- Nigeria’s Economy to Grow 4.1% in 2026 as IMF Warns Poverty Risks Persist
The International Monetary Fund says Nigeria’s economic reforms over the past three years have strengthened macroeconomic stability and improved resilience, but warned that poverty, food insecurity and inflation pressures continue to weigh heavily on millions of Nigerians.
The assessment follows the conclusion of the IMF Executive Board’s 2026 Article IV consultation with Nigeria on June 1, 2026.
According to the Fund, Nigeria’s economy grew by an estimated 4 percent in 2025 and is projected to expand by 4.1 percent in 2026, supported by reform momentum, improved external buffers and stronger reserves.
However, the IMF cautioned that economic conditions remain difficult for many Nigerians. Poverty has reached 63 percent based on the national poverty line, while an estimated 27 million Nigerians faced food insecurity in the fall of 2025.
The warning underscores the difficult balance facing Africa’s largest economy: macroeconomic reforms may be improving stability, but the social cost of adjustment remains high.
The IMF said higher global fuel, food and fertiliser prices could improve Nigeria’s exports and fiscal revenues, but may also create fresh inflationary pressures and aggravate poverty and food insecurity.
Growth is projected to remain positive but constrained, as higher food and transport costs weigh on economic activity.
Inflation, which had been declining for more than a year, rose again to 15.4 percent year-on-year in March 2026, as the impact of higher international fuel and food prices began to feed through the economy.
The Fund expects the external shock to push inflation up in the short term, but projects that the disinflation trend will resume in the second half of the year.
Nigeria’s external position improved in 2025.
Gross international reserves increased to US$46 billion, from US$40 billion at the end of 2024. The improvement was supported by a current account surplus, non-resident purchases of central bank open market operation instruments and a Eurobond issuance.
Net international reserves also rose sharply to US$35 billion at the end of 2025, from US$23 billion at the end of 2024.
The stronger reserve position gives Nigeria more external buffers at a time when global financing conditions remain uncertain and oil-market volatility continues to shape the outlook for major commodity exporters.
On fiscal policy, the IMF said the consolidated government deficit increased to an estimated 4.4 percent of GDP in 2025.
While non-oil revenues were broadly on target, oil revenues fell short of budget expectations. The shortfall was partly offset by under-execution of reported capital expenditure.
The Fund also noted that some capital spending that previously occurred outside the budget perimeter has now been brought into the budget through repeal and reenactment bills.
IMF Executive Directors commended Nigerian authorities for reforms that have strengthened stability and resilience, but cautioned that continued discipline would be needed to preserve the gains.
They called for a neutral fiscal stance in 2026 to support macroeconomic stability and disinflation, while protecting priority and social spending.
The Board welcomed Nigeria’s recent tax reforms, but noted that additional tax policy measures may be needed over the medium term, particularly to fund a scaled-up cash transfer programme for vulnerable households.
The IMF also raised concerns about off-budget spending and complex financing instruments, calling for faster reforms to strengthen the budget process, public financial management, fiscal reporting, risk management, transparency and accountability.
On monetary policy, IMF Directors said the Central Bank of Nigeria should maintain a tight and data-dependent policy stance until disinflation is firmly established and inflation expectations are anchored.
They welcomed progress toward inflation targeting and encouraged stronger monetary transmission and clearer policy communication.
The Fund also welcomed Nigeria’s commitment to a flexible exchange rate regime, while recognising that foreign exchange interventions can complement the framework in specific circumstances.
However, Directors called for reduced reliance on portfolio flows with rollover risks, and urged authorities to phase out remaining exchange restrictions, capital flow management measures and multiple currency practices as conditions allow.
The IMF said Nigeria’s financial system remains resilient, supported by recent bank recapitalisation, but warned that rising non-performing loans and the sovereign-bank nexus require continued vigilance.
Directors encouraged faster implementation of Basel III standards, including the countercyclical capital buffer and liquidity coverage ratio.
They also stressed the need to strengthen supervision and bring stablecoin and other crypto-asset activities within the regulatory perimeter.
Nigeria’s removal from the Financial Action Task Force grey list was welcomed, but the IMF said sustained implementation would be needed to preserve gains in financial integrity.
The Fund also urged Nigeria to deepen reforms that support inclusive growth and diversification.
Priority areas identified include governance, security, electricity, agriculture, infrastructure and human capital development.
Nigeria’s crude oil production is projected to rise from 1.64 million barrels per day in 2025 to 1.71 million barrels per day in 2026, and further to 1.75 million barrels per day in 2027.
The current account surplus is projected to narrow from 4.8 percent of GDP in 2025 to 3.9 percent in 2026 and 2 percent in 2027.
Public debt is projected to decline from 36.1 percent of GDP in 2025 to 35.4 percent in 2026, before rising slightly to 36.7 percent in 2027.
However, the burden of interest payments remains a concern. Federal Government interest payments are projected at 53.7 percent of Federal Government revenue in 2026, compared with 53.2 percent in 2025.
This points to one of Nigeria’s central fiscal challenges: even with relatively moderate debt-to-GDP levels, low revenue mobilisation keeps debt servicing pressure high.
For the IMF, Nigeria’s reform story is therefore one of progress mixed with fragility.
The country has improved reserves, strengthened macroeconomic stability and maintained growth. But poverty, food insecurity, inflation, insecurity and weak revenue mobilisation remain major risks.
The Fund’s message is clear: Nigeria must stay the reform course, but the reforms must become more inclusive.
That means protecting vulnerable households, improving public finance transparency, sustaining tight monetary policy, managing the exchange rate flexibly, strengthening banks and investing in the foundations of long-term growth.
Nigeria’s next Article IV consultation is expected to be held on the standard 12-month cycle.
For now, the IMF’s verdict is cautious but direct: the reforms are producing results, but millions of Nigerians are still waiting to feel the recovery in their daily lives.
