Nigeria’s economy will grow by around 4.2 percent in 2026, supported by continued macroeconomic stabilisation, structural reforms and increased investment. The projection suggests cautious optimism for Africa’s largest economy after a prolonged period of inflationary pressure, exchange-rate weakness and fiscal strain.
The report said recent reforms under President Bola Tinubu had helped improve macroeconomic fundamentals. Since taking office, Tinubu has rolled out one of Nigeria’s most far-reaching economic reform programmes in decades, including the removal of fuel and electricity subsidies, exchange-rate liberalisation and changes to the tax system. The World Bank said those measures had contributed to stronger external buffers and more stable economic conditions, even though living costs remain elevated for many Nigerians.
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Inflation, which had eased sharply to 15.06 percent in February from around 33 percent in December 2024, remains well above levels seen in many regional peers and is now facing renewed upward pressure from the Middle East conflict. According to Haile, fuel prices in Nigeria have risen by more than 50 percent during the Iran war, feeding into transport, food and production costs across the economy.
That trend, he warned, poses a direct threat to household purchasing power and poverty reduction.
“Inflation is still elevated and under increasing pressure, and that poses risks to incomes and poverty reduction,” Haile said. He added that Nigeria should consider easing restrictions on fuel imports to help moderate domestic price pressures.
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The World Bank said Nigeria’s external position had improved, helped by rising foreign exchange reserves, resilient remittances, stronger non-oil exports and reduced exchange-rate volatility. The country’s gross external reserves rose to US$45.5 billion, equivalent to 8.7 months of imports, while the current account surplus reached 4.8 percent of GDP in 2025.
On the fiscal side, the bank said Nigeria’s budget deficit widened slightly to 3.1 percent of GDP in 2025, but remained lower than in pre-reform years. It also noted that the country’s debt-to-GDP ratio fell for the first time in a decade, helped by stronger revenues and exchange-rate valuation effects.
The World Bank urged authorities to use any windfall from higher oil prices to rebuild fiscal buffers rather than return to broad subsidy programmes. It also advised the government to keep monetary policy tight and deepen structural reforms in order to anchor inflation expectations and improve long-term resilience.
Beyond macroeconomic stability, the bank said Nigeria must do more to ensure growth translates into improved living standards. It singled out early childhood development as a major policy priority, warning that the country faces one of the world’s most severe child welfare crises. According to the report, around 110 children per 1,000 die before the age of five, roughly 40 percent are stunted, and more than half fail to meet developmental milestones before school age.
While recent investments in health and nutrition were encouraging, the World Bank said Nigeria would need a more integrated and sustained child-focused support system if it hopes to turn macroeconomic reform into inclusive and durable growtn
