MARKET NEWS

 by Bukola Aro-Lambo

The International Monetary Fund (IMF), in its April 2025 World Economic Outlook, has revised Nigeria’s 2026 economic growth projection downwards to 4.1 per cent, from 4.4 per cent previously forecast in January. Growth is, however, expected to edge up to 4.3 per cent in 2027.

The Fund also projected global growth at 3.1 per cent in 2026 and 3.2 per cent in 2027, warning that ongoing geopolitical tensions, particularly conflict in the Middle East, could further weigh on global economic performance.

IMF Economic Counsellor and Director of Research, Pierre-Olivier Gourinchas, disclosed this at the launch of the World Economic Outlook during the IMF/World Bank 2026 Spring Meetings in Washington, D.C.

He said growth projections across Sub-Saharan Africa had generally been downgraded, noting that rising oil prices would provide some relief to Nigeria but would not be sufficient to insulate Africa’s most populous country from broader global shocks.

“For many countries, especially energy importers, the effects are negative, although there is some differentiation, as a number of countries in the region are also energy exporters,” Gourinchas said.

He added that the IMF was closely monitoring developments in global energy markets and engaging member countries on emerging financing and policy needs, while coordinating with international institutions to respond to evolving risks.

Across Sub-Saharan Africa, he said, the Fund was seeing a general downgrade in growth alongside rising inflation in several economies, driven largely by global spillovers and reduced aid flows.

“For many economies, particularly energy importers, the outlook remains challenging, although the effects vary for energy exporters,” he said.

IMF Division Chief in the Research Department, Deniz Igan, said Nigeria’s downward revision reflected competing forces within the economy.

“For Nigeria, growth has been revised down by 0.3 percentage points to 4.1 per cent in 2026,” she said. “This reflects two opposing dynamics. On one hand, higher fuel and fertiliser prices, along with increased shipping costs, are expected to weigh on non-oil sector activity. On the other hand, higher oil prices provide some offset. Overall, the balance is negative for growth in 2026, with some recovery expected in 2027.”

She stressed that maintaining tight monetary policy, remaining data-dependent, and closely monitoring exchange rate movements and inflation expectations would be essential to achieving price stability.

“In spite of the gains the current high oil prices triggered by the war in the Middle East, Nigeria’s growth projections have been revised downwards by 0.3 per cent to 4.1 per cent in 2026,” she added.

On the wider Sub-Saharan Africa region, Igan noted that 2025 had been relatively strong, supported by resilient global growth, strong oil prices, and favourable external financial conditions.

“However, with the war, global growth has slowed, non-oil commodity prices have softened, and terms of trade have worsened for oil importers,” she said.

She also highlighted declining foreign aid as a major constraint, noting that bilateral aid cuts range from 16 per cent to 28 per cent in 2025, with the trend expected to persist.

As a result, she said, growth across the region has been downgraded by a cumulative 0.4 percentage points for 2026 and 2027, while median inflation is projected to rise from 3.4 per cent in 2025 to 5 per cent, driven by higher energy and fertiliser costs, fuel shortages, and rising borrowing costs.

Deputy Director in the IMF Research Department, Petya Koeva-Brooks, also said Nigeria’s outlook reflected a balance of opposing forces.

“While higher global oil prices are expected to support government revenues and provide some external buffer, the overall impact of the shock remains negative,” she said.

She added that war-related increases in fuel and fertiliser prices, as well as higher shipping costs, would weigh on non-oil activity.

“There is some offset from higher oil prices, but on balance, the effect is a drag on growth in 2026, with a recovery expected in 2027,” she said.

Koeva-Brooks further warned that Sub-Saharan Africa faces mounting headwinds, including weaker global growth, softer non-oil commodity prices, worsening terms of trade for oil importers, and declining foreign aid flows, projected to fall between 16 per cent and 28 per cent in 2025.

She noted that inflationary pressures across the region were likely to intensify due to higher energy and fertiliser prices, potential fuel shortages, and rising borrowing costs.

On Nigeria, she said the impact was particularly significant given the country’s reliance on agriculture and sensitivity to fertiliser and food price shocks.

She emphasised that continued vigilance by the Central Bank of Nigeria would be crucial, stressing the need for a tight, data-driven monetary policy stance to navigate the current economic environment.