The International Monetary Fund (IMF) has projected Nigeria’s headline inflation to rise sharply to 37 percent in 2026, according to its April 2025 World Economic Outlook report released on Tuesday.  The IMF attributed the updated forecast to the rebasing of Nigeria’s Consumer Price Index by the National Bureau of Statistics in January 2025. 

The Fund also cautioned that ongoing price pressures and structural challenges are likely to keep inflation elevated over the medium term. Inflation, which averaged 33.2 percent in 2024, is expected to ease slightly to 26.5 percent in 2025 before climbing steeply to 37 percent in 2026. 

The forecast has sparked mixed reactions among Nigerian economists, with some describing it as “excessively pessimistic” and disconnected from the realities of domestic economic policies.

The IMF report also lowered Nigeria’s economic growth forecast for 2025, highlighting weakening global oil prices as a significant threat to the country’s fiscal and external balances.

The Fund adjusted its GDP growth projection for Nigeria in 2025 down by 0.2 percentage points, from 3.2 percent to 3.0 percent. Similarly, the growth forecast for 2026 was reduced by 0.3 percentage points, to 2.7 percent.

The report noted, “Among the larger economies, Nigeria’s growth forecast has been revised downward by 0.2 percentage points for 2025 and 0.3 percentage points for 2026, primarily due to lower oil prices.

The report highlighted that Nigeria, like many oil-exporting countries in Sub-Saharan Africa, remains highly vulnerable to external shocks—particularly declines in commodity prices—which continue to impact government revenues, trade balances, and investor confidence.

Although Nigeria maintained a current account surplus in 2024, the IMF expects its external position to weaken in the coming years.

The Fund projected the current account surplus to narrow from 9.1 percent of GDP in 2024 to 6.9 percent in 2025, before contracting further to 5.2 percent in 2026. This follows a balance of payments surplus of $6.83 billion recorded in 2024, according to data from the Central Bank of Nigeria.

The surplus was largely driven by a goods trade balance of $13.17bn and a recovery in capital flows.

But analysts have warned that the surplus may not be sustained. Global investment bank JP Morgan said earlier this year that Nigeria could slide into a current account deficit if crude oil prices remain below its fiscal breakeven of $60 per barrel.

Fitch Ratings, however, gave a slightly more optimistic view. It projected that Nigeria’s current account surplus—estimated at 6.6 per cent of GDP in 2024—would average 3.3 per cent over 2025 and 2026, buoyed by improved local refining capacity and continued reforms in the energy sector.

The IMF’s inflation forecast follows Nigeria’s recent decision to rebase its Consumer Price Index (CPI) calculations. In January 2025, the National Bureau of Statistics updated the base year from 2009 to 2024 to more accurately capture current consumption patterns.

As a result of this adjustment, January’s inflation rate was revised downward to 24.48 percent, compared to 34.80 percent recorded in December 2024 under the previous base. Inflation then eased further to 23.18 percent in February but rose slightly to 24.23 percent in March, a trend economists attribute to food price surges, supply chain disruptions, and foreign exchange volatility.

At its February meeting, the Central Bank of Nigeria (CBN) held the Monetary Policy Rate steady at 27.5 percent, citing the need to maintain a tight monetary stance amid persistent inflation. However, with inflation and money supply both increasing in March, the CBN may be pressured to consider further rate hikes at its upcoming policy review.

While the IMF did not provide any justification for the inflation projection, Nigerian economists have expressed reservations over the severity of the projection.

Adewale Abimbola, a Lagos-based economist, told The PUNCH that the IMF’s 37 per cent forecast may be overstated.

“Since the rebasing, inflation has remained between 23 and 24 percent. Even during 2024, when inflation was persistently high, it averaged around 33 percent. Therefore, I believe the IMF’s 37 percent projection for 2026 is overstated,” he said.

Abimbola also proposed several measures to help curb inflation, including stronger support for the real sector to boost productivity, continued Central Bank intervention to stabilise exchange rates, improved security in food-producing regions, and the ongoing implementation of the naira-for-crude policy to manage petrol prices.

Economist and CEO of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, added that the IMF’s forecast did not fully consider Nigeria’s domestic policy flexibility. “Inflation in Nigeria is largely driven by supply-side constraints and exchange rate volatility,” he noted.

“If insecurity, particularly in food-producing regions, is tackled, food inflation—which makes up the largest portion of headline inflation—will ease. Additionally, providing fiscal support to manufacturers and lowering production costs will help moderate inflation,” Yusuf said.

He criticised the IMF’s 37 percent inflation forecast, arguing that it assumes no progress in Nigeria’s fiscal discipline, oil production, or security framework.

“I don’t believe inflation will reach 37 percent; that represents a worst-case scenario. With effective management of public spending, reduced deficit financing, and increased oil revenues, Nigeria’s macroeconomic stability can improve. The outlook doesn’t have to be this bleak,” he added.

He further stressed the need for Nigeria to manage its monetary expansion carefully.

“We must keep money supply growth in check, reduce unnecessary borrowing, and avoid overheating the economy,” he added.

The President of the Nigerian Economic Society and former Head of Economics at the University of Ibadan, Prof. Adeola Adenikinju, agreed that Nigeria’s growth prospects have weakened but attributed this partly to global economic trends.

“The trend is consistent with what’s happening in other parts of the world. We are likely to post lower growth this year due to weak oil prices and low output,” he said.

Adenikinju highlighted that domestic challenges—including insecurity in agricultural areas, rising transport and energy costs, and inadequate infrastructure—are exacerbating the inflation outlook.

“These issues create a ripple effect on production and inflation, leading to higher food prices and declining productivity,” he explained.

He also cautioned that the government’s expansionary fiscal policies could further drive inflation unless carefully managed.

“If high spending leads to wider deficits financed by borrowing—especially from the CBN—it will drive inflation. We also have to watch the exchange rate, which continues to weaken. That will further feed into prices,” he said.

He noted that with inflation and money supply rising again in March, the CBN may be forced to raise rates further, a move that could slow economic activity in the short term.

The IMF also pointed to weak income growth in Nigeria, projecting that real output per capita will grow by just 0.6 per cent in 2025 and 0.3 per cent in 2026.

These figures, far below the Sub-Saharan Africa average, underscore the country’s inability to translate headline growth into tangible welfare improvements for citizens.

Economists say this highlights the need for Nigeria to diversify its economy away from oil, invest in infrastructure, address insecurity, and create enabling conditions for private investment to thrive.