Nigerian economy recovers, but poverty remains a threat – World Bank Report

According to the report, wage growth has lagged behind inflation, leaving real incomes under pressure and poverty levels largely unchanged.

Nigeria’s economy strengthened in 2026, driven by gains from recent stabilisation reforms, but poverty has yet to decline, according to a new World Bank report.

The World Bank revealed the insights in a 2026 Economic Update released on Tuesday, titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development”.

According to the bank, the Nigerian economy grew at a moderate pace in 2026, despite a slight cooldown following the start of the Middle East conflict. This followed a 4.1 per cent expansion in 2024, while real GDP grew by 4.0 per cent in 2025.

It noted that the growth was driven primarily by the services sector, particularly ICT, financial services, and real estate, while agriculture and crude oil production have also contributed modestly.

The World Bank noted that the country’s inflation declined substantially, though it remained in double digits as the Middle East conflict added renewed pressure on the economy.

“Tight monetary policy, reduced exchange rate volatility, and improved food supply have helped ease price pressures,” the report stated.

The report also acknowledged that favourable external inflows contributed to a buildup in reserves, with net external reserves rising to $34.8 billion at end-2025 and gross reserves reaching $45.5 billion, which is equivalent to 8.7 months of imports.

According to the World Bank report, Nigeria’s fiscal deficit widened slightly in 2025, as the continued surge in non-oil revenues was largely absorbed by increased state-level capital spending and higher federal recurrent spending.

“Federation Account Allocation Committee (FAAC) gross revenues rose from 7.9 percent of GDP in 2024 to 8.5 percent in 2025, driven by strong non-oil tax collections reflecting improved tax administration.

“This includes expanded e-filing and e-payments, higher compliance ahead of the implementation of the new tax bills, and the rollout of VAT e-invoicing, alongside a 0.2 percent of GDP rise in subnational internally generated revenues,” the report stated.

Worsening Poverty

The World Bank further warned that for most Nigerians, the economic recovery has yet to translate into better living conditions.

According to the report, wage growth has lagged behind inflation, leaving real incomes under pressure and poverty levels largely unchanged.

“Notably, food inflation declined from 27.0 per cent y/y to 12.1 per cent y/y over the same period, easing pressure on real incomes, particularly for lower-income households.”

“Nevertheless, household incomes have not grown fast enough to offset still-elevated inflation, and poverty has yet to begin declining.”