The World Bank has revised its economic growth forecast for Sub-Saharan Africa in 2026 downward to 4.1 per cent, citing mounting debt, rising fuel and fertilizer costs, and fallout from the ongoing Middle East conflict as key risks. The new projection, released Wednesday, marks a decline from the 4.4 per cent forecast in October and indicates growth will remain flat compared to 2025.

According to Andrew Dabalen, World Bank chief economist for Africa, the forecast reflects a more challenging external environment than anticipated. Energy and fertilizer price spikes following the Iran conflict, alongside uncertain investment flows from Gulf countries, have placed additional strain on African economies.

The report warns that remittance inflows, a critical lifeline for millions of African households, may also be affected if Middle East labour demand weakens. The potential slowdown in these transfers could further limit consumption and economic stability.

Debt pressures across the region remain severe. Debt-servicing costs have nearly doubled over the past decade, rising from 9 per cent of government revenues in 2017 to roughly 18 per cent in 2025. Nearly half of Sub-Saharan countries are now classified as either at high risk of debt distress or already experiencing it, leaving governments with limited capacity to respond to new shocks.

The report highlights particular vulnerability in oil-importing and financially fragile economies, including Burundi, Malawi, Ethiopia, Kenya, and Mozambique. For instance, Kenya may face significant inflationary pressures, while Ethiopia is exposed due to its large workforce in Saudi Arabia and other Middle Eastern countries.

While West Africa appears relatively less affected, Dabalen cautioned that incomplete fertilizer data for the sub-region may mask emerging risks.

The World Bank’s assessment underscores Sub-Saharan Africa’s heightened susceptibility to global shocks, warning that geopolitical tensions, commodity price fluctuations, and structural debt challenges continue to weigh heavily on economic recovery prospects.

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The World Bank Country Director for Nigeria, Mathew Verghis, has warned that Nigeria’s stubbornly high inflation is eroding household incomes and driving more Nigerians into poverty.

He described inflation as the most urgent problem limiting economic recovery and weakening purchasing power.

Speaking during an interview with our source, Verghis said poverty levels will continue to rise unless inflation drops significantly. He noted that food inflation, currently hovering around 20 percent, hits poor households the hardest because most of their income goes to food.

Verghis said inflation in Nigeria remains among the highest in the world. He stressed that both monetary and fiscal authorities must act cautiously, adding that loosening policy too early could undermine stabilisation efforts. Bringing inflation down, he insisted, must remain the government’s top priority.

The World Bank director highlighted structural issues that continue to fuel Nigeria’s inflation problem. These include high transport costs caused by poor roads and multiple checkpoints, inadequate power supply and the absence of large-scale irrigation systems. He noted that the Bank is supporting reforms to tackle these long-standing problems.

However, he also listed measures that could provide quicker relief. He pointed out that Nigeria still maintains high import tariffs and, in some cases, total import bans on goods consumed widely by low-income households. Lowering these tariffs, he argued, could bring down prices faster and help protect vulnerable citizens.

Verghis stressed that Nigeria’s ongoing reforms must be sustained. He compared the process to experiences in India and China, noting that their economic transformations took decades of continuous policy adjustments.

He also backed the Central Bank’s decision to keep the benchmark interest rate at 27 percent. According to him, monetary policy must remain firm until inflation shows a clear downward trend.

On exchange rate stability, Verghis said the long-term solution lies in strengthening Nigeria’s export base and attracting more foreign investment. He explained that a stable exchange rate helps businesses plan better but emphasised that the ultimate goal is stronger economic growth.

Verghis also commended Nigeria’s progress in generating higher non-oil revenues. He attributed this development to subsidy removal and a more realistic exchange rate regime.

With revenues improving, Nigeria’s debt indicators are beginning to stabilise, and the debt-to-revenue ratio is now declining for the first time in years.

He warned, however, that borrowing must be transparent and purposeful. Borrowed funds, he said, must be channelled into productive sectors to avoid future debt distress.

Discussing inclusive growth, Verghis said public spending must intentionally target the poor.

He praised the federal government’s plan to reach 15 million vulnerable households through digital cash transfers, describing it as a major step toward reducing inequality.

He emphasised long-term investments in clean water, nutrition, education, and health as critical to building a productive population and sustaining inclusive economic growth.

Verghis concluded that Nigeria’s path to recovery requires a blend of immediate inflation control and long-term structural reforms. According to him, this combination is necessary to rebuild confidence, attract investment and create sustainable economic growth for millions of Nigerians.

Source: Arise TV

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