Global trade and economic growth are expected to slow in 2026, the United Nations Conference on Trade and Development (UNCTAD) has warned. According to its latest report, the world economy is projected to grow by just 2.6 percent in 2025 and 2026, down from 2.9 percent in 2024. Experts caution that this slowdown could have severe implications for developing countries, including Nigeria, which remain highly dependent on global trade and external financing.
Earlier in 2025, global trade experienced a temporary boost, rising by around 4 percent. This growth was fueled by companies rushing to import goods ahead of tariff changes and by soaring demand for digital-economy and artificial intelligence-related products. However, UNCTAD notes that these drivers are short-lived, and underlying trade growth is already tapering off to 2.5–3 percent, a trend likely to continue into next year.
A key factor in the slowdown is the growing role of financial conditions in global trade. Over 90 percent of international trade now relies on bank financing, payment systems, currency markets, and capital flows. This financialization makes trade volumes highly sensitive to interest rate changes, investor sentiment, and global market volatility—unlike in previous decades when trade was mostly driven by real economic demand. Commodity markets, including food exports, are increasingly affected, as financial income now contributes a larger share of revenue for major trading companies.
The UN report highlights that developing countries are particularly vulnerable. While the “global South” accounts for over 40 percent of world output and nearly half of merchandise trade, it represents only about 25 percent of global financial market value. Many countries depend on external borrowing at high interest rates, leaving them exposed to shifts in global liquidity and investor confidence. Such conditions threaten long-term investment, debt sustainability, and economic growth, especially for nations reliant on commodity exports or import-dependent supply chains.
To address these challenges, UNCTAD recommends structural reforms in trade and finance. Countries are urged to update trade rules to reflect digital and climate-sensitive industries, strengthen domestic and regional capital markets, and reduce dependence on volatile external financing. For Nigeria and other developing economies, boosting access to affordable, long-term financing for small businesses and exporters could be key to sustaining growth even amid slowing global trade.
source: Business day