The World Bank has maintained its earlier projection that Nigeria’s economy will grow by 3.6 percent in 2025, even as it trimmed its global forecast due to mounting trade tensions and rising uncertainty in international markets.
In its Global Economic Prospects report released Tuesday, the Bank revised its 2025 global growth outlook downward to 2.3 percent, a 0.4 percentage point cut from its January estimate. It cited “higher tariffs and heightened uncertainty” as critical drags on global trade, investment, and supply chains.
Despite this more pessimistic global tone, the Bank said Nigeria’s economic momentum is expected to hold steady, bolstered by ongoing reforms and rising investment in service sectors such as financial services and ICT. It reaffirmed that domestic growth would accelerate from an estimated 3.4 percent in 2024 to 3.6 percent in 2025, and average 3.8 percent from 2026 through 2027.
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“Domestic reforms have helped spur investment, supporting growth in the services sector, especially in financial services and information and communication technology,” the Bank said. “Services activity will continue to be the main driver of growth, while the industrial sector will remain constrained by subdued crude oil production.”
The Bank’s outlook also suggests gradual inflation easing, as monetary tightening implemented in 2024 — in response to the naira’s rapid depreciation — begins to take effect. Inflation has remained elevated in Nigeria, driven by exchange rate volatility, fuel subsidy removal, and rising food costs. However, tighter policy and structural reforms are expected to moderate price growth in the coming year.
Limited Impact of Global Trade Tensions
While the World Bank expects escalating trade tensions between major powers like the United States and China to dampen global output, it downplayed the immediate impact on Nigeria and much of Sub-Saharan Africa (SSA). The report noted that the region’s limited integration into global manufacturing supply chains offers some insulation from direct trade fragmentation.
“The direct impact on SSA growth of further escalation in global trade tensions may be contained owing to the limited direct exposure to export markets in China and the United States, apart from commodity demand,” the report said.
That said, Nigeria remains vulnerable to commodity price fluctuations, particularly a downturn in crude oil or mineral exports linked to any broader slowdown in China — one of Africa’s largest commodity trading partners. A steeper-than-expected slowdown in China would shrink demand for minerals and metals, with ripple effects across SSA economies dependent on extractive exports.
Growth Too Weak to Cut Poverty
While Nigeria’s macro outlook appears stable, the Bank warned that the region’s per capita income growth — including Nigeria’s — remains weak. It forecasts average per capita gains of just 1.6 percent between 2025 and 2027, far too low to make meaningful progress in lifting people out of poverty.
“This pace would mean that, in terms of living standards, the region would fall even further behind other emerging markets and developing economies, excluding China and India,” the Bank noted. “These per capita income gains will remain inadequate for significantly reducing extreme poverty in the region.”
Sub-Saharan Africa still hosts the majority of the world’s poorest people, and the Bank emphasized that sustained improvement in welfare would require faster income growth, greater investment in social infrastructure, and more inclusive economic planning.
Mounting Risks from Insecurity and Climate Shocks
The report also flagged rising insecurity, climate shocks, and limited fiscal space as key threats to long-term growth. It noted that persistent violence across parts of the region, including Nigeria, continues to weigh heavily on investment, agricultural productivity, and household welfare.
Meanwhile, the economic toll from worsening weather events — floods, droughts, and erratic rainfall — is rising sharply.
“The share of the population affected by adverse weather events, which destroy crops and dampen economic activity, has increased sharply in recent years,” the Bank warned.
Even though public debt levels are projected to ease moderately, high debt servicing costs remain a concern. Nigeria and many of its regional peers are struggling with limited fiscal space for development-related spending, particularly after a recent rise in sovereign spreads increased borrowing costs.
Foreign aid inflows are also shrinking, putting more pressure on national budgets. “Further declines in official development assistance inflows risk worsening humanitarian and fiscal challenges,” the report said.
Conversely, the World Bank’s decision to maintain Nigeria’s growth projection at 3.6 percent signals cautious optimism. However, the Bank’s warning that current growth remains inadequate to reduce poverty underlines economists’ warning that macro stability alone will not solve Nigeria’s deeper development challenges.