The International Monetary Fund (IMF) has raised Nigeria’s economic growth forecast for 2026 to 4.2 percent, an upward revision from its July projection of 3.2 percent.
The Fund’s latest World Economic Outlook (WEO), released this week, attributes the improvement to stronger oil output, rising investor confidence, and a more supportive fiscal stance expected to take hold over the next two years.
The updated projection places Nigeria ahead of South Africa, whose outlook remains subdued, but slightly below the broader Sub-Saharan African regional average. For 2025, Nigeria’s growth is projected to remain steady at 3.4 percent, consistent with the IMF’s July update, before accelerating to 4.2 percent in 2026.
According to the report, South Africa’s growth forecast was raised marginally from 1.0 to 1.1 percent for 2025 but revised downward from 1.3 to 1.2 percent for 2026. Meanwhile, the Sub-Saharan African region’s growth outlook improved slightly from 4.0 to 4.1 percent for 2025 and from 4.3 to 4.4 percent for 2026.
Domestic Factors Driving Nigeria’s Outlook
In explaining the basis for Nigeria’s stronger growth forecast, the IMF said the revision was driven by “supportive domestic factors, including higher oil production, improved investor confidence, and a supportive fiscal stance in 2026.” The Fund also noted that Nigeria remains relatively insulated from the impact of rising U.S. tariffs that are expected to dampen trade across other emerging economies.
The report stated: “Whereas growth in Nigeria is revised upward on account of supportive domestic factors, including higher oil production, improved investor confidence, a supportive fiscal stance in 2026, and given its limited exposure to higher US tariffs, many other economies see significant downward revisions because of the changing international trade and official aid landscape.”
Nigeria, Africa’s largest oil producer, has recently seen modest gains in output following a series of interventions by the Nigerian National Petroleum Company Limited (NNPCL) and improved security in the Niger Delta region. The recovery in crude production — which rose above 1.5 million barrels per day in mid-2025, compared to about 1.2 million earlier in the year — has played a crucial role in strengthening fiscal revenues and foreign exchange inflows.
Economists say this rebound, combined with efforts to unify the exchange rate and attract foreign direct investment, is beginning to reflect renewed confidence in the economy. The IMF’s acknowledgment of these developments underscores optimism that Nigeria’s medium-term growth trajectory could stabilize, provided the government sustains its current reforms.
Global Economic Context
Globally, the IMF projects that growth will moderate to 3.2 percent in 2025 and 3.1 percent in 2026. While this marks a slight improvement from the July 2025 update, it remains 0.2 percentage points below forecasts made before the latest round of global trade and policy shifts. The Fund said the slowdown reflects persistent headwinds from uncertainty and protectionism, although the impact of recent tariff measures was smaller than initially expected.
“This is an improvement relative to the July WEO Update—but cumulatively 0.2 percentage point below forecasts made before the policy shifts in the October 2024 WEO, with the slowdown reflecting headwinds from uncertainty and protectionism, even though the tariff shock is smaller than originally announced,” the IMF explained.
Advanced economies are expected to expand by around 1.5 percent over 2025–2026, with the United States slowing to 2.0 percent. By contrast, emerging markets and developing economies are projected to grow just above 4.0 percent during the same period.
Inflation and Trade Outlook
On inflation, the IMF forecasts a continued decline in global consumer prices to 4.2 percent in 2025 and 3.7 percent in 2026, compared to 5.8 percent in 2024. The Fund attributes the moderation to easing energy prices, improved food supply chains, and tighter monetary policies across major economies.
World trade volume, however, is expected to expand more slowly, at an average of 2.9 percent during 2025–2026 — below the 3.5 percent recorded in 2024 — as trade fragmentation and new tariff barriers continue to weigh on global commerce.
Nigeria’s Fiscal and Monetary Policy
The IMF’s upward revision comes months after its Executive Board concluded the 2025 Article IV consultation with Nigeria, projecting a 3.4 percent expansion in the country’s real GDP for 2025. The consultation report commended the Central Bank of Nigeria (CBN) for maintaining a tight monetary policy stance aimed at curbing inflation and stabilizing the naira.
The Fund described the CBN’s policies as “critical tools in managing inflation and safeguarding macroeconomic stability,” but it also urged the government to complement monetary tightening with fiscal discipline and targeted social support programs to cushion the impact of reforms on vulnerable populations.
Nigeria’s inflation rate, which peaked at over 33 percent in early 2025, has since slowed on a month-on-month basis, although food and transportation costs remain high. The IMF noted that consistent fiscal and monetary coordination will be crucial to sustain the momentum of economic stabilization into 2026.
Economic analysts interpret the IMF’s upward revision as a sign that the country’s macroeconomic reforms are gradually restoring investor confidence, particularly in the oil and energy sectors. The IMF’s latest projection, nonetheless, signals a shift in perception — from caution to cautious optimism — as Nigeria continues to implement structural reforms.
