Oil price rally won’t fully protect Nigeria, IMF cautions

THE International Monetary Fund (IMF)¹has lowered Nigeria’s economic growth projection for 2026 to 4.1 percent, down from an earlier estimate of 4.4 percent, warning that stronger oil prices alone will not be enough to shield the economy from global headwinds. Although higher crude earnings may provide some fiscal breathing room, the Fund said they are unlikely to offset the broader risks facing Africa’s most populous nation.

Speaking at the ongoing IMF/World Bank Spring Meetings in Washington, D.C., the IMF’s Economic Counsellor and Director of Research, Pierre-Olivier Gourinchas, highlighted that the current global environment, shaped by geopolitical tensions and elevated energy costs,is largely unfavourable for many economies, particularly those reliant on energy imports.

He noted that while some countries benefit from exporting energy, many others are experiencing adverse effects, underscoring uneven impacts across regions.

Gourinchas added that the IMF is actively tracking developments in global energy markets and working with countries to evaluate emerging financing and policy requirements, while also coordinating responses with other international institutions.

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Providing further detail, Deputy Director in the IMF’s Research Department, Petya Koeva-Brooks, said Nigeria’s revised outlook reflects a mix of offsetting factors. The 0.3 percentage point downgrade to 4.1 percent captures both the support from higher oil prices and the drag from external shocks.

According to her, although rising crude prices are expected to bolster government revenues and offer some external cushion, the overall impact remains negative. She explained that increases in fuel and fertiliser costs linked to global conflicts, alongside higher shipping expenses, will weigh on the non-oil sector of the Nigerian economy.

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

Koeva-Brooks also pointed to growing challenges across Sub-Saharan Africa, including slower global growth, weaker non-oil commodity prices, and deteriorating trade conditions for energy-importing nations. She added that declining foreign aid flows are compounding these pressures, with bilateral assistance projected to drop by between 16 percent and 28 percent in 2025, a trend likely to persist.

As a result, the region faces downgraded growth prospects and rising inflation, driven by higher energy and fertiliser prices, potential supply disruptions, and increasing borrowing costs.

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For Nigeria, these challenges are particularly acute given the economy’s reliance on agriculture and the sensitivity of food prices to input costs such as fertiliser.

On inflation and monetary policy, Koeva-Brooks stressed the importance of a cautious and data-driven approach by the Central Bank of Nigeria (CBN), noting that tight policy conditions will be essential to maintain price stability. She emphasised the need for close monitoring of exchange rate movements and inflation expectations.

Despite near-term pressures, the IMF expects Nigeria’s growth outlook to improve after 2026, supported by stabilising global conditions and ongoing domestic adjustments.

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