World Bank Lifts Nigeria's 2026 Growth Forecast to 4.3%, Warns Pre-Election Spending Could Derail Reforms

The World Bank has raised Nigeria's 2026 growth forecast to 4.3 per cent, citing improving macroeconomic stability, stronger investor confidence and a gradual recovery in private investment. But the bank warned that higher government spending ahead of the 2027 general elections could weaken reform momentum 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 growing by 4.4 per cent annually in 2027 and 2028, against 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 to 2028," the bank said.

Q2 Growth Beat Expectations

The upgrade follows a stronger-than-expected second quarter of 2026, when real Gross Domestic Product grew 4.43 per cent year-on-year, compared with 4.23 per cent in the same period of 2025. Agriculture grew 4.39 per cent, up from 2.82 per cent a year earlier, while services expanded 4.6 per cent. Real oil GDP rose 7.3 per cent, though the sector contributed only 0.2 percentage points to overall growth. Industrial growth slowed to 4.0 per cent from 7.5 per cent in the second quarter of 2025, showing uneven performance across the economy.

The World Bank named financial services, information and communications technology and real estate among the key growth drivers, supported by digitalisation and resilient domestic demand. It expects agriculture to keep recovering but sees weaker momentum in industry on softer oil production and manufacturing.

Election Spending Tops Risk List

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 as the major downside risks.

"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.

It warned that these pressures could erode the public support needed to sustain macroeconomic adjustments. Fuel subsidy removal, exchange-rate liberalisation, fiscal consolidation and domestic revenue mobilisation could become harder to sustain during intense political competition, especially with households still facing high living costs. If painful reforms fail to deliver visible gains in living standards soon, pressure for populist policies could build.

The bank urged the government to avoid fiscal slippages, noting that elevated debt-service obligations continue to constrain fiscal space. It also stressed preserving central bank independence and avoiding monetary financing of deficits to keep inflation expectations anchored.

Inflation Seen Easing

The World Bank projects inflation falling from 23.0 per cent in 2025 to 15.7 per cent in 2026, then to 12.2 per cent by 2028, helped by monetary tightening, exchange-rate stabilisation and better supply conditions. "Lower inflation is expected to support household purchasing power and contribute to a gradual reduction in poverty," it said.

It cautioned, however, that faster growth alone may not lift living standards much, because income per person continues to lag overall expansion. Poverty reduction could also be constrained by elevated fuel prices linked to the Middle East conflict.

Central Bank of Nigeria Governor Olayemi Cardoso said the apex bank is ready for election-related liquidity pressures. "We are ready," Cardoso said after the 307th Monetary Policy Committee meeting in Abuja, adding that the CBN had studied previous election cycles and would "proactively deploy any tools and instruments to mop up any excess liquidity."

The World Bank also raised its sub-Saharan Africa growth projection to 4.3 per cent in 2026, up from 4.1 per cent in 2025 and 0.3 percentage points above its April forecast. Nigeria was among nearly three-quarters of countries in the region whose 2026 forecasts were upgraded. Chief Economist for Africa Andrew Dabalen said the region had shown resilience despite a challenging global environment.