The International Monetary Fund (IMF), in its April 2025 World Economic Outlook report, projected a significant surge in Nigeria’s headline inflation to 37% in 2026. This alarming prediction stems from the rebasing of Nigeria’s Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) in January 2025, coupled with persistent price pressures and deep-seated structural constraints that are expected to keep inflation elevated in the medium term. The IMF anticipates a slight moderation of inflation to 26.5% in 2025 from the 33.2% average recorded in 2024, before the anticipated spike in 2026. This projection, however, has sparked debate among Nigerian economists, with some dismissing it as overly pessimistic and disconnected from the realities of domestic policy dynamics.
The IMF report also revised its economic growth forecast for Nigeria downwards, citing weakening global oil prices as a primary risk to the country’s fiscal and external balances. The 2025 GDP growth projection was reduced by 0.2 percentage points to 3.0%, and the 2026 projection was lowered by 0.3 percentage points to 2.7%. This downward revision is attributed to the vulnerability of Nigeria, like many other oil-exporting nations in Sub-Saharan Africa, to external shocks, particularly fluctuations in commodity prices, which significantly impact government revenue, trade balances, and investor confidence. Despite maintaining a current account surplus in 2024, Nigeria’s external position is expected to weaken, with the surplus projected to shrink from 9.1% of GDP in 2024 to 6.9% in 2025 and further down to 5.2% in 2026.
The rebasing of Nigeria’s CPI from a 2009 base year to 2024, aimed at reflecting current consumption patterns, has significantly altered the inflation landscape. The recalculated January inflation figure stood at 24.48%, down from 34.80% recorded in December 2024 under the old base. While February saw a further decline to 23.18%, March witnessed a slight uptick to 24.23%, attributed to food price increases, logistical challenges, and foreign exchange volatility. In response to these inflationary pressures, the Central Bank of Nigeria (CBN) maintained its Monetary Policy Rate at 27.5% in February, signaling its commitment to a tight monetary policy stance. However, the continued rise in both inflation and money supply in March might necessitate further rate hikes in subsequent policy meetings.
While the IMF hasn’t explicitly justified its inflation projection, Nigerian economists have voiced concerns about its severity. Some argue that the 37% forecast is exaggerated, considering that inflation has remained within the 23-24% range since the CPI rebasing. They advocate for measures like bolstering the real sector to enhance productivity, continued CBN intervention in the foreign exchange market, improved security in food-producing regions, and the continuation of the naira-for-crude policy to manage petrol prices. Others criticize the IMF’s projection for not adequately considering domestic policy adjustments, arguing that addressing insecurity in food-producing areas and supporting manufacturers through fiscal measures could significantly moderate inflation. They believe that with improved fiscal discipline, increased oil output, and enhanced security, the inflation outlook needn’t be so bleak.
The importance of prudent fiscal management, including controlling money supply growth, reducing unnecessary borrowing, and avoiding economic overheating, is also emphasized. Experts acknowledge the weakening of Nigeria’s growth prospects, attributing it partly to global economic trends, including weak oil prices and low output. Domestic factors, such as insecurity in agricultural areas, high transportation and energy costs, and inadequate infrastructure, are further exacerbating the situation. The government’s expansionary fiscal stance is also a concern, particularly if it leads to larger deficits financed by borrowing, especially from the CBN, which could further fuel inflation.
The weakening exchange rate adds another layer of complexity to the economic challenges. With both inflation and money supply rising again in March, the CBN may be compelled to raise interest rates further, potentially dampening economic activity in the short term. The IMF’s projection of weak income growth, with real output per capita expected to grow by only 0.6% in 2025 and 0.3% in 2026, significantly below the Sub-Saharan Africa average, underscores the country’s struggle to translate headline growth into tangible improvements in living standards. This emphasizes the urgent need for Nigeria to diversify its economy away from its reliance on oil, invest in infrastructure development, address security concerns, and create a more conducive environment for private investment to flourish.
