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World Bank Projects 3.6% Average Growth for Nigerian Economy in 2025/26

World Bank Projects 3.6% Average Growth for Nigerian Economy in 2025/26

The World Bank has projected an average economic growth rate of 3.6% for Nigeria between 2025 and 2026, citing the Federal Government’s ongoing reforms as a key driver of this positive outlook.

The projection, contained in the World Bank’s “Global Economic Prospects” report for January 2025, credits reforms such as the removal of fuel subsidies, unification of the foreign exchange rate, and controversial tax policies for boosting business confidence and driving economic recovery.

The report highlighted that Nigeria’s Gross Domestic Product (GDP) growth climbed to an estimated 3.3% in 2024, primarily fueled by the services sector, which saw significant activity in financial and telecommunication services. This marks a steady improvement in economic performance compared to the previous year.

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The World Bank stated: “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.”

Inflation and Monetary Policy

The report underscored that inflation, a long-standing challenge in Nigeria, is expected to decline gradually following the Central Bank of Nigeria’s (CBN) tightening monetary policy in 2024. This decline is anticipated to boost consumption, which, alongside the robust services sector, will remain a significant driver of growth over the forecast period.

The World Bank further noted: “Following monetary policy tightening in 2024, inflation is projected to gradually decline, boosting consumption and supporting growth in the services sector, which continues to be the main driver of growth.”

Regional Context: Sub-Saharan Africa Growth Projections

On a broader scale, the World Bank projected that growth in Sub-Saharan Africa (SSA) will firm to 4.1% in 2025 and 4.3% in 2026. The revision reflects improved economic conditions across various subgroups in the region, as financial conditions ease and inflationary pressures subside. Nearly half of the economies in SSA are expected to witness upgraded growth projections for 2025 and 2026.

Oil Production and Its Role in Economic Growth

While Nigeria’s economy is diversifying, oil production continues to play a critical role. The World Bank forecasted a marginal increase in oil production over the forecast period, although output is expected to remain below the Organization of the Petroleum Exporting Countries (OPEC) quota.

Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that daily average oil production rose to 1.486 million barrels per day (mbpd) in November 2024, marking an increase of 152,000 barrels compared to the previous month. However, production slightly declined to 1.667mbpd in December 2024, reflecting a 1.35% month-on-month decrease.

Cumulatively, oil output in December 2024 reached 51.69 million barrels, a marginal 1.9% increase compared to November’s 50.71 million barrels. Despite these gains, the World Bank emphasized that per capita income growth in Nigeria is expected to remain weak over the forecast horizon.

The World Bank attributed the improved economic outlook to several reforms introduced by the Federal Government, including:

  • Removal of Fuel Subsidies: The elimination of subsidies reduced fiscal pressure, redirecting funds toward critical sectors of the economy.
  • Tax Reforms: While some of the proposed tax bills have been controversial, they have contributed to a more structured revenue system.
  • Exchange Rate Unification: This move eliminated the implicit foreign exchange subsidy, resulting in improved revenue collection and narrowing of the fiscal deficit.

The reforms have reportedly bolstered business confidence, with investors and industry players responding positively to the government’s efforts to create a more predictable economic environment.

However, the World Bank warned that Nigeria’s per capita income growth will likely remain weak, indicating that economic gains may not translate into significant improvements in living standards for a large portion of the population.

Additionally, the persistence of high inflation and ongoing structural challenges in key sectors such as energy and infrastructure could limit the full potential of these reforms.

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