Why Nigeria’s improved growth forecasts still aren’t enough, By Posi Olatubosun

A growth rate measures the pace at which total output expands, not how evenly that growth is distributed. Nigeria’s population grows by approximately 2.5 per cent annually. With the economy expanding at just over 4 per cent, output per person increases by perhaps 1.5 to 2 per cent a year. At that rate, average income per capita would take more than three decades to double. This arithmetic explains why headline growth and household experience can diverge so sharply. Given Nigeria’s demographic profile, growth closer to 7 or 8 per cent, sustained over many years, is needed to make a decisive impact on poverty and unemployment.

Nigeria’s economy is expanding. Why, then, do so many Nigerians feel that they are making little progress? This question arises amid a week of encouraging forecasts. The International Monetary Fund has raised its projection for Nigeria’s growth in 2026 to 4.2 per cent and expects growth of 4.3 per cent in 2027. In its latest Nigeria Development Update, the World Bank projects growth of 4.3 per cent this year, rising to an average of 4.4 per cent in 2027 and 2028.

Official data indicate that the economy expanded by 4.43 per cent in the second quarter of 2026, up from 3.89 per cent in the first quarter. These are the strongest figures in years. Nevertheless, public service workers recently staged a three-day warning strike over economic hardship, while ActionAid Nigeria has described the current rate of growth as insufficient. Both perspectives can be valid simultaneously. Nigeria’s economy is growing, but not yet rapidly or broadly enough for most people to benefit from this.

The improvement merits recognition. Growth exceeding 4 per cent after years of hovering between 2 and 3 per cent indicates that reforms are beginning to yield results. The foreign exchange market is more orderly, reserves have been rebuilt, inflation has eased from its peak, and oil production has improved. Upgrades from both Bretton Woods institutions reinforce the view that Nigeria is pursuing a credible course. For investors, this credibility is significant: it reduces perceived risk and encourages long-term commitments. Precision is essential, however.

A growth rate measures the pace at which total output expands, not how evenly that growth is distributed. Nigeria’s population grows by approximately 2.5 per cent annually. With the economy expanding at just over 4 per cent, output per person increases by perhaps 1.5 to 2 per cent a year. At that rate, average income per capita would take more than three decades to double. This arithmetic explains why headline growth and household experience can diverge so sharply. Given Nigeria’s demographic profile, growth closer to 7 or 8 per cent, sustained over many years, is needed to make a decisive impact on poverty and unemployment.

The first reason economic growth has not yet been widely felt is its composition. Much of Nigeria’s expansion has been driven by services such as finance, telecommunications, and trade, as well as by a recovering oil sector. These activities are important, but they generate relatively few jobs per naira of output. Agriculture and manufacturing, which employ substantially more people, have faced challenges including insecurity, high input costs, and unreliable electricity. Growth concentrated in capital-intensive or urban sectors will increase GDP more rapidly than it raises household incomes.

What would make growth more inclusive? The World Bank’s plan to mobilise approximately $5.79 billion in private financing, with a projected 850,000 jobs, points in the right direction. Such initiatives should prioritise sectors with strong employment potential, including agro-processing, light manufacturing, construction, logistics, and digital services that extend beyond Lagos and Abuja.

The second reason is the lingering impact of past inflation. Although inflation has eased considerably, a slower rate of price increases does not reverse the earlier surge. Food, transport, and rent prices remain far above their levels of three years ago, while many salaries have not kept pace. Workers who feel poorer are not mistaken; their real incomes have eroded faster than the economy has grown. Restoring purchasing power will take time, even if prices remain stable.

The third reason is that the gains of stability have not fully reached small businesses. Manufacturers and traders need affordable credit, reliable power, and secure transport routes to expand. Until recently, interest rates were punishingly high, and many firms still find bank lending out of reach. The Central Bank’s recent rate cut may help, but transmission takes time. Without expanding enterprises, job creation will lag behind GDP growth.

What would make growth more inclusive? The World Bank’s plan to mobilise approximately $5.79 billion in private financing, with a projected 850,000 jobs, points in the right direction. Such initiatives should prioritise sectors with strong employment potential, including agro-processing, light manufacturing, construction, logistics, and digital services that extend beyond Lagos and Abuja.

Ultimately, Nigerians will judge growth by jobs, incomes, and the cost of living, not by forecasts from Washington. Four per cent growth is a foundation, not a destination. The task now is to build on it, turning stability into investment, investment into employment, and employment into rising living standards. The forecasts show Nigeria is moving in the right direction. The challenge is to move faster and bring more Nigerians along.

Public investment should focus on the binding constraints that impede these sectors. Electricity remains the most significant. Few interventions would increase productivity across the economy as rapidly as a reliable power supply. Security is equally critical. Farmers who cannot safely access their fields will not increase output, regardless of how favourable the macroeconomic environment may be. Rural insecurity has disrupted food production, increased prices, and displaced people from productive activity. Investment in security and rural infrastructure is therefore an economic policy priority, not merely a matter of public order.

Human capital is the third priority. A growing young population is an asset only if it has the skills employers need. Spending on education, vocational training and health is not a cost to be cut when budgets are tight; it determines whether Nigeria’s demographic dividend becomes a dividend or a burden. Risks remain. The IMF has warned that rising energy and food prices, global disputes and possible market corrections linked to artificial intelligence threaten the global outlook. Higher oil prices may help Nigeria’s revenue, but they also raise domestic fuel and transport costs. The pre-election period adds its own pressure. Politically driven spending, rather than productive need, could reignite inflation and undo hard-won stability.

Ultimately, Nigerians will judge growth by jobs, incomes, and the cost of living, not by forecasts from Washington. Four per cent growth is a foundation, not a destination. The task now is to build on it, turning stability into investment, investment into employment, and employment into rising living standards. The forecasts show Nigeria is moving in the right direction. The challenge is to move faster and bring more Nigerians along.

Posi Olatubosun is a UK-based academic faculty member in accounting and finance.