The International Monetary Fund (IMF) has thrown cold water on Nigeria’s economic ambitions with its latest World Economic Outlook, projecting average inflation of 26.5% in 2025—more than 11 percentage points higher than the Nigerian government’s own optimistic estimate of 15% in its 2025 budget.

The report not only exposes the deep chasm between Abuja’s fiscal assumptions and economic reality but also calls into question the credibility of the much-trumpeted goal of transforming Nigeria into a $1 trillion economy by 2030.

In a report that spans inflation forecasts, GDP performance, and current account projections, the IMF paints a sobering picture of a country weighed down by painful reforms, external vulnerabilities, and a shrinking economic base. Inflation, it warns, may slow temporarily due to the recent rebasing of the Consumer Price Index (CPI), but this relief is superficial. By 2026, inflation is expected to spike again to 37%, highlighting the fragility of the current easing.

The gulf between the IMF’s projection and the federal government’s 15% inflation estimate is not a rounding error. It reflects a fundamental mismatch between policy expectations and economic outcomes—and one that could derail the assumptions underpinning next year’s federal budget.

The Vanishing Economy: GDP Halved in Two Years

Perhaps the most striking revelation is not just the inflation rate, but the massive collapse in the size of Nigeria’s economy, largely triggered by the floating of the naira and removal of petrol subsidies in 2023. While both moves were initially praised by international institutions for ending costly distortions, their immediate economic effect has been devastating.

According to the IMF’s figures, Nigeria’s GDP stood at $363.82 billion in 2023. But by 2025, that number is projected to fall to $188.27 billion—a staggering 48.3% decline in just two years. Such a contraction is unprecedented outside of wartime economies or states in financial meltdowns.

This collapse in dollar-denominated GDP is not just a statistical artifact. It reflects a real and painful erosion in the value of the naira, capital flight, reduced foreign investment, and a decline in real incomes. It also means Nigeria has slipped to the fourth-largest economy in Africa, behind South Africa, Egypt, and now Algeria—countries that, until recently, lagged behind in nominal terms.

Despite assurances from the government that these reforms would “unlock growth,” the short-term result has been a shrinking economy, worsened inequality, and rising poverty. The administration’s hopes of achieving a $1 trillion economy within the next five years now seem fanciful, if not outright delusional, unless there’s a dramatic turnaround in both policy execution and investor sentiment.

Inflation Masked by Technical Revisions

The recent rebasing of Nigeria’s CPI, from a 2009 base year to 2024, offered momentary cosmetic relief. Headline inflation, which stood at 34.80% in December 2024, appeared to drop sharply to 24.48% in January 2025, and slightly further to 23.18% in February. But by March, it had crept back up to 24.23%, signaling that the root causes—rising food costs, high logistics prices, and weak supply chains—remain unresolved.

Food inflation in particular has proven stubborn, driven by insecurity in farming regions, rising global food import bills, and the naira’s depreciation. The Central Bank of Nigeria (CBN) has tried to rein in inflation by keeping the Monetary Policy Rate (MPR) at 27.5%, but this has further tightened credit and stifled economic activity, especially for small businesses.

Current Account Surplus at Risk

While the balance of payments turned positive in 2024, helped by a current account surplus of 9.1% of GDP and a trade surplus of $13.17 billion, the IMF warns that this may not be sustained. It forecasts the surplus will fall to 6.9% in 2025 and 5.2% in 2026, reflecting the volatility of oil prices and the sluggish pace of structural reforms.

JP Morgan has cautioned that oil prices dipping below Nigeria’s fiscal breakeven of $60 per barrel could plunge the current account back into deficit. Fitch Ratings, meanwhile, remains more optimistic, forecasting a moderate surplus averaging 3.3% of GDP through 2026, contingent on successful energy sector reforms and the operationalization of key refinery projects, particularly Dangote’s.

Growth with No Gains: Per Capita Output Nearly Flat

The IMF revised Nigeria’s real GDP growth down to 3.0% in 2025 and 2.7% in 2026. But more critically, real per capita income is expected to rise by just 0.6% in 2025 and 0.3% in 2026. These marginal increases underscore the growing inequality in the country: while macro indicators may show mild improvement, the average Nigerian is getting poorer in real terms.

This stagnation in individual income is one reason why the Fund has urged Nigeria to go beyond headline reforms and address deep structural bottlenecks—from poor infrastructure to inefficient state enterprises and weak fiscal governance.

To its credit, the IMF acknowledges Nigeria’s recent reform efforts. It praises the end of central bank deficit financing, the unification of exchange rates, and the removal of petrol subsidies. However, it stresses that these are only first steps, and that failure to build on them with institutional reforms, fiscal discipline, and investment in human capital could see the country slide further behind its peers.

In this context, the government’s projection of a return to 15% inflation by 2025 seems less like a goal and more like a talking point. The reality, according to the IMF, is that Nigeria’s economic fundamentals remain weak, and unless major structural changes are made, both inflation and poverty will continue to worsen.