Analysts Expect More From Reforms As World Bank Raises Nigeria’s Growth Forecast To 4.3%

The World Bank has raised its forecast for Nigeria’s economic growth in 2026 to 4.3 per cent from 4.0 per cent projected for 2025, but economic analysts have described the outlook for the next two years as conservative given the potential impact of ongoing reforms.

The bank expects the economy to expand by 4.4 per cent annually in 2027 and 2028, driven by improving macroeconomic stability, stronger investor confidence and a gradual recovery in private investment.

Nigeria was among Zambia, Ethiopia and Angola, whose growth forecasts were upgraded in the World Bank’s October 2026 Africa Economic Update following improvements in economic management.

The 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, supported by improving macroeconomic stability, strengthening investor confidence, and a gradual recovery in private investment.”

But the Head of Financial Institutions Ratings at Agusto & Co, Ayokunle Olubunmi, told LEADERSHIP that the projections, particularly for 2027 and 2028, appeared modest compared with the potential benefits of the government’s reforms.

Olubunmi said the 4.3 per cent projection for 2026 was not unexpected, considering the pace of economic expansion so far, but argued that stronger growth could emerge as the reforms begin to have a fuller impact.

“The 4.3 per cent growth projection for 2026 is not unexpected, at least given the pace of economic growth that we have seen. But I feel that the projection, particularly for 2027, 2028, is quite modest.

“This is because, in my view, we are going to see more of the impact of some of these reforms, particularly as Nigeria is getting more prominent on the global stage,” he said.

He cited Nigeria’s inclusion in the JPMorgan Government Bond Index-Emerging Markets (GBI-EM) and its expected re-entry into the MSCI Index as developments that could strengthen investor confidence and attract additional capital.

“Investors are taking a closer look at Nigeria and they are liking what they are seeing so far in terms of the reforms. Foreign investors are more in the medium term, and we expect to start seeing some of them by 2027, 2028,” Olubunmi said.

Services Remain Main Growth Driver

The World Bank said Nigeria’s growth would continue to be driven largely by the services sector, particularly financial services, information and communications technology (ICT) and real estate.

It said these sectors had benefited from digitalisation and resilient domestic demand.

Agricultural activity is expected to recover in 2026, while industrial growth is projected to moderate because of softer momentum in oil production and manufacturing.

The bank also expects 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.

It attributed the projected decline to monetary tightening, exchange-rate stabilisation and improving supply conditions.

Lower inflation, it said, should improve household purchasing power and support a gradual reduction in poverty.

However, the bank warned that poverty reduction would remain constrained by elevated fuel prices associated with the conflict in the Middle East, which disproportionately affect low-income households.

Higher oil prices could support Nigeria’s fiscal and external accounts, but the gains could be partly offset by increased capital-flow volatility amid global uncertainty.

Pre-Election Spending, Insecurity Pose Risks

The World Bank projected that Nigeria’s current account surplus would 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 oil prices normalise and import demand strengthens.

It nevertheless warned that the outlook remained exposed to significant downside risks, including tighter global financial conditions, a prolonged Middle East conflict, insecurity, climate-related shocks, disruptions to oil production and rising pre-election spending ahead of the 2027 elections.

The bank said these factors could weaken reform momentum and undermine the social consensus required to sustain macroeconomic adjustment.

Africa Growth Outlook Improves

At the continental level, the World Bank raised its growth forecast for sub-Saharan Africa to 4.3 per cent in 2026 from 4.1 per cent projected in April.

Growth forecasts were upgraded for nearly three-quarters of countries in the region, reflecting stronger-than-expected economic performance.

World Bank Chief Economist for Africa, Andrew Dabalen, said the region’s economy had remained resilient despite a difficult global environment.

“Economic activity in Sub-Saharan Africa continues to demonstrate remarkable resilience, with growth forecasts upgraded for nearly three-quarters of countries in the region,” Dabalen said.

The bank, however, warned that the region continued to face significant risks, including a prolonged Middle East conflict, the El Niño weather phenomenon, high interest rates in advanced economies and elevated debt-servicing costs.

It said the region’s debt-to-GDP ratio had stabilised at about 57 per cent, although about half of the countries were either in default or struggling to service their debts.

Despite the improved growth outlook, the bank cautioned that faster economic expansion had yet to translate into significant poverty reduction.

Per-capita income growth is expected to rise only marginally to 1.8 per cent this year from 1.6 per cent last year.

The warning reinforces the challenge confronting Nigeria and other African economies: headline growth must translate into higher household incomes, more jobs, lower living costs and a measurable reduction in poverty.