World Bank says Nigerian economy to grow in 2026 but Iran war lifts inflation

World Bank said on Tuesday that Nigeria’s economy is resilient and set to grow in the first half of 2026 despite the Iran war, adding that rising fuel costs and persistently high inflation risk squeezing incomes and ‌slowing poverty reduction.

Business activity remains in expansion territory with the U.S./Israel-Iran conflict so far lifting prices but leaving output largely intact, World Bank Nigeria lead economist Fiseha Haile said during a presentation in the capital Abuja.

“Overall business activity has been expanding over the past few months, suggesting the impact on growth has been relatively contained. But the shock is still being felt through higher inflation,” Haile said.

President Bola Tinubu, now in his third year in office, has rolled out Nigeria’s most ambitious economic overhaul in decades by ending costly fuel and energy subsidies, devaluing the currency and changing the tax system to stabilise an economy battered by high inflation, currency weakness and external shocks.

Inflation eased sharply to 15.06% in February from around 33% in December 2024, but remains high compared with regional peers and has come under renewed pressure since the Middle East conflict began, Haile said.

Fuel prices ‌have risen more than 50% during the Iran war, feeding into transport, food and production costs. Nigeria should consider lifting curbs on fuel imports to help ease inflation, he said.

“Inflation is still elevated and under increasing pressure, and that poses risks to incomes and poverty reduction,” Haile said.

Nigeria’s external buffers have improved as foreign exchange reserves rise and volatility eases, but tighter global financing conditions still threaten inflows, borrowing costs and remittances.

Nigeria’s fiscal deficit widened slightly to 3.1% of GDP in 2025, but remains lower than in pre-reform years, Haile said, adding that the debt‑to‑GDP ratio fell for the first time in a decade, helped by stronger fiscal performance and exchange rate valuation gains.

The World Bank forecasts economic growth of about 4.2% for 2026 and urged authorities to save windfalls from higher oil prices, keep monetary policy tight, and avoid blanket subsidies to rein in inflation.