Nigeria’s economy is poised for moderate growth in the coming years, the World Bank’s latest Global Economic Prospects report for Sub-Saharan Africa. The report projects the country’s Gross Domestic Product (GDP) to strengthen to an average of 3.6 percent per annum between 2025 and 2026.
This positive outlook follows an estimated 3.3 percent growth in 2024, primarily driven by the services sector, particularly in finance and telecommunications.
“Macroeconomic and fiscal reforms helped improve business confidence,” the World Bank report stated.
“In response to rising inflation and a weak naira, the central bank tightened monetary policy. Meanwhile, the fiscal deficit narrowed due to a surge in revenues driven by the elimination of the implicit foreign exchange subsidy, following the unification of the exchange rate and improved revenue administration.”
Inflation and Monetary Policy
The report anticipates a gradual decline in inflation following monetary policy tightening in 2024. This, in turn, is expected to boost consumption and further support growth in the services sector, which remains the primary driver of the Nigerian economy.
Oil Production and Economic Challenges
The projection indicates an increase in oil production during the forecast period, but it will remain below the OPEC quota. This, coupled with the report’s projection of weak per capita income growth, highlights the ongoing economic challenges facing the country.
Sub-Saharan Africa
Growth in Sub-Saharan Africa as a whole picked up from 2.9 percent in 2023 to an estimated 3.2 percent in 2024, a slight decrease from the June projection, primarily attributed to the ongoing conflict in Sudan and various country-specific challenges.
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The report projects a stronger growth rate of 4.2 percent on average for the region in 2025-2026, driven by improvements in the outlook for industrial-commodity-exporting countries, including the region’s largest economies. However, the report warns of significant risks, including:
Weaker global growth: Driven by heightened uncertainty and potential adverse changes in trade policies.
Sharp slowdown in China: The Chinese economy plays a crucial role in global trade and economic growth.
Increased regional or global instability: Such as the escalation of conflicts in Sudan and the Middle East, which could drive up energy and food prices.
Government distress: Amid a possibility of higher-for-longer global interest rates.
Adverse weather events: Increased frequency and intensity of climate-related disasters.
Nigeria GDP Growth and South Africa
Combining the growth of Nigeria GDP growth and South Africa, the two largest economies in the region, the report found an average growth rate of 2.2 percent in 2024, supported by improved electricity supply in South Africa and higher oil production in Nigeria.
Fiscal Space
The report emphasizes the constraints imposed by limited fiscal space across the region. High debt levels and increased borrowing costs are limiting government spending. While fiscal balances are expected to improve, the pace of improvement is projected to moderate.
“Primary fiscal deficits are, on average, forecast to close over the forecast period, with declining deficits in non-resource-rich countries and increasing surpluses in commodity-exporting countries,” the report stated.
If You Ask Me
Despite the projected economic growth, Nigeria GDP growth faces significant challenges, including high inflation, limited fiscal space, and global economic uncertainties. The success of the country’s economic trajectory will depend on effective policy responses to address these challenges and capitalize on the potential for growth in the services sector.