The World Bank has warned that elevated fuel prices could slow Nigeria’s progress in reducing poverty even as the country’s economic growth is projected to strengthen in 2026.
The warning was contained in the bank’s latest Africa Economic Update, which raised Nigeria’s 2026 growth forecast to 4.3 per cent from 4.0 per cent recorded in 2025.
The World Bank expects economic growth to increase further to an average of 4.4 per cent in 2027 and 2028, supported by improving macroeconomic stability, stronger investor confidence and a gradual recovery in private investment.
Services, particularly financial services, information and communication technology and real estate, are expected to remain major contributors to economic expansion as digitalisation and domestic demand continue to support activity.
Agricultural production is also projected to recover in 2026, although the industrial sector could experience slower momentum because of weaker growth in oil production and manufacturing.
Despite the positive growth outlook, the World Bank said the improvement in living conditions could be constrained by elevated fuel prices associated with the ongoing conflict in the Middle East.
The bank explained that lower inflation should gradually improve household purchasing power and support poverty reduction, but higher fuel costs disproportionately affect low-income households and could slow the pace of those gains.
The latest forecast puts Nigeria’s inflation rate at 15.7 per cent for 2026, a substantial decline from 23.0 per cent in 2025.
Inflation is expected to fall further to 12.2 per cent by 2028 as the effects of tighter monetary policy, exchange-rate stabilisation and improving supply conditions increasingly filter through the economy.
However, the potential benefits of disinflation could be weakened if fuel prices remain elevated because petrol and other energy costs influence transportation, food distribution, production and household expenses.
The pressure is particularly significant for poorer households, which typically spend a larger share of their income on essential goods and transport.
The World Bank also noted that higher international oil prices could provide some relief to Nigeria’s fiscal and external position by increasing government and export earnings from crude oil.
It projects the country’s current-account surplus to widen from 4.8 per cent of gross domestic product in 2025 to 6.0 per cent in 2026 before narrowing to 3.4 per cent by 2028 as oil prices normalise and import demand strengthens.
The report, however, identified several risks that could undermine Nigeria’s economic progress, including tighter global financial conditions, prolonged instability in the Middle East, insecurity, climate-related shocks and disruptions to oil production.
It also highlighted increased government spending ahead of Nigeria’s 2027 general elections as a significant domestic risk to the economic outlook.
According to the World Bank, rising pre-election spending could weaken the momentum of ongoing reforms and make it more difficult to maintain the public support required for macroeconomic adjustment.
The warning comes as Nigeria continues to deal with the difficult social consequences of higher energy and transportation costs following the removal of petrol subsidies.
Although the World Bank has previously acknowledged progress in restoring macroeconomic stability, it has also stressed that economic growth alone will not be sufficient to substantially reduce poverty if household incomes and productive employment fail to improve.
The bank’s latest assessment therefore places greater emphasis on ensuring that economic recovery translates into improved livelihoods, particularly for vulnerable households.
Beyond fuel prices and inflation, the report also examined Nigeria’s growing role in Africa’s emerging artificial intelligence ecosystem and the potential of technology to support productivity and job creation.
It reported that 44 per cent of surveyed firms in Nigeria and Kenya with at least 20 employees said they use artificial intelligence technologies, compared with 61 per cent of surveyed firms in the United States.
However, the depth of AI adoption remains lower in developing economies, with the World Bank identifying unreliable electricity, limited internet access, expensive data and devices, and inadequate computing infrastructure as major barriers.
Only 36 per cent of AI-using firms in the developing-country sample reportedly use AI agents or artificial intelligence for automation, compared with 56 per cent in the United States.
The findings suggest that Nigeria’s ability to turn technological adoption into broader economic gains will depend partly on improvements in electricity, digital infrastructure and access to affordable technology.
For policymakers, the challenge is therefore to maintain macroeconomic reforms while cushioning vulnerable Nigerians from the immediate effects of higher living costs.
The World Bank’s assessment presents an economy showing signs of greater stability and stronger growth, but with poverty reduction still vulnerable to energy prices, external shocks and domestic policy decisions.
As Nigeria approaches the 2027 elections, the ability to preserve reform gains while improving household welfare is likely to remain central to the country’s economic outlook.