Nigeria is projected to overtake Algeria as Africa’s third-largest economy by 2026, according to the International Monetary Fund. The projection, contained in the IMF World Economic Outlook database, reflects expectations that Nigeria’s economic output will rebound on the back of higher oil production, improved foreign exchange liquidity, and fiscal and monetary reforms implemented by the federal government.
The IMF data indicates that Nigeria’s gross domestic product at current prices stood at approximately 285 billion dollars in 2025, ranking the country fourth behind South Africa, Egypt, and Algeria. South Africa led with an estimated GDP of about 426 billion dollars, followed by Egypt at roughly 349 billion dollars, while Algeria ranked third with around 288 billion dollars. However, the Fund forecasts that Nigeria’s GDP will rise to about 334 billion dollars in 2026, surpassing Algeria’s projected 284 billion dollars and positioning Nigeria as the third largest economy on the continent behind South Africa and Egypt. 
The IMF’s outlook reflects expectations that Nigeria’s recent economic reforms, including the removal of petrol subsidies, liberalisation of the foreign exchange market, and fiscal consolidation measures, will support medium-term growth despite short-term inflationary pressures. These reforms have been central to the economic agenda of President Bola Ahmed Tinubu’s administration since its inauguration in May 2023 and are aimed at correcting longstanding macroeconomic imbalances, boosting investor confidence, and restoring fiscal sustainability.
Nigeria’s economic trajectory over the past decade has been characterised by volatility driven by oil price fluctuations, currency devaluations, and structural weaknesses. In 2014, Nigeria rebased its GDP and overtook South Africa to become Africa’s largest economy, but the subsequent collapse in global oil prices, combined with domestic security challenges, policy uncertainty, and exchange rate distortions, eroded growth and weakened the naira. By the early 2020s, Egypt and South Africa had surpassed Nigeria in nominal GDP rankings, while Algeria’s hydrocarbon-driven economy remained relatively resilient due to conservative fiscal policies and currency management.
Currency devaluation has played a critical role in reshaping Africa’s economic rankings in recent years. Nigeria’s naira underwent multiple devaluations and a major liberalisation in 2023, which significantly reduced the dollar value of its GDP despite domestic output levels. Similarly, Egypt’s pound experienced sharp devaluations under an IMF-backed reform programme, while South Africa’s rand has remained relatively flexible but has been affected by persistent structural constraints and political uncertainty. Algeria’s dinar has been managed through state controls and hydrocarbon revenues, insulating the economy from sudden valuation shocks. These currency dynamics have contributed to shifting nominal GDP rankings even when real economic activity remained broadly stable.
The IMF has also revised Nigeria’s economic growth outlook upward, projecting a growth rate of about 4.4 percent in 2026, up from an earlier estimate of 4.2 percent. The World Bank similarly increased its growth forecast for Nigeria for 2026 to 4.4 percent from a previous projection of 3.7 percent, citing improvements in macroeconomic policy coherence and reform implementation. These projections suggest cautious optimism among international financial institutions regarding Nigeria’s medium-term economic prospects, although both institutions have repeatedly warned of persistent risks, including high inflation, poverty, infrastructure deficits, and governance challenges.
Nigeria’s economy remains heavily dependent on the oil and gas sector, which accounts for a substantial share of government revenue and foreign exchange earnings despite contributing a smaller share to GDP. The IMF’s projection that Nigeria will overtake Algeria is partly driven by expectations of higher oil production following the gradual recovery of output levels from historical lows caused by pipeline vandalism, theft, and underinvestment. Recent efforts by the Nigerian National Petroleum Company Limited and private operators to curb oil theft and rehabilitate infrastructure have contributed to improved production levels, although challenges remain.
Foreign exchange liquidity is another critical factor underpinning the IMF’s forecast. Nigeria’s foreign exchange market has historically been characterised by multiple exchange rates, capital controls, and foreign currency shortages, which discouraged foreign investment and distorted economic signals. The 2023 exchange rate unification policy and subsequent reforms aimed at improving market transparency and liquidity have been welcomed by investors, though they also triggered inflationary pressures and increased the cost of living. The IMF expects that improved foreign exchange market functioning will attract foreign capital inflows and support private sector growth, contributing to higher nominal GDP.
Fiscal reforms, including the removal of fuel subsidies and efforts to broaden the tax base, are also expected to strengthen Nigeria’s public finances and reduce fiscal deficits. Fuel subsidies had long been a major burden on government finances, costing billions of dollars annually and crowding out spending on infrastructure, health, and education. Their removal, although politically sensitive, has been seen as a necessary step toward fiscal sustainability and macroeconomic stability.
Despite the optimistic projections, Nigeria faces significant structural challenges that could affect its economic trajectory. These include high unemployment, particularly among youth, inadequate infrastructure, electricity shortages, insecurity in several regions, and governance concerns. The IMF and World Bank have consistently emphasised the need for structural reforms to improve productivity, enhance human capital development, and diversify the economy away from oil dependence.
For Nigeria, overtaking Algeria as Africa’s third-largest economy in 2026 would symbolise a partial recovery of its economic standing and reflect the impact of ongoing reforms. However, nominal GDP rankings do not fully capture living standards, productivity, or economic resilience. Nigeria remains one of the world’s poorest countries in per capita income terms despite its large economy, and inequality and poverty rates remain high. Sustained growth, structural transformation, and inclusive development will be required to translate macroeconomic gains into tangible improvements in citizens’ welfare.
Samuel Aina