Nigeria’s headline inflation is projected to rise sharply to 37 per cent in 2026, according to the International Monetary Fund, which issued the forecast in its April 2025 World Economic Outlook report released on Tuesday.

The IMF said the new projection follows the rebasing of Nigeria’s Consumer Price Index by the National Bureau of Statistics in January 2025, and warned that persistent price pressures and structural constraints would likely keep inflation elevated over the medium term.

According to the Fund, inflation, which averaged 33.2 per cent in 2024, is expected to moderate slightly to 26.5 per cent in 2025 before surging to 37.0 per cent the following year.

The projection, however, has drawn mixed reactions from Nigerian economists, some of whom described the outlook as “excessively pessimistic” and detached from domestic policy realities.

The IMF report also downgraded Nigeria’s economic growth forecast for 2025, citing weakening global oil prices as a major risk to the country’s fiscal and external balances.

The Fund revised its 2025 GDP growth forecast for Nigeria downward by 0.2 percentage point to 3.0 per cent, down from 3.2 per cent. Growth for 2026 was also revised downward by 0.3 percentage point to 2.7 per cent.

The report stated, “Among the larger economies, the growth forecast in Nigeria is revised downward by 0.2 percentage point for 2025 and 0.3 percentage point for 2026, owing to lower oil prices.”

It noted that Nigeria, like many oil-exporting countries in Sub-Saharan Africa, remained highly vulnerable to external shocks, particularly commodity price declines, which continue to affect government revenue, trade balances, and investor sentiment.

Despite maintaining a current account surplus in 2024, Nigeria’s external position is expected to weaken.

The IMF projected that the current account surplus would shrink from 9.1 per cent of GDP in 2024 to 6.9 per cent in 2025, and further to 5.2 per cent in 2026.

This comes on the back of a balance of payments surplus of $6.83bn in 2024, according to data published by 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.

On inflation, the IMF’s forecast follows Nigeria’s decision to rebase its CPI calculations. The National Bureau of Statistics announced in January 2025 that it had updated the base year from 2009 to 2024 to better reflect present-day consumption patterns.

Following the adjustment, inflation for January was recalculated at 24.48 per cent, down from 34.80 per cent recorded in December 2024 under the old base.

The inflation rate declined further to 23.18 per cent in February before edging up again to 24.23 per cent in March, a development that economists attribute to food price spikes, logistics bottlenecks, and foreign exchange volatility.

The Central Bank of Nigeria retained its Monetary Policy Rate at 27.5 per cent at its February meeting, noting the need to sustain tightening in the face of sticky inflation.

With both inflation and money supply rising in March, the CBN may be compelled to consider further hikes in its next policy meeting.

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 hovered around 23 to 24 per cent. Even in 2024, when inflation was high and unrelenting, it averaged 33 per cent. So, I believe the IMF’s 37 per cent projection for 2026 is exaggerated,” he said.

Abimbola also offered recommendations for moderating inflation: “We need stronger support for the real sector to boost productivity, sustained CBN intervention to stabilise exchange rates, security enhancement in food-producing states, and continuation of the naira-for-crude policy to help manage petrol prices.”

Also speaking, economist and CEO of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the Fund’s outlook did not fully account for domestic policy flexibility.

“Inflation in Nigeria is largely driven by supply-side constraints and exchange rate instability,” he said.

“If we address insecurity, especially in food-producing areas, food inflation—which is the largest component of headline inflation—will ease. If we also support manufacturers through fiscal measures and reduce production costs, inflation will moderate,” he added.

Yusuf criticised the IMF’s 37 per cent projection, arguing that it assumes no improvement in Nigeria’s fiscal discipline, oil output, or security architecture.

“I don’t see inflation getting to 37 per cent. That’s a worst-case scenario. If we manage our spending, reduce deficit financing, and improve oil earnings, our macroeconomic stability will improve. The outlook does not have to be that dire,” he said.

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 added that local issues such as security in agricultural zones, high transport and energy costs, and poor infrastructure were worsening the outlook.

“These challenges have a ripple effect on output and inflation. Food prices will rise, and productivity will suffer,” he said.

He warned that the government’s expansionary fiscal stance might further fuel inflation if not managed prudently.

“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.