The International Monetary Fund (IMF) has revised its economic growth forecast for Nigeria, projecting a growth rate of 4.1 per cent for 2026. This figure represents a downward adjustment from the 4.4 per cent previously predicted in the January World Economic Outlook (WEO) 2026. Despite this near-term downgrade, the IMF anticipates a modest economic rebound for Nigeria, with growth expected to reach 4.3 per cent in 2027.
The IMF attributed the revised 2026 forecast to increasing global economic headwinds. The institution also commended the Central Bank of Nigeria (CBN) for the successful completion of its banking sector recapitalisation, noting that the strengthened capital buffers are proving effective in shielding the financial system from external shocks.
The adjustments in the WEO reflect the impact of intensifying global pressures. While the near-term outlook shows a slight slowdown for 2026, the upward revision for 2027 suggests that some of these challenges are expected to recede, paving the way for gradual recovery.
Deniz Igan, Division Chief in the IMF’s Research Department, explained that Nigeria's economic outlook is shaped by a balance of competing factors. Rising global fuel and fertilizer prices, coupled with increased shipping costs stemming from geopolitical tensions, are likely to dampen non-oil economic activities. However, higher crude oil prices are providing some compensatory support, preventing a more significant downturn.
Igan stated, "We have revised Nigeria’s growth as well by 0.3 percentage point to 4.1 in 2026, and that is reflecting a balance of two forces. One is that the war-related higher fuel and fertilizer prices and higher shipping costs that I mentioned are going to weigh on oil activity in Nigeria. There’s some offset coming from higher oil prices, but the end of the day, the balances are for weighing growth in 2026 with some recovery built in 2027."
Regarding inflation and macroeconomic management, the IMF emphasized the importance of maintaining a stringent monetary policy. This policy should remain data-dependent, with close monitoring of exchange rate movements and inflation expectations, especially as policymakers navigate a more volatile international environment.
"As far as inflation movements go, we believe that tight monetary policy and remaining data dependent and watching very carefully, both exchange rate movements and inflation expectations is going to be crucial to achieve the inflation target of central bank," the IMF official added.
Pierre-Olivier Gourinchas, IMF Chief Economist, noted that the downgrade in the continent's growth projection is part of a broader trend across Sub- Saharan Africa. Economies in the region are facing slower growth and rising inflation due to global uncertainties, particularly disruptions in energy markets.
"We are seeing some downgrade of growth, and we are seeing some uptick in inflation in a number of countries in the region," Gourinchas commented. He further elaborated that while energy importers are affected, energy exporters within the region also experience varied impacts, indicating differentiation in the economic consequences across countries.
The IMF's endorsement of Nigeria's banking sector recapitalisation initiative highlighted the effectiveness of enhanced capital buffers in safeguarding the financial system against external shocks. The Fund reiterated that robust fiscal positions are crucial for emerging markets to withstand volatile global capital flows and mitigate vulnerability to sudden market shifts.
Tobias Adrian, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department, shared insights during the presentation of the Global Financial Stability Report at the Spring Meetings. He stressed that recapitalisation efforts prove most valuable during periods of financial stress, reinforcing the importance of a well-capitalised banking sector for global financial stability amidst heightened uncertainty.
Adrian explained, "Concerning bank recapitalisation, it is in times of stress where the value of bank capital really comes to the fore. So, what we are aiming at for global financial stability is a banking sector that is capitalised against adverse shocks. So yes, the banking recapitalisation is welcome and are paying off, particularly under times of stress concerning debt to GDP and what the IMF is doing."
On capital flows to Sub-Saharan Africa, Adrian noted that the ongoing conflict in the Middle East has led to a more pronounced shift in fund movements compared to past crises, with capital flow reactions being approximately twice as significant as those observed at the start of the war in Ukraine.
He added, "When we are looking at capital flows since the beginning of the war in the Middle East, and compare that to previous episodes of conflict, we do see a sort of outsized reaction in terms of capital flows, but at the same time."
Jason Wu, Assistant Director of the Monetary and Capital Markets Department at the IMF, observed a growing reliance on debt over foreign direct investment (FDI) and equity in capital flows. He pointed out that emerging markets with stronger fiscal foundations generally experience better access to international markets and lower borrowing costs.
Eromosele Abiodun and Nume Ekeghe reported this story.
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