The International Monetary Fund (IMF) has projected that Nigeria’s inflation rate will rise again in 2026, averaging 37.0%, following a brief period of moderation in 2025.
This is according to the IMF’s April 2025 World Economic Outlook, which reflects updated inflation dynamics after Nigeria’s National Bureau of Statistics (NBS) rebased the Consumer Price Index (CPI) to better capture current spending patterns.
Inflation is expected to ease to 26.5% in 2025, from an estimated 33.2% in 2024. But the IMF’s forecast for a renewed spike in 2026 casts doubt on the sustainability of current macroeconomic gains. Despite efforts by the Central Bank of Nigeria (CBN) to rein in inflation—through tight monetary policy and aggressive rate hikes—the Fund warns that price stability remains elusive due to structural weaknesses and persistent supply shocks.
External Position Under Strain
The inflation outlook is compounded by emerging vulnerabilities in Nigeria’s external accounts. The IMF projects a narrowing current account surplus, from 9.1% of GDP in 2024 to 6.9% in 2025, and further to 5.2% in 2026. This reflects anticipated declines in oil exports and weaker terms of trade, as well as uncertainty around foreign capital inflows.
While Nigeria recorded a $6.83 billion balance of payments surplus in 2024—its first in three years—thanks to a strong goods trade surplus, analysts are skeptical about the durability of this position. JP Morgan has flagged a potential reversal if oil prices remain below the country’s fiscal breakeven of $60 per barrel, a level that may be difficult to sustain given global energy transition trends and geopolitical volatility.
In contrast, Fitch Ratings sees a more moderate scenario, forecasting an average current account surplus of 3.3% of GDP over 2025–2026, supported by new domestic refinery projects and long-overdue energy sector reforms.
Stalling Growth and Stagnant Incomes
The IMF has revised Nigeria’s growth projections downward, forecasting 3.0% GDP growth in 2025 and 2.7% in 2026, compared to 3.4% in 2024. The downgrade is driven by weaker oil production and reduced government revenues, both of which threaten the implementation of capital projects and social spending.
More worryingly, real GDP per capita—a key indicator of living standards—is projected to increase by just 0.6% in 2025 and 0.3% in 2026. This stagnation underscores the disconnect between headline growth and the lived experience of most Nigerians, especially in the face of high food inflation and rising utility costs.
Inflation Data Rebased but Pressures Persist
In January 2025, the NBS updated its CPI methodology, rebasing from 2009 to 2024 to reflect more recent consumption patterns. This technical change recalibrated inflation figures downward, with January’s inflation recorded at 24.48%, down from 34.80% in December 2024. The trend continued in February (23.18%) before ticking back up in March (24.23%), signaling persistent pressures on household budgets.
Food inflation, which disproportionately affects low-income households, has declined marginally but remains elevated due to insecurity, weak logistics infrastructure, and high input costs. The CBN has held its benchmark Monetary Policy Rate at 27.5%, reinforcing its inflation-fighting posture.
Reform Momentum at Risk?
The IMF acknowledged Nigeria’s bold macroeconomic reforms—fuel subsidy removal, cessation of monetary financing of deficits, and exchange rate unification—as essential first steps. But it stressed that these must be followed by deep structural reforms to unlock productivity, attract sustainable investment, and reduce vulnerability to shocks.
With inflation expected to surge again in 2026, there is concern that reform fatigue or political pushback could derail hard-won progress. As Nigeria approaches another election cycle, the challenge for policymakers will be maintaining fiscal and monetary discipline while addressing social discontent.
Nigeria’s inflation may temporarily slow in 2025 due to statistical adjustments and tighter policy, but underlying vulnerabilities persist. Without urgent structural reforms—especially in agriculture, energy, and public finance—the country risks sliding back into instability, with high inflation and weak growth constraining long-term development.
