ABUJA: Nigeria’s economy is expected to remain resilient through the first half of 2026 despite inflationary pressures linked to the ongoing Iran-related regional conflict, according to the World Bank, which warned that rising fuel costs could slow poverty reduction and squeeze household incomes across Africa’s largest economy.
Presenting the latest economic outlook in Abuja, World Bank Nigeria Lead Economist Fiseha Haile said business activity has continued expanding even as global energy markets remain unsettled by the ongoing U.S.–Israel–Iran tensions. While output growth has remained largely intact, inflationary spillovers from higher fuel prices are increasingly visible across transport, food supply chains, and production costs.
Haile noted that although overall economic activity has remained in expansion territory in recent months, inflationary pressures triggered by energy price shocks are becoming the main channel through which the Middle East conflict is affecting Nigeria’s domestic economy.
Fuel prices have risen by more than 50 percent during the Iran-linked conflict period, intensifying cost pressures across logistics and manufacturing sectors. The World Bank suggested Nigeria could consider easing restrictions on fuel imports to improve supply conditions and help contain inflationary momentum.
Inflation declined sharply to 15.06 percent in February 2026 from nearly 33 percent in December 2024, reflecting the early stabilising effects of macroeconomic reforms. However, renewed pressure linked to global energy volatility risks slowing the pace of disinflation in the months ahead.
Nigeria’s current macroeconomic trajectory is closely tied to structural reforms introduced by Bola Tinubu, whose administration has implemented one of the country’s most significant economic policy adjustments in decades. These reforms include the removal of fuel subsidies, exchange rate liberalisation, and tax restructuring designed to stabilise public finances and restore investor confidence following years of inflationary instability and currency weakness.
External buffers have strengthened in recent months as foreign exchange reserves improved and exchange rate volatility eased compared with earlier crisis periods. Although Nigeria’s fiscal deficit widened slightly to 3.1 percent of GDP in 2025, it remains below pre-reform levels. Importantly, the country’s debt-to-GDP ratio declined for the first time in a decade, supported by stronger fiscal performance and exchange-rate valuation gains.
Despite these improvements, inflation continues to pose a serious risk to household incomes and poverty reduction momentum. The World Bank warned that elevated price levels, combined with tighter global financing conditions, could affect remittance inflows, borrowing costs, and investment conditions across the economy.
The World Bank projects Nigeria’s economy will expand by approximately 4.2 percent in 2026 and advised policymakers to save windfall revenues generated by higher oil prices rather than expanding blanket subsidy programmes. Maintaining tight monetary policy and fiscal discipline, the institution noted, will remain essential to preserving macroeconomic stability amid continuing geopolitical uncertainty.
Beyond macroeconomic indicators, the World Bank emphasised that Nigeria’s long-term development prospects depend heavily on improvements in early childhood outcomes. The country currently faces one of the most severe child development crises globally, with approximately 110 deaths per 1,000 children before the age of five, nearly 40 percent stunting prevalence, and more than half of children failing to meet developmental milestones before entering school.
While recent investments in maternal and child health programmes represent encouraging progress, the World Bank stressed the need for a coordinated child-centred policy framework spanning pregnancy through age five, integrating health services, nutrition access, sanitation infrastructure, and foundational learning systems to support inclusive long-term growth.
– Camillus Eboh Gbogbo
