In the midst of a difficult external environment characterized by trade tensions, inflationary pressures, and growing debt loads, African economies are battling growing budgetary strains as global growth is predicted to decline to its worst pace since 2008.
Nigeria should step up efforts to diversify its economy and fortify regional trade partnerships in the face of a global economic downturn caused by rising trade tensions and policy uncertainties, according to the World Bank.
Economic diversification and more African integration are essential to maintaining growth and boosting resilience in the face of growing global challenges because of Nigeria’s significant reliance on oil exports and susceptibility to changes in global markets.
According to the World Bank’s most recent Global Economic Prospects report, unless there are outright recessions, sustained global trade tensions and policy uncertainty are predicted to cause global growth to decline to its lowest level since 2008. It is predicted that this slowdown will reduce growth in about 70% of economies, including Nigeria and a large portion of Africa.
Global growth is expected to slow to 2.3% in 2025, which is about half a percentage point less than what was previously anticipated.
Although a worldwide recession is not expected, the 2020s are expected to see the slowest average growth rate since the 1960s.
A worldwide recession, it stated, is not anticipated. However, if predictions for the next two years come to pass, the bank predicted that the first seven years of the 2020s would see the slowest average global growth since the 1960s.
These global dynamics present Nigeria with serious difficulties. Nigeria’s growth prediction has been decreased by the International Monetary Fund (IMF) to 3% in 2025 and 2.7% in 2026. This is due to the combined effects of falling oil prices, rising import prices, and capital flow issues in the face of increased global uncertainty. Because crude oil exports make up more than 70% of Nigeria’s export revenue, the country is especially susceptible to changes in the price of commodities globally.
The developing world is evolving into a region free of development outside of Asia. The World Bank Group’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, stated.
“.” It has been promoting itself for over ten years. Over the past three decades, the growth rate in developing countries has decreased, from 6% per year in the 2000s to 5% in the 2010s to less than 4% in the 2020s.
This reflects the decline in global trade growth, which dropped from an average of 5% in the 2000s to roughly 4.5% in the 2010s and less than 3% in the 2020s. The increase of investments has also slowed, while debt has reached all-time highs.
Nearly 60% of developing economies are predicted to see slower growth this year, with average growth of 3.8 percent in 2025 and a little increase to an average of 3.9 percent in 2026 and 2027. The 2010s average is more than a percentage point higher than that.
It is projected that low-income nations would expand 5.3% this year, which is 0.4 percentage points less than what was predicted at the beginning of 2025. Global inflation, which is expected to average 2.9% in 2025, is nevertheless higher than it was before to the pandemic due to the pressures of tight labor markets and tariff rises.
Growth slowdowns will make it more difficult for emerging nations to create jobs, alleviate extreme poverty, and catch up to developed nations in terms of per capita income. In 2025, developing economies’ per capita income growth is expected to be 2.9%, which is 1.1 percentage points less than the average for the years 2000–2019.
It would take them almost 20 years to reach their pre-pandemic economic output trajectory if developing economies other than China could maintain an overall GDP growth rate of 4%, which is the rate predicted for 2027, according to the analysis.
Global GDP may recover more quickly than anticipated, according to the Bretton Wood institution, provided major economies can resolve trade issues. This would lower financial volatility and general policy uncertainty. Global GDP would be 0.2 percentage points stronger on average throughout 2025 and 2026 if deals resolving today’s trade conflicts were reached that cut tariffs in half from their levels in late May.
Ayhan Kose, the director of the Prospects Group and deputy chief economist at the World Bank, stated that emerging-market and developing economies have benefited from trade integration but are now at the forefront of a global trade war.
Redoubling efforts to integrate with new partners, advancing pro-growth policies, and strengthening budgetary resilience to weather the storm are the best ways to respond. Rekindled international discussion and collaboration may map out a more secure and prosperous future as trade barriers and uncertainty rise, Kose wrote in the paper.
By seeking strategic trade and investment alliances with other economies and diversifying trade, particularly through regional accords, the research makes the case that emerging economies should aim for broader liberalization in the face of growing trade barriers. Policymakers should concentrate on mobilizing domestic income, giving priority to fiscal spending for the most vulnerable households, and fortifying fiscal frameworks in light of the government’s limited resources and growing development demands.
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In order to boost economic growth, the World Bank stated that nations must enhance business environments and encourage productive employment by providing individuals with the skills they need and establishing the framework for labor markets that effectively connect workers and businesses.
In order to sustain the most vulnerable emerging economies, international cooperation will be essential. This cooperation will include multilateral interventions, concessional funding, and emergency relief and support for nations involved in ongoing wars.
In addition to Nigeria’s own 27% tariff on American goods, trade tensions, particularly the US’s 14% tariff on Nigerian exports, threaten to lower export demand and foreign exchange inflows. In addition to raising import prices for Nigerians, these reciprocal tariffs run the risk of further depreciating the Naira and upsetting vital supply lines for the country’s economy.
Nigeria’s fiscal space will probably be constrained by such trade disputes and the ensuing uncertainty, making it more difficult to finance infrastructure and social initiatives, the World Bank cautions. Additional threats to Nigeria and other African economies come from the slowdown in global trade growth, which went from 5% in the 2000s to less than 3% in the 2020s, as well as growing debt levels.
Experts advise Nigeria to reduce reliance on external demand by increasing industrial capacity and deepening internal value chains in order to accelerate economic diversification and overcome these challenges. Another way to counteract global concerns is to pursue strategic commercial alliances within Africa and strengthen regional economic integration.
Furthermore, maintaining growth and job creation depends on strengthening the labor market, boosting domestic revenue, and improving the business climate. To help Nigeria and other vulnerable African nations get through this time of increased economic uncertainty, international assistance and concessional finance will be crucial.
