AfDB Sees Nigeria’s Economic Growth Slipping to 3.7% in 2027, Explains Why

By Àkànní Olúwaségún Michael

Nigeria’s economic growth is projected to moderate to 3.7 percent in 2027 as weaker global oil prices reduce external earnings and fiscal buffers, according to the African Development Bank’s African Economic Outlook 2026 report.

The continental lender, however, expects a modest near-term improvement in growth performance, projecting that Africa’s largest economy will expand by 4.1 percent in 2026, slightly above the estimated 4.0 percent growth rate for 2025.

The AfDB attributed the expected 2026 growth to stronger oil production, favourable crude prices, services sector expansion, and increased public investment in infrastructure, particularly electricity, transportation, and logistics.

“Growth in Nigeria, the region’s largest economy, is projected to increase marginally from an estimated 4.0 percent in 2025 to 4.1 percent in 2026,” the report stated.

“In 2027, growth is projected to decelerate to 3.7 percent on account of the anticipated easing of global oil prices and thus reduced external revenue inflows.”

The projection underscores Nigeria’s continued vulnerability to oil market volatility despite ongoing efforts to diversify the economy and deepen non-oil revenue sources.

Oil receipts remain critical to Nigeria’s fiscal position, foreign exchange liquidity, and external reserves, making the economy highly exposed to shifts in global commodity prices.

The AfDB warned that Africa’s broader medium-term outlook remains exposed to several downside risks, including persistent inflationary pressures, exchange rate depreciation, tighter global financial conditions, geopolitical fragmentation, and supply chain disruptions.

According to the report, elevated fuel and fertiliser costs could weaken agricultural productivity across the continent, worsen food insecurity, and sustain inflationary trends.

The bank also noted that prolonged inflation could force African central banks to maintain tight monetary conditions, potentially constraining credit growth and private sector investment.

“Elevated inflation could force African central banks to tighten monetary policy further, thereby weakening growth through reduced lending to the private sector,” the report said.

The AfDB added that recurring external shocks may heighten debt vulnerabilities across African economies by increasing borrowing costs, weakening fiscal balances, and limiting public sector spending capacity.

To mitigate these risks, the bank urged African governments to adopt coordinated fiscal, monetary, and structural reforms aimed at strengthening economic resilience.

It also called for improvements in domestic resource mobilisation through broader tax bases, digitised tax administration systems, and stronger transparency mechanisms in public finance management.

The report further advised African countries to attract long-term external capital into emerging sectors such as renewable energy, digital infrastructure, and data centres.

According to the AfDB, preserving macroeconomic stability and deepening domestic financial markets will remain essential to sustaining investor confidence and reducing the risk of capital flight.

In the report’s foreword, AfDB President, Dr Sidi Tah, said African economies had continued to demonstrate resilience despite mounting global economic and geopolitical pressures.

“Africa stands at a critical juncture in its development journey,” Tah said.

“Its economies continue to demonstrate remarkable resilience despite numerous concurrent challenges, such as escalating trade tensions, climate change, declining international aid, and geopolitical fragmentation.”

He noted that Africa’s average real GDP growth strengthened to 4.4 percent in 2025, positioning the continent among the world’s fastest-growing regions.

Tah stressed that Africa would need to sustain annual growth rates of at least seven percent over several decades to drive meaningful job creation and poverty reduction.

The report also estimated that Africa could unlock up to $1.43 trillion in additional annual financing by addressing inefficiencies in domestic resource mobilisation and public investment management.

It stated that about $469 billion in potential revenue remains untapped due to weaknesses in tax compliance, administration, and policy design, while more than 40 percent of public investment is lost to inefficiencies.

For West Africa, the AfDB projected regional growth to stabilise at 4.7 percent in 2026 and 4.5 percent in 2027, compared to an estimated 4.8 percent growth rate in 2025.

The bank added that 10 of the region’s 15 economies are expected to post growth rates of at least five percent in 2026, placing them among Africa’s fastest-growing economies.