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Daniel Adaji
Nigeria’s inflation rate is expected to spike to 37 per cent in 2026, a development the International Monetary Fund (IMF) warns will significantly hamper economic recovery and reduce the current account surplus to just 5.2 per cent of Gross Domestic Product.
The grim projection, revealed in the IMF’s April 2025 World Economic Outlook released on Tuesday, also includes a downward revision of Nigeria’s GDP growth to 3.0 per cent in 2025 and 2.7 per cent in 2026—down from an earlier 3.4 per cent in 2024.
The IMF attributes the weakening outlook to falling oil revenues and unresolved structural issues.
Although inflation is forecast to ease temporarily to 26.5 per cent in 2025, the Fund stresses that “price stability remains elusive” and calls for a “tight monetary policy stance” and a clearly defined disinflation strategy to anchor expectations.
Real per capita income growth is also expected to remain sluggish—0.6 per cent in 2025 and 0.3 per cent in 2026—well below regional averages, underscoring persistent poverty and inequality.
The country’s current account surplus, which stood at 9.1 per cent of GDP in 2024, is projected to fall to 6.9 per cent in 2025 before dipping further to 5.2 per cent the following year. This deterioration is attributed in part to external pressures, including oil price volatility and elevated global risk sentiment.
The Central Bank of Nigeria (CBN) recorded a $6.83bn balance of payments surplus in 2024, bolstered by $17.22bn in current and capital inflows and a $13.17bn trade surplus. However, the IMF warns that these gains remain vulnerable.
Other institutions echoed these concerns. PricewaterhouseCoopers has cautioned that a potential mass deportation of Nigerians from the U.S. could sharply cut foreign exchange inflows.
Fitch Ratings, while more optimistic, projects a narrower current account surplus of 3.3 per cent of GDP on average between 2025 and 2026, supported by domestic refining growth and energy reforms.
Despite recent reforms—such as the removal of fuel subsidies, the end of central bank deficit financing, and the unification of exchange rates—the IMF notes these efforts have yet to yield widespread benefits.
“Gains have yet to benefit all Nigerians, as poverty and food insecurity remain high,” said Axel Schimmelpfennig, head of the IMF’s mission to Nigeria.
In January 2025, the National Bureau of Statistics rebased the Consumer Price Index, shifting the base year from 2009 to 2024. This led to a recalibration of inflation data, with the rate dropping to 24.48 per cent in January from 34.80 per cent in December 2024. Although the rate declined in February, it climbed again in March—highlighting continued cost-of-living challenges.
The IMF advised Nigerian authorities to reinvest fiscal savings from subsidy cuts into essential services, growth-driven investments, and expanded cash transfers to support vulnerable households.
“Adjustments should protect critical, growth-enhancing investment while accelerating and broadening the delivery of cash transfers,” the report stated.
The IMF emphasized that sustained implementation of reforms is essential for shielding the economy from further shocks and laying the groundwork for long-term, inclusive growth. The Fund’s final report will be submitted to its Executive Board for approval in the coming weeks.
This outlook comes just months after President Bola Tinubu pledged to cut inflation from 34.6 per cent to 15 per cent by the end of 2025.
“In 2025, our government is committed to intensifying efforts to lower these costs by boosting food production and promoting local manufacturing of essential drugs and other medical supplies. We are resolute in our ambition to reduce inflation,” Tinubu said in his New Year’s address.