On the world economic outlook for Nigeria

A few days ago, the International Monetary Fund (IMF) revised downward Nigeria’s economic growth projections for 2025 and 2026, to 3.0 for 2025 and 2.7 for 2026, as global uncertainties grow and sustained weaknesses in oil prices impact the country’s economy. The World Economic Outlook (WEO) has thus projected a slow in global growth with Nigeria growth cut from 3.2 per cent and 3.0 per cent for 2025 and 2026. This development needs to be looked into by any concerned Nigerian, hence what struck my mind to examine the implications of such report to the survival of our economy.

The fund has attributed the downgrade to a combination of domestic challenges and worsening global conditions, including trade tensions, slowing demand from advanced economies, and a sharp decline in crude oil prices. The IMF warned that without robust policy responses, Nigeria may struggle to maintain macroeconomic stability in the face of external headwinds. In its Global Financial Stability Report, the IMF further noted that country’s return to the international debt market in late 2024, its first eurobond issuance since 2022, marked a notable shift in investor sentiment towards frontier economies, strengthened by macroeconomic reforms.

In addition, sovereign eurobond spreads for frontier economies narrowed in 2024 and at the start of 2025, with macrofinancial reforms, progress on debt restructuring, and credit rating upgrades in several countries all having contributed to this narrowing. Therefore, frontier economies were able to issue foreign currency debt at relatively modest yields, with total issuance during the first quarter of 2025, amounting to roughly half of total issuance in 2024. What this means is that the economic growth across the Sub Saharan Africa region is also projected to slow slightly to 3.8 per cent in 2025 before rebounding to 4.2 per cent in 2026, a performance that still places Nigeria slightly below the regional average.

Reacting to the report, the Lagos Chamber of Commerce and Industry (LCCI) has acknowledged with deep concern, the projections presented in the report, which underscored the downward revision in the nation’s economic growth forecast to 3.0% in 2025 and 2.7% in 2026, as a confluence of global and domestic headwinds. These include subdued crude oil prices below the federal budget benchmark of US$75, heightened global trade tensions, weakening demand from advanced economies, and volatility in international financial markets. According to the Director-General of LCCI, Dr. Chinyere Almona, the IMF’s concerns regarding Nigeria’s vulnerability to external shocks are not unfounded.

The increased sovereign spread, volatile investor sentiment, and depreciating exchange rates paint a precarious macroeconomic landscape. While Nigeria recorded a positive balance of payments in 2024 and returned to the international debt market, the sustainability of these gains remains uncertain without deeper structural reforms. The chamber is also worried by the IMF’s inflation projection of an average of 26.5% in 2025 and a surge to 37.0% by 2026, saying recent policy measures, such as the unification of exchange rates and cessation of deficit financing by the Central Bank of Nigeria, are commendable, but they remain insufficient in isolation.

However, the potential for economic growth in the economy gives some hope that, if the country sustain ongoing reforms in the oil and gas sector to drive more crude production, increase domestic refining capacity, and reduce fuel importation, the nation could record an improved oil revenue to support our budget aspirations and projections. In terms of increased tax revenue, we urge the Federal Government to start the implementation of the recommended tax reforms, driven by a better tax administration system. In the face of fragile economic conditions in Nigeria, the group enjoin the country to prioritise a better-managed fiscal policy environment that drives public debt reduction, creating bigger buffers to accommodate the likely increase in defence spending pressures and trade-related shocks to the economy in the short term.

With crude oil revenue under attack from falling prices, LCCI recommends that the government should get stricter with cutting the cost of governance within adjusted budget assumptions that reflect current realities. In a scenario of projected global public debt reaching 117% of GDP by 2027, Nigeria’s current debt level is close to attaining this projection if nothing drastic is done to reduce the value and cost of borrowing within the short term. A stern focus can be directed based on interventions on inflationary pressures that seem not to have sufficiently abated even with the rebased computations.

The group further calls for necessary and critical adjustments to non-essential recurrent expenditures and non-productive subsidies, to intensify our non-oil export promotion, the government should provide incentives to empower high-growth sectors like solid minerals, the creative industry, and the digital economy. We can boost agricultural production and agro-processing through targeted investments in local fertilizer production, highly subsidised extension services, tech-driven irrigation, and value chain infrastructure. To drive inclusive economic growth, the country has been advised to boost access to microfinance, improve and stabilise power supply, and drive regulatory reforms that support Micro, Small and Medium-Sized Enterprises (MSMEs) and local manufacturing for job creation, revenue generation, and economic growth, among others.

SOURCE: Blueprint.ng