Nigeria’s Economic Rebound and the Race for Africa’s Top Three

Nigeria is emerging from a period of economic recalibration with renewed momentum, as new projections from the International Monetary Fund (IMF) point to a significant shift in Africa’s economic hierarchy by 2026. The Fund expects Nigeria to overtake Algeria to become the continent’s third-largest economy, reflecting both cyclical recovery and the early effects of structural reform.

In 2025, Nigeria ranked fourth in Africa, with a gross domestic product of roughly $285 billion. It trailed South Africa and Egypt, Africa’s two largest economies, while Algeria held third place with an estimated GDP of $288 billion. The narrow gap between Nigeria and Algeria underscored how sensitive continental rankings had become to exchange-rate movements, energy output, and fiscal policy adjustments.

By 2026, the IMF projects Nigeria’s economy will expand to about $334 billion, compared with Algeria’s forecast GDP of $284 billion. South Africa and Egypt are expected to retain first and second positions, with projected outputs of $443 billion and $399 billion respectively. While the ranking change may appear incremental, it signals a broader shift in economic fundamentals rather than a one-off statistical adjustment.

Nigeria’s projected rebound is anchored primarily in higher oil production, improved foreign-exchange liquidity, and the gradual stabilisation of macroeconomic conditions. The liberalisation of the exchange rate and the removal of petrol subsidies, long considered politically sensitive but economically necessary, have altered price signals and reduced fiscal distortions. Although these reforms have contributed to short-term inflationary pressures, they are expected to support stronger and more sustainable growth over the medium term.

The IMF’s confidence in Nigeria’s outlook is further reflected in its revised growth estimates. In January 2026, the Fund raised Nigeria’s projected growth rate for the year to 4.4 percent, up from an earlier estimate of 4.2 percent. The World Bank reached a similar conclusion, lifting its 2026 growth forecast from 3.7 percent to 4.4 percent. The convergence of projections from both institutions suggests increasing consensus around Nigeria’s recovery trajectory.

Nigeria’s position as Africa’s largest economy has shifted repeatedly over the past decade, shaped by currency devaluations, GDP rebasing exercises, and external shocks affecting commodity-dependent economies. The latest projections indicate that Nigeria’s climb in the rankings is less about headline size and more about improving economic structure and policy direction.

Whether the country can sustain this momentum will depend on the consistency of reform implementation, stability in the energy sector, and the ability to manage inflation without undermining growth. For now, however, Nigeria’s expected return to Africa’s top three economies marks an important turning point in its post-adjustment economic narrative.