Nigeria is facing a fresh wave of economic pressures despite recent reforms, as the International Monetary Fund warns of multiple risks that could slow growth and strain public finances in its latest Regional Economic Outlook for Sub-Saharan Africa.
The report acknowledges that Nigeria made progress in 2025 through key reforms, but says the country now faces serious challenges ranging from global shocks to domestic structural weaknesses.
These pressures, if not managed carefully, could weaken economic stability and increase hardship for households and businesses.
Foreign Aid Cuts Put Pressure on Finances
The IMF said Nigeria is among the countries most exposed to sharp cuts in foreign aid, with potential losses estimated between $240 million and $780 million.
This drop in funding is expected to increase pressure on government finances, especially at a time when the country is already managing tight budgets.
Healthcare Funding Under Strain
Nigeria’s health sector is also at risk due to its heavy reliance on funding from the United States Agency for International Development.
The report noted that health support from USAID exceeded $440 million in 2024, and with expected cuts, the government has already had to increase its own spending by $200 million to keep services running.
This shift is putting additional strain on the national budget.
Rising Fuel Prices from Global Shocks
The IMF said the ongoing conflict in the Middle East is pushing up global energy prices, leading to higher fuel costs in Nigeria.
READ ALSO:
- Risks, Opportunities US-Iran War Poses for Nigeria
- IMF Cuts Nigeria’s 2026 Growth Outlook to 4.1% on Middle East War Shock
- Middle East War Threatens Africa’s Economic Gains — IMF’s Selassie Warns
- Nigeria’s Economic Stability Improves in Q1, but Rising Costs Threaten Outlook — CPPE
- Global Economy Faces Rising Risks, IMF Chief Warns
These rising costs are expected to affect both households and businesses, increasing expenses and reducing spending power.
The report also warned that this could raise risks in the banking sector as financial pressures build.
Fiscal Deficit Set to Widen
Nigeria’s fiscal position is expected to worsen in 2026, according to the IMF.
The report projects that the country’s fiscal deficit will increase from 1.8 per cent of GDP in 2025 to 4.4 per cent in 2026, showing growing pressure on government finances.
Oil Dependence Remains a Risk
As a major oil exporter, Nigeria remains highly exposed to swings in global oil prices.
The IMF warned that periods of high oil prices can lead to increased government spending, which may be difficult to control later and could fuel inflation.
Persistent Economic Imbalances
Despite recent reforms such as exchange rate adjustments and subsidy removal, the IMF said Nigeria still faces long-standing economic challenges.
These include structural imbalances that continue to affect stability and long-term growth.
Weak Digital and Power Infrastructure
The report highlighted challenges in expanding digital technologies, including artificial intelligence, due to unreliable electricity and high internet costs.
While Nigeria has made some progress in using technology in sectors like agriculture and education, scaling these efforts remains difficult.
Food Supply Risks Rising
Higher global fertiliser prices and disruptions in shipping are expected to affect food production.
The IMF warned that this could worsen food shortages and push up food prices, increasing the burden on households.
Fragile Economy Limits Response
Nigeria continues to be classified by the IMF as a fragile and conflict-affected country, meaning it faces deeper challenges in responding to economic shocks.
This classification reflects limited capacity and resources to manage crises effectively, and according to the IMF, Nigeria is at a critical point, where the gains from recent reforms are being tested by new and ongoing challenges.
The report suggests that while progress has been made, the country remains vulnerable to both global and domestic risks, and careful policy decisions will be needed to protect economic stability in the months ahead.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X