Nigeria could face a sharp increase in headline inflation, reaching as high as 37 per cent by 2026, according to the International Monetary Fund (IMF) in its April 2025 World Economic Outlook. The report, released on Tuesday, attributes the projection to structural inefficiencies, persistent inflationary pressures, and recent changes to how the country calculates consumer prices.
The IMF explained that this outlook follows the rebasing of Nigeria’s Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) in January 2025.
The statistical agency revised the base year from 2009 to 2024 to better reflect current consumption patterns, which initially led to a downward adjustment in inflation rates. However, the IMF warns that despite this rebasing, Nigeria’s inflation is unlikely to ease sustainably in the coming years.
According to the Fund, Nigeria’s average inflation rate stood at 33.2 per cent in 2024, and while it is forecast to moderate slightly to 26.5 per cent in 2025, it is expected to surge again to 37.0 per cent by 2026.
The IMF did not provide detailed justifications for this spike but emphasized structural constraints and currency volatility as key drivers.
Despite the rebasing, monthly inflation figures have remained volatile. The NBS recorded January 2025 inflation at 24.48 per cent, a drop from 34.80 per cent in December 2024. However, by March 2025, the figure climbed again to 24.23 per cent, driven by rising food costs, supply chain bottlenecks, and persistent foreign exchange instability.
The IMF’s inflation forecast has sparked debate among Nigerian economic experts. Adewale Abimbola, a Lagos-based economist, criticized the projection, calling it excessively pessimistic.
argued that even during 2024, one of Nigeria’s most inflationary years in recent memoryinflation only averaged 33 percent.
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“I don’t think inflation will reach 37 per cent in 2026. That’s an extreme-case scenario, Abimbola said. He recommended supporting the real economy, enhancing security in food-producing areas, and stabilizing the naira to curb inflation.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, echoed similar sentiments. He highlighted that inflation in Nigeria is mostly supply-driven, impacted by insecurity, logistics challenges, and FX instability.
If we improve oil earnings, manage government spending, and reduce deficit financing, the macroeconomic environment will improve significantly, he noted.
Alongside inflation concerns, the IMF also downgraded Nigeria’s economic growth projections for the next two years. The country’s GDP growth for 2025 was revised downward from 3.2 per cent to 3.0 per cent, while 2026 growth was cut from 3.0 per cent to 2.7 per cent.
The main reason cited is declining global oil prices, which continue to pose significant risks to Nigeria’s fiscal and external balances.
“Nigeria, like other oil-dependent nations in Sub-Saharan Africa, remains vulnerable to external shocks, the IMF stated.
The Fund also noted that weakening oil prices threaten not only revenues but also foreign investor confidence and trade performance.
Current Account and External Position
Despite recording a current account surplus of 9.1 per cent of GDP in 2024, the IMF predicts Nigeria’s external position will deteriorate. The surplus is expected to narrow to 6.9 per cent in 2025, and further to 5.2 per cent in 2026.
These changes follow a balance of payments surplus of $6.83 billion in 2024, driven primarily by improved trade and capital inflows.
However, analysts remain cautious. JP Morgan warned earlier that Nigeria may slip into a current account deficit if oil prices fall below the government’s fiscal breakeven level of $60 per barrel.
On the other hand, Fitch Ratings offered a more optimistic assessment, projecting Nigeria’s current account to average a 3.3 per cent surplus between 2025 and 2026, supported by growing local refining capacity and ongoing energy sector reforms.
Beyond macroeconomic indicators, the IMF also highlighted the sluggish pace of income growth in Nigeria. Real output per capita is projected to grow by just 0.6 per cent in 2025 and 0.3 per cent in 2026, significantly below the regional average.
This suggests that any headline growth will be largely ineffective in improving the average Nigerian’s standard of living.
Professor Adeola Adenikinju, President of the Nigerian Economic Society, said the country’s sluggish growth is exacerbated by both global and domestic issues.
He cited insecurity, poor infrastructure, and rising costs in energy and transportation as critical challenges.
If not carefully managed, expansionary fiscal policies could lead to overheating and more inflation, Adenikinju warned. He emphasized that rising money supply and currency weakness are compounding inflationary risks.
Way Forward
Economists agree that reversing these projections requires a multi-pronged approach. Key recommendations include:
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Strengthening agricultural security
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Supporting local production
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Managing public borrowing more responsibly
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Implementing targeted subsidies
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Stabilizing the exchange rate
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Continuing reforms in energy and manufacturing
Nigeria stands at a crossroads, and the next two years will be crucial in determining whether the country can stabilize its macroeconomic environment or slide into deeper economic challenges.
