Fuel price to slow Nigeria’s poverty reduction – World bank

•Says rising pre-election spending may derail reforms

•Raises Nigeria’s 2026 growth forecast to 4.3%

•Projects 15.7% inflation rate for 2026

•44% of firms in Nigeria, Kenya adopt AI, power constraints threaten gains

The World Bank has warned that elevated fuel prices could slow Nigeria’s poverty reduction efforts despite an expected improvement in economic growth and a sharp decline in inflation in 2026.

The warning was contained in its latest Africa Economic Update, which projected that Nigeria’s economic growth would accelerate from 4.0 per cent in 2025 to 4.3 per cent in 2026, before rising further to an average of 4.4 per cent in 2027 and 2028.

The World Bank attributed the projected improvement to strengthening macroeconomic stability, improved investor confidence and a gradual recovery in private investment.

It said: “Economic activity in Nigeria is projected to strengthen from 4.0 percent in 2025 to 4.3 percent in 2026, before edging up to 4.4 percent annually in 2027–28, supported by improving macroeconomic stability, strengthening investor confidence, and a gradual recovery in private investment.

“Growth continues to be driven primarily by the service sector, particularly financial services, ICT, and real estate, which have benefited from ongoing digitalization and resilient domestic demand.

Agricultural activity is expected to recover in 2026, while growth in the industrial sector is projected to moderate, reflecting softer momentum in oil production and manufacturing.”

On inflation, the World Bank projected a substantial decline from 23.0 per cent in 2025 to 15.7 per cent in 2026, with the rate expected to fall further to 12.2 per cent by 2028.

However, it cautioned that the improvement in living conditions could be constrained by elevated fuel prices linked to the conflict in the Middle East.

The report stated: “Inflation is projected to decline from 23.0 percent in 2025 to 15.7 percent in 2026, easing further to 12.2 percent by 2028 as the effects of monetary tightening, exchange rate stabilization, and improving supply conditions continue to feed through the economy.

“Lower inflation is expected to support household purchasing power and contribute to a gradual reduction in poverty. However, the pace of poverty reduction is likely to remain constrained by elevated fuel prices associated with the conflict in the Middle East, which continue to weigh disproportionately on low-income households.”

The World Bank also noted that higher international oil prices could provide some support to Nigeria’s fiscal and external accounts through stronger oil earnings.

It projected Nigeria’s current account surplus to widen from 4.8 per cent of GDP 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.

However, the World Bank warned that the economic outlook remained exposed to significant downside risks.

These include tighter global financial conditions, a prolonged Middle East conflict, insecurity, climate-related shocks and disruptions to oil production.

It also singled out rising government spending ahead of the 2027 general elections as a major domestic risk.

The report stated: “Nevertheless, the outlook remains subject to significant downside risks, including tighter global financial conditions, a prolonged conflict in the Middle East, insecurity, climate related shocks, disruptions to oil production, and  rising pre-election spending ahead of the 2027 elections.

These factors could weaken reform momentum and erode the social consensus needed to sustain ongoing macroeconomic adjustment efforts.”

The  report  also highlighted Nigeria’s emerging position in Africa’s artificial intelligence ecosystem, but warned that inadequate infrastructure could limit the economic benefits.

According to the World Bank, 44 per cent of surveyed firms across Nigeria and Kenya with at least 20 employees reported using AI technologies, compared with 61 per cent of surveyed firms in the United States. However, the report said adoption in Africa remains relatively shallow, with only 36 per cent of AI-using firms in the developing-country sample using AI agents or AI for automation, compared with 56 per cent in the US.

The bank identified unreliable electricity, limited internet access, high data and device costs and inadequate computing infrastructure as major constraints.  (Vanguard)