Nigeria's economy ​is resilient and set to grow in the first half of 2026 despite the Iran war, the World ‌Bank said on Tuesday, 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 by 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.

RISK TO INCOMES

"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.

Beyond macro stabilisation, ​Nigeria must accelerate ⁠reforms to deliver inclusive long-term growth, with early childhood development a priority, the World Bank said.

Nigeria's outcomes are among the world's worst, with 110 deaths per 1,000 children before age five, roughly 40% stunted, and more than half failing to ⁠meet developmental ​milestones before school, a situation Haile called "a crisis".

While recent health and ​nutrition investments are encouraging, the challenge, he said, is delivering "a coherent, continuous, child‑centred package" from pregnancy to age five, spanning health, nutrition, water and ​sanitation, and foundational learning.