IMF forecasts Nigeria’s inflation to fall to 26.5% in 2025 but spike to 37% in 2026. Warns of fragile stability amid FX volatility and reform pressures.
IMF Predicts Spike in Nigeria’s Inflation to 37% by 2026 Despite 2025 Moderation
Global lender cautions that price stability remains fragile as Nigeria grapples with economic reforms and external headwinds
The International Monetary Fund (IMF) has projected that Nigeria’s headline inflation rate will moderate to 26.5% in 2025 following a recalibration of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) but warns that inflation could surge again to 37.0% by 2026.
The inflation outlook, detailed in the IMF’s April 2025 World Economic Outlook (WEO) report, underscores the volatile nature of Nigeria’s macroeconomic environment despite short-term gains from ongoing structural reforms.
Moderation Followed by a Surge
According to the Fund, inflation is expected to decelerate in 2025 from its current high of 33.2% in 2024, largely due to base effects and tighter monetary policy. However, the respite may be short-lived, with inflation projected to rebound sharply in 2026 underscoring the fragility of recent gains.
The IMF attributes this projected inflationary spike to continued pressures from foreign exchange volatility, subsidy removals, and energy sector reforms that may lead to cost-driven price increases across key sectors.
Current Account Under Pressure
In parallel, Nigeria’s external position while currently stable faces increasing headwinds. The IMF projects that the current account surplus will shrink from 9.1% of GDP in 2024 to 6.9% in 2025, and further to 5.2% in 2026, as global oil dynamics and capital flow uncertainties weigh on the economy.
Recent figures from the Central Bank of Nigeria (CBN) show a Balance of Payments surplus of $6.83 billion in 2024, buoyed by a $17.22 billion current and capital account surplus, driven largely by a $13.17 billion goods trade surplus.
But the sustainability of these gains remains uncertain. Investment analysts at JP Morgan have warned that oil prices falling below Nigeria’s fiscal breakeven price of $60 per barrel could quickly reverse the trend, potentially plunging the current account into a deficit.
Mixed Outlook from Global Ratings Agencies
In contrast to the IMF’s cautious tone, Fitch Ratings offers a more optimistic view. The agency expects Nigeria to maintain a moderate current account surplus, averaging 3.3% of GDP between 2025 and 2026, supported by increased crude oil output, energy sector reforms, and the operationalization of new local refineries such as the Dangote Refinery.
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Policy Implications and Outlook
These mixed forecasts highlight the urgent need for policy coordination between Nigeria’s monetary and fiscal authorities. While the Central Bank of Nigeria (CBN) has raised benchmark interest rates to curb inflation, broader structural reforms particularly in the energy, agriculture, and infrastructure sectors are critical to improving long-term resilience.
The IMF’s projection of 37% inflation in 2026 serves as a warning to Nigerian policymakers that without sustained and inclusive reform, the country risks undoing recent economic progress.
