The International Monetary Fund has raised Nigeria’s economic growth forecast for 2026 to 4.2%, citing improved macroeconomic stability and favorable terms of trade, but warned that rising food and energy prices could deepen poverty and worsen food insecurity despite the economy’s continued expansion.
The revised projection, published in the IMF’s 2026 World Economic Outlook, represents an increase of 0.1 percentage point from the institution’s previous estimate. The Fund retained its forecast of 4.3% growth for 2027, suggesting that it expects Nigeria’s economic recovery to continue, although at a pace that may not translate into meaningful improvements in household welfare for many Nigerians.
Presented in Bangkok, Thailand, under the title Resilience Under Strain, Urgent Choices, the report highlighted the tension between improving macroeconomic conditions and the pressure that higher living costs continue to place on households. The IMF’s assessment suggests that stronger headline growth alone will not resolve the hardship associated with Nigeria’s ongoing economic adjustment.
Register for the next Tekedia Mini-MBA.
Register for Tekedia AI in Business Masterclass.
Join Tekedia Capital Syndicate and co-invest in great global startups.
“Nigeria is supported by improved macroeconomic stability and favorable terms-of-trade effects, though higher prices for essentials are expected to further aggravate poverty and food insecurity,” the Fund said.
The warning is significant because Nigeria’s recent economic reforms have sought to improve the functioning of the foreign exchange market, strengthen public finances and reduce distortions associated with government interventions. While these changes have attracted support for their potential to improve long-term stability, they have also contributed to an environment in which households and businesses face elevated costs and weakened purchasing power.
The IMF’s latest outlook therefore presents a dual assessment of the economy: macroeconomic conditions have improved sufficiently to support a modest upgrade in growth expectations, but the benefits remain unevenly distributed, with food and energy affordability posing persistent risks.
Nigeria’s revised growth outlook comes as the economy continues to adjust to reforms introduced over the past three years. The IMF attributed the improvement to greater macroeconomic stability and favorable terms of trade, factors that can support economic activity through improved market conditions and stronger earnings from external trade.
However, the Fund cautioned that rising prices for essential goods could undermine the gains from stronger output. Higher food and energy costs reduce the amount households can spend on other goods and services, while increasing operating expenses for businesses. For lower-income families, whose budgets are often concentrated on basic necessities, these increases can have a disproportionate impact on living standards.
This creates a distinction between economic growth and economic welfare. An increase in real gross domestic product indicates that the economy is producing more goods and services, but it does not establish how much household purchasing power has improved or whether the benefits are reaching the most vulnerable groups.
The National Bureau of Statistics reported that Nigeria’s real GDP grew by 4.43% year-on-year in the second quarter of 2026, compared with 4.23% in the corresponding period of 2025. The figures indicate an acceleration in economic activity, although the IMF’s annual projection remains below the second-quarter growth rate.
The difference is not necessarily contradictory. Quarterly growth measures activity over a specific period, while the IMF’s annual forecast reflects its assessment of the economy’s performance across the full year and the risks that could affect subsequent quarters.
That brings the question: can the expansion become broad enough to support employment, incomes and consumption while essential costs remain high? If rising food and transport expenses absorb a large share of household earnings, stronger output may coexist with persistent hardship.
That concern is necessary for Nigeria’s reform programme. Improvements in macroeconomic stability can create conditions for investment and more sustainable growth, but the social consequences of adjustment can weaken public confidence if households do not experience corresponding improvements in their daily lives.
IMF Recommends Targeted Cash Transfers to Ease Cost Pressures
The IMF called for immediate relief from rising food and energy prices, recommending temporary cash transfers and targeted income support for Nigeria’s most vulnerable households. The advice was delivered by Deniz Igan, a division chief in the Fund’s Research Department, in response to a question from Nigerian journalist Nancy Nnaji.
Igan said policymakers needed to balance immediate social needs with the requirement to preserve medium-term economic stability, particularly as food and energy prices rise disproportionately and threaten household security.
“What we are advocating for is for policymakers to balance the near-term needs of the population, including food security and energy security, given that the prices of food and energy are increasing disproportionately, while also keeping in mind medium-term stability,” she said.
She identified Nigeria as an example of an economy where headline growth and household hardship can coexist. Although the country has benefited from its position as an energy exporter, Igan said pressure on households remained high, particularly in relation to food security, which also faces risks from El Niño.
“Nigeria is a good example. While growth held up in Nigeria, given that it is an energy exporter, power pressures are still very high, and we are mindful that the population is suffering, especially when it comes to food security, which also faces risks from El Niño,” she said.
“In that environment, what we are advocating for is cash transfers and targeted, temporary income support for the most vulnerable households in Nigeria. That can alleviate high poverty and help ensure food security.”
The recommendation reflects an approach that seeks to protect vulnerable households without reversing broader economic reforms. Rather than subsidizing prices across the entire population, targeted transfers would direct assistance towards households least able to absorb higher living costs.
Such support, however, depends on the government’s ability to identify eligible beneficiaries, deliver assistance efficiently and maintain adequate funding. Poor targeting or delays in distribution could limit its impact, while a poorly financed relief programme could undermine the fiscal stability the reforms are intended to strengthen.
Igan said assistance should remain fiscally sustainable through more effective public spending and stronger revenue collection. This places the emphasis on how government resources are allocated and mobilized, rather than on introducing relief measures without a clear funding framework.
The IMF’s position also highlights the policy challenge facing the Tinubu administration: how to cushion the immediate effects of economic adjustment without recreating fiscal pressures that could weaken the stability policymakers are trying to establish.
Petrol Discount Reignites Debate Over Subsidy Policy
The call for targeted assistance comes amid renewed political pressure on the government to provide broader relief from rising living costs. Opposition presidential aspirants Atiku Abubakar and Peter Obi have called for the restoration of elements of petrol subsidies to ease the burden on households and businesses.
The debate has gained further attention following the administration’s announcement of a 30-day discount window on petrol sold by NNPC Limited, with public transport operators nationwide given priority.
Finance Minister Taiwo Oyedele denied that the measure amounted to a partial restoration of petrol subsidies. He said the discount would be funded entirely from the retailer’s margins, rather than from the federal budget or the Federation Account.
Critics have challenged that explanation, arguing that the measure represents a return to subsidy practices in response to public pressure.
The source of funding determines the measure’s direct implications for public finances, while its design influences who benefits and how much relief reaches consumers. A discount financed from a retailer’s margins differs from a government-funded subsidy, although the broader economic effect depends on the discount’s size, duration, implementation and whether savings are passed through to transport fares and other consumer costs.
The government has not, in the information provided, established that the petrol discount will translate into lower transport costs across the country. Prioritizing public transporters could help target the intervention towards a sector with a direct influence on commuting and the movement of goods, but the eventual benefit to households will depend on how operators respond.
The 30-day window also raises questions about what happens after the intervention expires. Temporary measures can offer short-term relief, but they do not necessarily resolve the underlying pressures driving food, transport and energy costs.
The IMF’s recommendation for targeted cash transfers provides a different framework for addressing those pressures. Instead of reducing prices for a particular commodity, income support would help vulnerable households meet essential expenses while allowing the government to retain a more direct focus on fiscal sustainability.
Neither approach eliminates the need for effective implementation. Targeted transfers require reliable beneficiary identification and payment systems, while price discounts require transparency over funding and evidence that the intended beneficiaries receive the savings.
World Bank Also Upgrades Nigeria’s Growth Outlook
The IMF’s improved forecast follows a more optimistic assessment from the World Bank, which last week raised its projection for Nigeria’s 2026 growth to 4.3%, compared with estimated growth of 4.0% in 2025. The institution expects the economy to expand by 4.4% in both 2027 and 2028.
The World Bank attributed its stronger outlook to improving macroeconomic stability, strengthening investor confidence and a gradual recovery in private investment. It also upgraded growth forecasts for nearly three-quarters of Sub-Saharan African countries, suggesting that the improvement in Nigeria’s outlook forms part of a broader reassessment of regional economic prospects.
The two institutions’ forecasts are broadly aligned, with the World Bank marginally more optimistic about Nigeria’s performance in 2026. Their projections nevertheless point to moderate expansion rather than a dramatic acceleration in economic activity.
The gap between the growth forecasts and the lived experience of households remains central to the policy debate. A stronger economy can create opportunities for employment and investment, but the extent to which those benefits reach households depends on the composition of growth, income distribution, productivity and the cost of essential goods and services.
Therefore, Nigeria’s immediate challenge is not just to maintain economic expansion, but to ensure that improved macroeconomic conditions support a more tangible recovery in living standards.
The IMF’s revised projection offers some support for the government’s reform direction, but its warning over poverty and food insecurity places equal emphasis on the social costs of adjustment. Its recommendation for targeted, temporary assistance suggests that stabilization and household protection should be treated as complementary objectives rather than competing priorities.