IMF lifts Nigeria growth forecast to 4.2%, urges relief for struggling

The International Monetary Fund (IMF) has raised Nigeria’s economic growth forecast for 2026 to 4.2 per cent but warned that rising food and energy costs continue to deepen hardship, urging the Federal Government to provide targeted support to vulnerable households without undermining economic stability.

The revised projection, contained in the October 2026 World Economic Outlook titled “Resilience Under Strain, Urgent Choices”, represents an upward adjustment of 0.1 percentage point, while the forecast for 2027 remains unchanged at 4.3 per cent.

The improved outlook reflects greater macroeconomic stability and favourable terms of trade, but the Fund cautioned that stronger economic activity does not necessarily mean living conditions are improving for all Nigerians.

That contradiction is becoming increasingly important for the economy. While growth is projected to strengthen, elevated prices for essential goods continue to erode household purchasing power, particularly among low-income earners who spend a larger share of their income on food, transport and energy.

The IMF’s assessment places targeted social protection at the centre of the policy response, arguing that the government must address immediate welfare pressures without reversing the reforms intended to restore macroeconomic stability.

Speaking during the presentation of the report in Bangkok, IMF Research Department Division Chief Deniz Igan said policymakers should balance the immediate needs of the population with medium-term economic stability.

She identified temporary cash transfers and targeted income support as appropriate measures to help vulnerable Nigerians cope with rising food and energy prices.

Nigeria’s recent economic performance provides some support for the improved outlook. The National Bureau of Statistics reported that real gross domestic product grew by 4.43 per cent year-on-year in the second quarter of 2026, compared with 4.23 per cent in the corresponding period of 2025.

However, the IMF warned that higher prices could worsen poverty and food insecurity, particularly if global energy shocks persist and food costs remain elevated.

The Fund’s latest position shifts attention beyond the pace of economic expansion to the extent to which that growth improves household welfare. For an economy where food and energy costs affect production, transportation and everyday consumption, persistent price pressures can weaken the benefits of rising output.

The IMF also called for support to remain fiscally sustainable, pointing to the need for more efficient government spending and stronger revenue mobilisation. Targeted assistance, rather than broad-based interventions that place additional pressure on public finances, would allow relief to reach those most exposed to the cost-of-living crisis.

The recommendation comes amid renewed debate over the impact of petrol prices and the broader economic reforms introduced since 2023. The Federal Government recently announced a 30-day discount window on petrol sold by Nigerian National Petroleum Company Limited, prioritising public transport operators. Finance Minister Taiwo Oyedele has said the arrangement is being funded from the retailer’s margins rather than the Federal Government’s budget.

Globally, the IMF projects economic growth of 3.1 per cent in 2026 and 3.4 per cent in 2027, warning that geopolitical tensions, elevated energy prices and other risks continue to threaten the outlook.

For Nigeria, the upward revision provides a measure of confidence in the direction of the economy, but the more pressing test is whether stronger output can translate into better incomes, affordable essentials and improved living standards.

The IMF’s message is that growth and relief must advance together: without targeted support for vulnerable Nigerians, the benefits of economic stabilisation risk remaining unevenly distributed even as headline indicators improve.