The International Monetary Fund has projected that Nigeria’s economy will grow by 4.1 per cent in 2026, but warned that rising prices of essential goods could deepen poverty and worsen food insecurity across the country.
In its July 2026 World Economic Outlook Update released on Wednesday, the Fund retained its April forecast for Nigeria while cautioning that higher costs for basic necessities may offset some of the gains from ongoing economic reforms.
According to the report, Nigeria continues to benefit from improved macroeconomic stability and favourable terms-of-trade effects. However, the Fund noted that these positive developments could be undermined by soaring prices of essentials, which are expected to further aggravate poverty and food insecurity.
“Nigeria is supported by improved macroeconomic stability and favourable terms-of-trade effects, though higher prices for essentials are expected to further aggravate poverty and food insecurity,” the report read.
The IMF projected Nigeria’s growth to rise further to 4.3 per cent in 2027, even as it warned that households across the country remain highly vulnerable to rising living costs.
The Fund also retained its forecast for sub-Saharan Africa at 4.3 per cent in 2026, noting that performance would vary widely among countries depending on policy choices, reform implementation and exposure to external shocks.
It observed that oil-importing and non-resource-intensive economies in the region were likely to suffer more from rising energy and food prices, while some larger economies had benefited from earlier stabilisation efforts despite facing weaker official development assistance.
On the global front, the IMF projected economic growth of 3.0 per cent in 2026 and 3.4 per cent in 2027, compared with an average of 3.5 per cent in 2024 and 2025. It attributed the slowdown to the economic fallout from the war in the Middle East, although stronger technology investment driven by advances in artificial intelligence was expected to partly offset the impact.
The Fund warned that inflationary pressures had intensified following higher energy prices, with global headline inflation projected to rise from 4.1 per cent in 2025 to 4.7 per cent in 2026 before declining to 3.9 per cent in 2027.
It noted that the disinflation trend in place since the beginning of 2024 had stalled.
According to the IMF, renewed geopolitical tensions remain the biggest downside risk to the global economy, warning that a possible escalation of conflict in the Middle East could extend commodity price volatility, further threaten supply chains, raise prices and weigh on financial conditions.
The report projected that higher energy costs would continue to feed into food prices. Crude oil prices were estimated to rise by 32 per cent in 2026 compared with 2025 levels, while natural gas prices would increase by 22 per cent. Fertiliser prices were forecast to rise by 26 per cent, with food prices expected to increase by eight per cent because of higher energy, transport and fertiliser costs.
The IMF further cautioned that food insecurity could deteriorate materially if disruptions in fertiliser and energy markets persisted, particularly in low-income countries in South Asia and sub-Saharan Africa, where food supply is largely provided by smallholder farmers unable to outbid competitors from wealthier nations.
The Fund advised governments against broad-based fuel subsidies, tax cuts and price controls, describing such measures as expensive and often poorly targeted.
Instead, it recommended temporary and targeted support for vulnerable households while maintaining policies aimed at restoring price stability.
“Fiscal policy should avoid broad-based subsidies, tax cuts, and price controls, which are typically poorly targeted, fiscally costly, and politically difficult to unwind. If support is deemed necessary, it should be temporary, tightly targeted to vulnerable households, and embedded in a macroeconomic policy mix consistent with price stability,” the report stated.
The IMF also urged countries to rebuild fiscal buffers, strengthen tax administration, improve spending efficiency and expand well-targeted social protection programmes to cushion the impact of rising living costs while preserving debt sustainability.
The warning comes as Nigeria’s headline inflation rose to 15.93 per cent in May 2026, marking the third consecutive monthly increase in the annual inflation rate. The National Bureau of Statistics had reported that inflation increased from 15.69 per cent in April to 15.93 per cent in May, extending a rebound that began in March.
The organised private sector has blamed geopolitical tensions in the Middle East, rising energy costs, insecurity and import bottlenecks for the worsening inflation.
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