Nigeria’s economy is expected to grow by 3.5% in 2025 and by a modest 3.7% in 2026, according to World Bank projections. This growth would be fuelled by gradual improvements in macroeconomic stability and greater activity in the services sector.
In the face of persistent domestic and international difficulties, these projections, which are covered in the World Bank’s most recent Global Economic Prospects report, point to a gradual but steady recovery for Nigeria.
Strong performance in the services sector, particularly in financial and telecommunication industries, was the main driver of Nigeria’s growth, which grew to an expected 3.3% in 2024.
The World Bank observed that the fiscal and macroeconomic changes made in 2024 contributed to an increase in business confidence.
The report stated, “In Nigeria, growth increased to an estimated 3.3% in 2024, mainly driven by services sector activity, particularly in financial and telecommunication services. Macroeconomic and fiscal reforms helped improve business confidence.
“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.”
Economic Factors and Obstacles
The anticipated recovery in consumption, bolstered by a slow decline in inflation after the Central Bank of Nigeria tightened monetary policy in 2024, is reflected in the growth forecast for 2025 and 2026.
While oil production is predicted to rise somewhat but stay below the nation’s OPEC quota, the services sector is likely to continue to be the primary engine of growth.
According to the World Bank’s report, Nigeria’s growth is expected to pick up speed in 2025–2026, averaging 3.6% annually.
Inflation is expected to steadily decrease as monetary policy tightens in 2024, increasing demand and fostering expansion in the services sector, which remains the primary engine of GDP.
Over the predicted period, oil production is anticipated to rise, but it will still fall short of the OPEC limit.
According to the baseline estimate, the increase in per capita income is expected to be modest during the duration of the forecast.
The World Bank underlined that despite these encouraging trends, per capita income growth is probably going to continue to be sluggish for the foreseeable future.
The enduring structural problems, such as inflationary pressures, a depreciating naira, and poor oil production seriously threaten long-term economic recovery. Growing debt-servicing expenses and constrained fiscal reserves further complicate Nigeria’s economic prospects.
Regional Background
- Nigeria’s performance continues to be vital to the economic development of Sub-Saharan Africa. The region is expected to develop at a faster rate in 2025 and 2026, from 3.2% in 2024 to 4.1% and 4.3%, respectively, due to strong domestic demand and better trade prospects.
- The two biggest economies in the region, South Africa and Nigeria, grew by an average of 2.2% in 2024, propelled by increased oil output in Nigeria and better energy supplies in South Africa.
- According to World Bank projections, Nigeria’s economy would pick up speed in 2025–2026, averaging 3.6% annually, thanks to strong services sector activity and rebounding domestic demand. Nonetheless, it is anticipated that macroeconomic issues such as currency rate vulnerabilities and inflationary pressures will continue to have an impact on economic performance.
What To Note
- According to the most recent report from the National Bureau of Statistics (NBS), Nigeria’s GDP rose by 3.46% in real terms during the third quarter of 2024, as previously reported by THE NEWS CHRONICLES.
- This represents an improvement over the 3.19% growth seen in the second quarter of 2024 and a significant increase over the 2.54% growth noted in a similar period of 2023.
- The services sector, which grew by 5.19% and contributed 53.58% of the total GDP, was the main driver of the growth in Q3 2024.
- This demonstrates the sector’s increasing significance in Nigeria’s economy since expansion in the sector typically results in economic growth as a whole.
