Middle East war: IMF downgrades Nigeria’s 2026 growth outlook to 4.1%

Says oil price gains not enough to shield Nigeria’s economy

.Lowers global growth forecasts amid Middle East war

Emeka Agu Jnr with agency reports

The International Monetary Fund (IMF) has downgraded Nigeria’s 2026 growth forecast to 4.1 per cent as the economic fallout from the Middle East war continues.

The revision was announced at the IMF and World Bank Spring Meetings in Washington, D.C., where officials warned that war-related energy and supply shocks are undercutting recovery across the region.

IMF Chief Economist Pierre-Olivier Gourinchas said the downgrade reflects broader pressures facing energy-importing countries.

  “On Sub-Saharan Africa, we are seeing some downgrade of growth, and we are seeing some uptick in inflation in a number of countries in the region.

“The impact is very much along the lines of what we see more broadly — for a lot of the countries, especially the ones that are energy importers,” Gourinchas noted.

He added that the Fund is “following with a number of countries what their needs may be in the current environment” and coordinating with the International Energy Agency and the World Bank on energy market disruptions.

Speaking further, the Chief of the IMF Research Department’s World Economic Studies Division, Denz Igan, said the 0.3 percentage point cut reflects competing pressures.

“War-related higher fuel and fertilizer prices and higher shipping costs are going to weigh on non-oil activity in Nigeria,” Igan said. “There’s some offset coming from higher oil prices, but the net balance is weaker growth in 2026, with some recovery built in for 2027.”

The Fund projects that median inflation in Sub-Saharan Africa will rise from 3.4% in 2025 to 5% in 2026, driven by high oil and fertilizer prices, potential fuel shortages, and rising costs.

For Nigeria, she said tight monetary policy will be “crucial to achieve the inflation target of the central bank.”

The IMF noted that bilateral aid to Sub-Saharan Africa has fallen by 16% to 20% in 2025, removing a key buffer just as commodity and shipping costs spike.

The IMF also on Tuesday said rising oil prices will provide some relief to Nigeria.

It said, however, that the relief would not be enough to shield the country from the broader impact of a global economic shock.

The IMF’s Economic Counsellor and Director of Research, Pierre-Olivier Gourinchas, said this at the ongoing IMF/World Bank Spring Meetings in Washington D.C. on Tuesday.

Gourinchas said that the effects of the current global environment, driven by geopolitical tensions and rising energy costs were largely negative for many economies, particularly energy importers.

“For many countries, especially energy importers, the effects are negative, although there is some differentiation, as a number of countries in the Gulf region are also energy exporters,” he said.

He said that the fund was monitoring developments in energy markets closely and engaging with countries to assess emerging financing and policy needs.

He said that it was also coordinating with global institutions to respond to the evolving crisis.

The Deputy Director IMF’s Research Department, Petya Koeva-Brooks, said that Nigeria’s growth outlook had been revised downward by 0.3 percentage point to 4.1 percent in 2026, reflecting a balance of opposing forces.

According to her, higher global oil prices are expected to support government revenues and provide some external buffer.

She said that the overall impact of the shock remained negative.

“The war-related increase in fuel and fertilizer prices, as well as higher shipping costs, are expected to weigh on non-oil activity in Nigeria.

“There is some offset from higher oil prices, but on balance, the effect is a drag on growth in 2026, with a recovery expected in 2027.”

Koeva-Brooks said that the broader Sub-Saharan Africa region was also facing mounting headwinds.

She said that the headwinds included weaker global growth, softer non-oil commodity prices, and worsening terms of trade for oil-importing economies.

She said that the region was constrained by declining foreign aid flows, with bilateral support projected to fall between 16 per cent and 28 per cent.

Koeva-Brooks said that growth across the region had been downgraded, while inflationary pressures were set to intensify, driven by higher energy and fertiliser prices, potential fuel shortages, and rising borrowing costs.

She said that for Nigeria, these pressures were particularly significant given the importance of agriculture and the sensitivity of food prices to input costs such as fertiliser.

She called for continued vigilance by the Central Bank of Nigeria, adding that a tight and data-dependent policy stance will be critical in navigating the current environment.

“Close monitoring of exchange rate movements and inflation expectations will be essential to achieving price stability,” she said

Meanwhile, the International Monetary Fund (IMF) says it expects global economic growth to be slightly weaker than previously forecast, warning that rising geopolitical tensions and energy disruptions are weighing on activity.

“Once again, the global economy is threatened with being thrown off course – this time by the outbreak of war in the Middle East at the end of February 2026,” the IMF said on Tuesday in its latest outlook.

Whereas last year it was “higher trade barriers and elevated uncertainty,” the IMF said – likely referring to U.S. President Donald Trump’s tariff policy – the current situation is being weighed down by the slump in the supply of raw materials resulting from the blockage of the vital Strait of Hormuz and the uncertainty caused by the war with Iran.

The fund revised down forecasts for many economies, noting that its projections assume the conflict remains limited and that economic disruptions ease by mid-2026.

The IMF now expects global growth of 3.1 per cent in 2026, down from 3.3 per cent forecast in January, and 3.2 per cent in 2027.

This would leave global growth below its long-term average.

IMF Managing Director Kristalina Georgieva had warned that even in a best-case scenario, there will be no quick return to pre-war growth levels, with expansion likely to remain structurally weaker.

Economic growth is therefore likely to stabilize at this new level in the medium term, and thus lie well below the average of 3.7 per cent between 2000 and 2019.

The IMF chief also highlighted short-term risks of a surge in inflation as a result of the war.

Expectations for inflation in the United States and the eurozone have already risen significantly.

“Fortunately, longer-run expectations have not budged – this is very good and very important,” Georgieva said.

Global headline inflation is expected to stand at 4.4 per cent in 2026 and fall to 3.7 per cent next year.

This would place the figures well above the 2 per cent target that many central banks have set themselves.

Georgieva does not yet see central banks such as the Federal Reserve or the European Central Bank under pressure to act.

The IMF now forecasts eurozone growth of 1.1 per cent this year (January: 1.3 per cent) and 1.2 per cent in 2027, down from a previous estimate of 1.4 per cent.

The fund also adopted a more cautious outlook for the U.S. projecting growth of 2.3 per cent in 2026 (January: 2.4 per cent).

For 2027, growth is seen at 2.1 per cent, slightly above the earlier forecast of 2 per cent

For Germany, this meant another downward revision just three months after the most recent upward revision.

The German economy is now expected to grow by 0.8 per cent in 2026.

As recently as January, economic experts had raised their expectations to 1.1 per cent.

The German government is also likely to follow suit and scale back its expectations in the near future: so far, Berlin is forecasting growth of 1 per cent this year.

The spring forecast forms the basis for the tax estimate.

Leading economic institutes have already cut their outlook to as low as 0.6 per cent.

Economists say higher energy prices are weighing heavily on the recovery.

Supply disruptions linked to the Strait of Hormuz have driven up global oil and gas prices, pushing fuel costs higher.

In response, Germany’s coalition government has announced temporary tax cuts on fuel, reducing petrol and diesel prices by about 17 cents per litre for two months.

Workers may also receive a tax-free €1,000 bonus from employers.