Nigeria's Economy Stabilizes, but AfDB Warns Financing Gap Threatens Long-Term Development Goals

The African Development Bank's Country Focus Report 2026 says Nigeria's economic reforms have improved growth, reduced inflation and strengthened investor confidence, but the country still needs US$47.6 billion annually and US$2.3 trillion in infrastructure investment by 2043 to achieve sustainable development. The report urges policymakers to strengthen domestic revenue, deepen financial markets, expand public-private partnerships and attract private investment, while calling on development partners to support blended finance and institutional reforms to help close Nigeria's financing gap.

Nigeria has restored a measure of economic stability after years of high inflation, foreign exchange volatility and fiscal stress, but the country's biggest challenge is no longer macroeconomic recovery, it's finding enough money to sustain long-term development. That is the central message of the African Development Bank's (AfDB) Country Focus Report 2026, which says recent reforms have laid the foundation for stronger growth, but achieving the Sustainable Development Goals (SDGs) and closing Nigeria's infrastructure gap will require unprecedented levels of public and private investment. The report estimates that Nigeria needs US$47.6 billion every year to achieve the SDGs by 2030, while cumulative infrastructure investment requirements could reach US$2.3 trillion by 2043. Without a significant increase in financing, the country's development ambitions could remain out of reach despite improving economic indicators.

Economic Reforms Deliver Stability, But Growth Alone Is Not Enough

According to the report, Nigeria's economy grew by 4.0% in 2025, supported by stronger performance in services, agriculture, oil and gas, trade, and real estate. Inflation eased to 23% from 33.2% in 2024, helped by tighter monetary policy and foreign exchange reforms introduced since 2023. The country's foreign exchange reserves also improved to around US$45 billion, providing nearly 11 months of import cover. At the same time, the current account remained in surplus due to stronger oil exports and remittance inflows.

The AfDB attributes these improvements to a series of major reforms, including foreign exchange liberalization, removal of fuel subsidies, tax reforms, banking sector recapitalization and stronger monetary policy. However, the report cautions that macroeconomic stability is only the first step. Despite higher growth, an estimated 31% of Nigerians continue to live in extreme poverty, highlighting the gap between economic recovery and improvements in living standards.

Closing the Financing Gap Requires Better Revenue and Smarter Spending

The report identifies weak domestic resource mobilization as one of Nigeria's biggest structural challenges. Although government revenue increased from 10.8% of GDP in 2024 to an estimated 13.5% in 2025, Nigeria still has one of Africa's lowest tax-to-GDP ratios. Heavy dependence on oil revenues, a large informal economy, weak tax compliance and revenue leakages continue to limit the government's ability to finance development.

The AfDB recommends expanding the tax base rather than simply raising tax rates. Greater use of digital tax systems, stronger revenue administration, formalizing informal businesses and improving tax collection at the state level could significantly increase public revenues. The report also urges policymakers to improve public financial management so that available resources are spent more efficiently on infrastructure, education, healthcare and social protection.

Debt management is another priority. While Nigeria's public debt remains moderate relative to GDP, debt servicing consumes almost half of federal government revenue, reducing fiscal space for development spending. The Bank argues that future borrowing should focus on productive investments capable of generating long-term economic returns rather than financing recurrent government expenditure.

Private Investment and Financial Markets Hold the Key

The report stresses that public resources alone cannot finance Nigeria's development ambitions. It calls for stronger capital markets, wider financial inclusion, improved access to finance for small and medium-sized enterprises, and greater use of innovative financing instruments such as green bonds, blended finance, infrastructure bonds, diaspora bonds and climate finance.

Public-private partnerships (PPPs) are identified as one of the country's biggest opportunities. Investments in transport, electricity, renewable energy, water, logistics and digital infrastructure could help close Nigeria's infrastructure gap while reducing pressure on government finances. However, attracting private capital will require transparent regulation, stronger project preparation, predictable policies and improved governance.

The report also highlights Nigeria's pension funds and insurance industry as underutilized sources of long-term domestic capital. Better mobilization of these resources could significantly increase investment in productive sectors while reducing dependence on external borrowing.

A Shared Agenda for Governments, Development Partners and Investors

For policymakers, the report emphasizes maintaining reform momentum while strengthening institutions, improving revenue collection, diversifying the economy beyond oil and ensuring that economic growth translates into better jobs and lower poverty. Continued investment in energy, transport, manufacturing, agriculture, education and digital infrastructure will be essential for sustaining productivity and competitiveness.

For international development partners, the findings reinforce the importance of supporting Nigeria through blended finance, technical assistance, institutional reforms and climate finance rather than relying solely on traditional lending. Catalytic financing that attracts private investment could have a much greater development impact than public funding alone.

For private-sector stakeholders, Nigeria presents one of Africa's largest long-term investment opportunities. Infrastructure development, renewable energy, financial services, manufacturing, agribusiness, digital technologies and logistics all offer strong growth potential as reforms improve the business environment. At the same time, investors must remain mindful of risks including oil price volatility, security concerns, climate change and policy implementation challenges.

The AfDB concludes that Nigeria has already demonstrated that bold reforms can restore macroeconomic stability. The next phase will be far more demanding: mobilizing billions of dollars in long-term finance, strengthening institutions and creating an investment climate that allows public and private capital to work together. If these priorities are pursued consistently, Nigeria could transform its recent economic recovery into sustained, inclusive growth and emerge as one of Africa's strongest development success stories.