Yemisi Izuora
Considering volatile geopolitical tensions and energy price instability the World Bank has revised downward Nigeria’s economic growth projection for 2026.
In its April 2026 Economic Outlook update, the World Bank adjusted Nigeria’s growth projection to 4.10 per cent for 2026 and 4.20 per cent for 2027, a notable decline from the 4.40 per cent previously forecast for both years.
“The bank’s downward adjustment was driven by several combined factors, including the persistent uncertainty in the global economy, particularly following the Middle East conflict,” noted an investment analyst at Meristem Securities Limited.
The revision considers intense geopolitical friction between the U.S. and Iran, which triggered a significant oil shock earlier this year. While a brief ceasefire led to a sharp single-day decline in crude prices, the initial spike has already begun to permeate the Nigerian domestic economy through increased transportation and logistics costs.
“The geopolitical tension has triggered an oil shock, driving global fuel and commodity prices upward. This pushed up transportation and food costs in Nigeria, exerting upward inflationary pressures on prices which could dampen consumption and business investment,” the analyst stated.
Beyond external pressures, the World Bank highlighted internal structural challenges that continue to impede a more robust recovery. Weaker-than-expected investment growth and policy ambiguities have left key sectors like agriculture struggling to find a consistent rhythm.
“Weaker investment growth, policy uncertainties, and uneven performance of key sectors like agriculture and oil contributed to the downward revision,” the report observed.
Despite the downgrade, local sentiment remains cautiously optimistic. Analysts point to the Central Bank of Nigeria’s Purchasing Manager’s Index, which remains above the 50-point expansion threshold, as a sign that the private sector is still showing grit.
The financial markets have reacted with a split personality. While the bond market faced sell pressures, the T-Bills and Eurobond markets showed resilience, with yields moderating as investors sought quality assets.
“As the Federal Government continues its push to boost output in the petroleum sector, the focus now shifts to whether domestic policy can shield the economy from the ‘upward trend’ of global inflation, which recently saw U.S. headline figures hit a two-year high of 3.30 per cent. “
“While the reduced growth outlook is likely to temper expectations for corporate earnings and foreign investment inflows, we expect that favourable macroeconomic conditions, particularly with a relatively stable exchange rate and the slightly lower interest rate, recent ratings upgrade and reclassification, will support business activity and sustain positive investor sentiments.
Furthermore, leading macroeconomic indicators like the CBN’s Purchasing Managers’ Index suggest that the domestic economy remained in expansion so far in 2026, as PMI readings stayed above the 50.00 points threshold.
However, growth momentum slowed in March following the escalation of the US-Iran war, with the PMI declining to 53.20 pts (vs. 56.40 pts in February).
“Overall, we expect economic growth momentum to remain resilient in the near to medium term, supported by the government’s efforts to boost output in sectors like oil and agriculture, while a relatively stable interest rate environment and exchange rate market should encourage credit and support import costs, respectively,” the analyst added