IMF upgrades forecast for Nigeria’s economic growth to 4.2%

IMF Managing Director Kristalina Georgieva speaks at the Milken Institute ahead of the World Bank and International Monetary Fund annual meetings in Washington, DC on October 8, 2025. The global economy is doing better than expected, even as it faces prolonged uncertainty and underwhelming medium-term growth prospects, Georgieva said Wednesday. The world economy is doing “better than feared, but worse than we need,” Georgieva told reporters in Washington. (Photo by Brendan Smialowski / AFP)

*Warns of tougher times as global growth slows to 3.1%

*Says AI boom, energy shocks threaten global economic outlook

By Babajide Komolafe, Economy Editor

The International Monetary Fund (IMF) has upgraded its forecast for Nigeria’s economic growth for 2026 to 4.2 per cent but warned that rising energy and food prices, geopolitical tensions and potential market corrections linked to artificial intelligence (AI) threaten the global economic outlook.

The new forecast was contained in the IMF World Economic Outlook report October 2026, titled Resilience Under Strain, Urgent Choices”, released on Monday during the ongoing annual meetings of the IMF/World Bank in Bangkok, Thailand.

Furthermore, the new forecast represents one percentage point above the 4.1 per cent earlier projected by the IMF in the July 2026 edition of its WEO.

According to the IMF, “Growth in sub-Saharan Africa is expected to remain stable at 4.5 per cent in 2026, though this masks substantial divergence across countries, reflecting differences in policy space, reform implementation, commodity exposure, climate shocks, and access to external financing.

“Oil-importing, non-resource-intensive economies are more adversely affected by higher energy and food prices, whereas some larger economies continue to benefit from earlier stabilisation and reform efforts, even though they are largely absent from the AI-driven global technology upswing and face headwinds from declines in official development assistance.

“Nigeria is supported by improved macroeconomic stability and favourable terms-of-trade effects, though higher prices for essentials are expected to further aggravate poverty and food insecurity.”

Global growth under pressure

However, the IMF warned that the global economy’s resilience was under increasing pressure, with growth projected to slow from 3.5 per cent in 2025 to 3.1 per cent in 2026, before recovering to 3.4 per cent in 2027.

Speaking at the press briefing on the WEO report, Sylvana Tenreyro, the IMF’s Economic Counsellor and Director of the Research Department, said, “The global economy has been resilient, but that resilience is under strain, with risks tilted to the downside.”

She added, “The task ahead is to move from coping to rebuilding,” stressing the need to restore fiscal space, strengthen supply-side resilience and improve countries’ capacity to withstand future economic shocks.

Explaining the global outlook, Tenreyro identified energy and commodity price increases as major factors weighing on economic activity, while investment associated with artificial intelligence had provided support for growth.”

The IMF report noted that the global economy had withstood repeated shocks, including geopolitical conflicts and trade tensions, but cautioned that “these margins of adjustment are not unlimited.”

According to the IMF, the interaction between geopolitical tensions and technological investment has created divergent growth outcomes across countries.

While economies benefiting from technology-related investment and favourable commodity trade conditions have received some support, others face higher import bills, exchange-rate pressures and weaker real incomes.

The Fund warned that prolonged geopolitical tensions could keep energy and food prices elevated, revive inflationary pressures, worsen fiscal and external balances, and weigh on economic growth.

Global headline inflation is projected to rise from 4.1 per cent in 2025 to 4.7 per cent in 2026 before easing to 4.1 per cent in 2027, with higher energy and food prices driving the temporary increase.

AI boom raises fresh risks

The IMF also cautioned that the technology investment boom, particularly in artificial intelligence, could become a source of financial instability.

Although AI-related investment has supported economic activity and international trade, the Fund warned that investment gains were concentrated in a relatively small number of firms, sectors and economies.

It cautioned that “a reassessment of AI-related profitability and productivity prospects could sharply reduce investment, trigger equity market corrections, and tighten financial conditions.”

Such a correction, the report said, could spill over into economies integrated into technology supply chains and markets with significant exposure to technology stocks.

Urges fiscal discipline

Against this backdrop, Tenreyro called on governments to rebuild fiscal buffers, safeguard financial stability and strengthen private-sector dynamism.

“Fiscal policy must be restrained and help contain demand pressures at a time of heightened inflationary risks,” the IMF chief economist said in the report.

The Fund also stressed the importance of monetary policy focused on price stability, adding that “central bank independence is instrumental in achieving that goal.”

“The global economy has been resilient, but that resilience is reaching its limits,” urging countries to strengthen their capacity to withstand future disruptions and achieve sustainable growth,” Tenreyro added.