The World Bank reported that Nigeria's economy remains resilient and is likely to register growth in the first half of 2026, even as inflation has come under renewed upward pressure linked to the U.S./Israel-Iran conflict. The institution's Nigeria lead economist, Fiseha Haile, said on Tuesday in Abuja that business activity has continued to expand in recent months, indicating the hit to output so far has been relatively modest.
"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 during a presentation in the capital. The World Bank's assessment balances that ongoing expansion in activity with the inflationary effects of higher global fuel prices.
President Bola Tinubu, now in his third year in office, has enacted sweeping economic changes designed to stabilise a struggling economy. Key elements of the administration's package include ending sizeable fuel and energy subsidies, devaluing the currency and overhauling the tax system. These measures aim to address an economy coping with high inflation, currency weakness and external shocks.
Inflation in Nigeria eased substantially to 15.06% in February from roughly 33% in December 2024, but the World Bank cautioned that it remains high relative to regional peers. Since the onset of the Middle East conflict, inflationary pressure has returned, driven in large part by a sharp rise in fuel costs. The Bank said fuel prices have climbed by more than 50% during the Iran war, a move that has filtered through to transport, food and production costs across the economy.
Haile urged policymakers to consider easing restrictions on fuel imports as a measure to help cool inflation. "Inflation is still elevated and under increasing pressure, and that poses risks to incomes and poverty reduction," he said, pointing to the potential social cost of sustained price pressures.
On external finances, the World Bank noted improvements in Nigeria's buffers. Foreign exchange reserves have risen and market volatility has waned, strengthening the country's position. Nonetheless, the Bank warned that tighter global financing conditions could still undermine inflows, increase borrowing costs and reduce remittances, all of which pose risks for the broader economy.
Fiscal metrics also showed mixed signs of progress. The fiscal deficit widened slightly to 3.1% of GDP in 2025, yet remained below levels seen before the recent reforms. Meanwhile, Nigeria's debt-to-GDP ratio fell for the first time in a decade, a development the World Bank attributed to stronger fiscal performance and valuation gains from the exchange rate.
Looking ahead, the World Bank forecasts economic growth of about 4.2% for 2026. It urged authorities to channel any windfalls from higher oil prices into savings, maintain a tight monetary stance and avoid blanket subsidies that could undermine efforts to rein in inflation.
Key takeaways from the World Bank's briefing include a cautiously optimistic growth outlook for 2026, the immediate inflationary impact of higher fuel prices, and the importance of policy choices in shaping near-term economic outcomes.