The World Bank has reiterated its projection that the Nigerian economy would grow by 3.6 per cent in 2025 despite the shift in the global trade dynamics.
This was disclosed in its twice-yearly Global Economic Prospects report released on Tuesday, where it slashed its forecasts for nearly 70 per cent of all economies, including the United States, China, and Europe, as well as six emerging market regions, from the levels it projected just six months ago, before US President Donald Trump took office.
The World Bank also slashed its global growth forecast for 2025 by 0.4 percentage points to 2.3 per cent, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies. It warned that global growth could be weaker than projected if global trade tensions were to escalate further.
Earlier in the year, the World Bank projected that Nigeria’s economy would grow by 3.6 per cent in 2025, building on an estimated expansion of 3.4 per cent in 2024, as key macroeconomic reforms begin to stabilize the business environment.
However, in its latest report, the bank stated, “Growth in Nigeria is forecast to strengthen to 3.6 per cent in 2025 and to an average of 3.8 per cent in 2026-27. Following monetary policy tightening in 2024 to address rapid currency depreciation, inflation is projected to decline gradually.
“Domestic reforms have helped spur investment, supporting growth in the services sector, especially in financial services and information and communication technology.
Services activity will continue to be the main driver of growth, while the industrial sector will remain constrained by subdued crude oil production as last year’s slight rebound wanes.”
It affirmed that the global risks of the trade wars will be limited in Nigeria and the rest of sub-Saharan Africa.
The bank further stated, “The direct impact on SSA growth of further escalation in global trade tensions may be contained owing to the limited direct exposure to export markets in China and the United States, apart from commodity demand.”
The direct effects of the increased U.S. trade barriers on SSA economies are expected to be contained, as the region exports relatively few manufacturing goods to the United States. However, should trade fragmentation increase further or lead to a sharper slowdown in global growth, the adverse effects on SSA economies could be considerable due to their dependence on commodity trade.
“Indeed, a worse-than-expected economic slowdown in China would adversely affect the demand for minerals and metals. Lower prices for these commodities, which are the main exports of several SSA countries, would have particularly negative effects on these countries through diminished economic activity and even tighter fiscal space.”
On the other hand, should global trade tensions subside, the growth outlook for SSA would benefit from improved global economic activity, lower export tariffs, higher demand for commodities, reduced uncertainty, and stronger global investors’ risk appetite.
However, it raised concerns about the vulnerability to violence and its impact on economic activities: “Levels of violence in SSA remain high, weighing on economic activity. While public debt-to-GDP ratios are expected to decline gradually, debt servicing costs remain elevated, limiting fiscal space in many SSA economies for development-promoting expenditures, especially given the recent rise in sovereign spreads.
“Further declines in official development assistance inflows risk worsening humanitarian and fiscal challenges. The share of the population affected by adverse weather events, which destroy crops and dampen economic activity, has increased sharply in recent years.”