Nigeria’s economy is expected to grow in the first half of 2026, demonstrating resilience even as the ongoing Iran war pushes inflation higher, the World Bank reported on Tuesday.
Rising fuel prices and persistently high inflation, however, threaten to squeeze incomes and slow efforts to reduce poverty, as seen on Reuters.
“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,” said Fiseha Haile, World Bank Nigeria lead economist, during a presentation in Abuja.
While the U.S./Israel-Iran conflict has so far driven prices up, it has left overall economic output largely intact.
President Bola Tinubu, now in his third year in office, has implemented Nigeria’s most ambitious economic reforms in decades, including ending costly fuel and energy subsidies, devaluing the currency, and overhauling the tax system to stabilize an economy challenged by high inflation, currency weakness, and external shocks.
Inflation, which had eased to 15.06% in February from around 33% in December 2024, remains high compared with regional peers and has come under renewed pressure since the Middle East conflict began.
Fuel prices have surged more than 50% amid the war, feeding into higher transport, food, and production costs. Haile suggested that Nigeria consider lifting restrictions on fuel imports to help reduce inflationary pressure.
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“Inflation is still elevated and under increasing pressure, and that poses risks to incomes and poverty reduction,” Haile added.
Nigeria’s external financial buffers have strengthened, with rising foreign exchange reserves and reduced volatility, but tighter global financing conditions continue to threaten inflows, borrowing costs, and remittances.
The country’s fiscal deficit widened slightly to 3.1% of GDP in 2025 but remains below pre-reform levels. The debt-to-GDP ratio also fell for the first time in a decade, supported by stronger fiscal performance and gains from exchange rate valuations.
The World Bank projects Nigeria’s economic growth at about 4.2% for 2026 and recommended that authorities save windfalls from higher oil prices, maintain tight monetary policy, and avoid blanket subsidies to control inflation.
Beyond macroeconomic stabilization, the World Bank emphasized the need to accelerate reforms for inclusive long-term growth, with early childhood development as a priority.
Haile highlighted Nigeria’s dire outcomes in child health and development, describing them as “a crisis.” Currently, 110 children per 1,000 die before age five, roughly 40% are stunted, and more than half fail to meet developmental milestones before school.
While recent investments in health and nutrition are promising, the challenge remains in delivering “a coherent, continuous, child-centred package” from pregnancy to age five, covering health, nutrition, water and sanitation, and foundational learning.
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Image Credit: Vanguard News
