High Fuel Costs Threaten Nigeria’s Poverty Reduction Drive — World Bank

The World Bank has cautioned that elevated fuel prices could undermine Nigeria’s poverty reduction efforts, even as the country is projected to record stronger economic growth and lower inflation in 2026.

The warning was contained in the institution’s latest Africa Economic Update, which forecasts that Nigeria’s economy will grow by 4.3 per cent in 2026, up from 4.0 per cent in 2025.

The bank expects growth to improve further to an average of 4.4 per cent annually in 2027 and 2028, attributing the outlook to greater macroeconomic stability, rising investor confidence and a gradual rebound in private investment.

In its report, the World Bank said: “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 2027–28, supported by improving macroeconomic stability, strengthening investor confidence, and a gradual recovery in private investment.

“Growth continues to be driven primarily by the service sector, particularly financial services, ICT, and real estate, which have benefited from ongoing digitalization and resilient domestic demand.

“Agricultural activity is expected to recover in 2026, while growth in the industrial sector is projected to moderate, reflecting softer momentum in oil production and manufacturing.”

The institution also projected a considerable easing of inflation, from 23.0 per cent in 2025 to 15.7 per cent in 2026, before reaching 12.2 per cent by 2028.

It said the expected decline would be driven by the effects of tighter monetary policy, exchange rate stabilisation and improvements in supply conditions.

Nevertheless, the bank warned that high fuel prices resulting from the conflict in the Middle East could continue to put pressure on low-income households, limiting the benefits of falling inflation.

The report stated: “Inflation is projected to decline from 23.0 percent in 2025 to 15.7 percent in 2026, easing further to 12.2 percent by 2028 as the effects of monetary tightening, exchange rate stabilization, and improving supply conditions continue to feed through the economy.

“Lower inflation is expected to support household purchasing power and contribute to a gradual reduction in poverty. However, the pace of poverty reduction is likely to remain constrained by elevated fuel prices associated with the conflict in the Middle East, which continue to weigh disproportionately on low-income households.”

The World Bank further observed that higher global oil prices could strengthen Nigeria’s fiscal and external positions through increased oil earnings.

It forecast that Nigeria’s current account surplus would rise from 4.8 per cent of GDP in 2025 to 6.0 per cent in 2026, before falling to 3.4 per cent by 2028 as international oil prices normalise and demand for imports picks up.

However, the bank warned that several factors could derail the projected economic gains.

Among the risks identified were tighter global financial conditions, a prolonged Middle East conflict, insecurity, climate-related shocks and interruptions to oil production.

It also expressed concern about rising government expenditure ahead of Nigeria’s 2027 general elections, warning that such spending could weaken the country’s economic reform programme.

The report stated: “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.

“These factors could weaken reform momentum and erode the social consensus needed to sustain ongoing macroeconomic adjustment efforts.”

Infrastructure Gaps Could Limit Nigeria’s AI Growth

Beyond the economic outlook, the World Bank highlighted Nigeria’s growing participation in Africa’s artificial intelligence ecosystem but warned that inadequate infrastructure could restrict the technology’s economic impact.

The report found that 44 per cent of surveyed firms in Nigeria and Kenya with at least 20 employees used AI technologies, compared with 61 per cent of surveyed businesses in the United States.

Despite this adoption, the bank said the use of advanced AI applications across developing countries remained limited.

It noted that only 36 per cent of AI-using firms in the developing-country sample deployed AI agents or used AI for automation, compared with 56 per cent in the United States.

The World Bank identified unreliable electricity, restricted internet access, expensive data and devices, and insufficient computing infrastructure as key barriers to broader AI adoption across Africa.

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