Nigeria’s economic outlook darkens as IMF flags oil, global risks
Onome Amuge
The International Monetary Fund (IMF) has lowered its economic growth forecasts for Nigeria in 2025 and 2026, citing increasing global uncertainties and the persistent impact of weaker oil prices on the nation’s economy.
The Fund’s latest projections, outlined in its April World Economic Outlook (WEO) released recently, now anticipate growth of 3.0 per cent in 2025 and 2.7 per cent in 2026. This marks a downward revision from the 3.2 per cent and 3.0 per cent respectively projected in the January edition of the WEO.
The IMF attributed this bleaker outlook to a combination of domestic challenges and a deteriorating global economic landscape, encompassing heightened trade tensions, decelerating demand from advanced economies, and a significant slump in crude oil prices – a crucial revenue source for Nigeria.
The report cautioned that without robust policy responses, Nigeria risks struggling to maintain macroeconomic stability in the face of these external headwinds.
Speaking at a press briefing during the IMF/World Bank Spring Meetings in Washington DC, Pierre-Olivier Gourinchas, the IMF’s Economic Counsellor and Director of Research, highlighted that emerging economies, including Nigeria, faced downgrades due to their deep integration into global supply chains.
He noted that the uncertainty is leading to a positive investment in activity, and they’re going to suffer from the decline in demand for products coming from the tariffs.
Jason Wu, assistant director in the IMF’s Global Markets division, further emphasised the impact of government reforms on Nigeria’s sovereign credit. He pointed out that amidst volatile global financial markets and wavering risk appetite, this is when we might see increases in sovereign spreads that will challenge the external picture for Nigeria as well as other frontier economies.
Wu noted the recent increase in Nigeria’s sovereign spread alongside declining global stock markets. He also highlighted the vulnerability of large commodity exporters like Nigeria to lower global demand stemming from trade tensions, which would “obviously weigh on revenue that they will receive.”
The IMF also indicated a growing probability of a global recession, revising its previous estimate from October to 40 per cent.
In its Global Financial Stability Report (GFSR), the IMF acknowledged Nigeria’s return to the international debt market in late 2024, its first eurobond issuance since 2022 , as a key indicator of improved investor sentiment towards frontier economies, buoyed by macroeconomic reforms and enhanced credit profiles.
The report noted the narrowing of sovereign eurobond spreads for frontier economies in 2024 and early 2025, attributing this to macrofinancial reforms, progress in debt restructuring (as seen in Ethiopia and Ghana), and credit rating upgrades in several nations, including Nigeria’s foreign exchange market reforms.
The GFSR highlighted that frontier economies were able to issue foreign currency debt at relatively modest yields, with Nigeria and Egypt being notable returnees to the eurobond market.
Economic growth across Sub-Saharan Africa is also projected to moderate slightly to 3.8 per cent in 2025 before recovering to 4.2 per cent in 2026. This regional performance places Nigeria’s growth forecast slightly below the average.
The IMF revised down growth projections for South Africa as well, citing slowing momentum and heightened uncertainty. South Sudan experienced a significant downward revision due to delays in resuming oil production.
Despite the downward growth revisions, the IMF projects Nigeria’s current account balance to remain in surplus, although declining 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 surplus is expected to offer some buffer against external economic shocks for the country.