The World Bank has warned that high fuel prices could slow Nigeria’s efforts to reduce poverty, even as the country’s economic growth is expected to improve and inflation continues to ease.
In its latest Africa Economic Update, the World Bank raised its forecast for Nigeria’s economic growth from 4.0 per cent in 2025 to 4.3 per cent in 2026. It also projected growth of about 4.4 per cent annually in 2027 and 2028.
The bank attributed the expected improvement to stronger macroeconomic stability, increased investor confidence and a gradual recovery in private-sector investment.
According to the report, the services sector, particularly financial services, information and communications technology and real estate, will remain major drivers of economic activity, supported by digitalisation and resilient domestic demand.
Agriculture is also expected to recover in 2026, while industrial growth could moderate due to weaker momentum in oil production and manufacturing.
Inflation expected to fall
The World Bank projected a significant decline in Nigeria’s inflation rate, from 23.0 per cent in 2025 to 15.7 per cent in 2026. It expects inflation to fall further to 12.2 per cent by 2028.
The bank said lower inflation should improve household purchasing power and support a gradual reduction in poverty.
However, it warned that high fuel prices could limit the pace of improvement in living standards, particularly for poorer households.
The report noted that elevated fuel prices associated with the conflict in the Middle East could continue to place pressure on low-income Nigerians, who are disproportionately affected by higher transportation and other living costs.
Higher oil prices could boost government revenue
The World Bank said higher international oil prices could provide some support to Nigeria’s fiscal and external positions by increasing oil earnings.
It projected that Nigeria’s current account surplus would rise from 4.8 per cent of GDP in 2025 to 6.0 per cent in 2026, before declining to 3.4 per cent by 2028 as global oil prices normalise and import demand increases.
Despite the positive growth outlook, the bank warned that Nigeria remains exposed to several economic risks.
These include tighter global financial conditions, a prolonged conflict in the Middle East, insecurity, climate-related shocks and disruptions to oil production.
It also identified increased government spending ahead of the 2027 general elections as a major domestic risk.
The World Bank warned that rising pre-election spending could weaken the momentum of ongoing economic reforms and undermine the public support required to sustain macroeconomic adjustments.
AI adoption grows despite infrastructure challenges
The report also highlighted Nigeria’s growing use of artificial intelligence and its potential contribution to economic growth.
It said 44 per cent of surveyed firms in Nigeria and Kenya with at least 20 employees reported using AI technologies, compared with 61 per cent of surveyed firms in the United States.
However, the World Bank said AI adoption in developing economies remains relatively shallow. Only 36 per cent of AI-using firms in its developing-country sample were using AI agents or AI for automation, compared with 56 per cent in the United States.
The bank identified unreliable electricity supply, limited internet access, high data and device costs and inadequate computing infrastructure as major obstacles to wider AI adoption.
It said addressing these infrastructure gaps would be important for Nigeria and other African economies to fully benefit from the productivity gains associated with artificial intelligence.
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