By Editor
The International Monetary Fund (IMF) has raised its forecast for Nigeria’s economic growth in 2026 to 4.2 per cent from 4.1 per cent, while warning that rising energy and food prices, geopolitical tensions and a possible correction in artificial intelligence (AI)-related investments threaten the global economic outlook.
The revised projection was contained in the IMF’s October 2026 World Economic Outlook (WEO), titled Resilience Under Strain, Urgent Choices, released yesterday during the ongoing annual meetings of the IMF and World Bank in Bangkok, Thailand.
The upward revision reflects improved macroeconomic stability and favourable terms-of-trade effects in Nigeria. However, the Fund warned that higher prices of essential goods could worsen poverty and food insecurity, potentially undermining the benefits of stronger economic growth.
According to the IMF, economic growth in sub-Saharan Africa is expected to remain stable at 4.5 per cent in 2026, although the regional outlook masks significant differences among countries.
The Fund attributed the divergence to variations in policy flexibility, reform implementation, exposure to commodity prices, climate shocks and access to external financing.
It noted that oil-importing and non-resource-intensive economies were more vulnerable to rising energy and food prices, while some larger economies continued to benefit from earlier stabilisation and reform efforts.
Nigeria, it said, was benefiting from improved macroeconomic stability and favourable terms of trade, even as rising prices of essential goods threatened to deepen poverty and food insecurity.
Global growth faces fresh headwinds
Despite the improved outlook for Nigeria, the IMF warned that global economic resilience was coming under increasing pressure.
The Fund projected global growth 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 briefing on the WEO report, Sylvana Tenreyro, the IMF’s Economic Counsellor and Director of the Research Department, said the global economy had continued to withstand repeated shocks, but warned that the risks to growth were increasingly tilted to the downside.
“The global economy has been resilient, but that resilience is under strain, with risks tilted to the downside,” she said.
Tenreyro said governments needed to move beyond responding to successive crises and begin rebuilding their capacity to withstand future economic disruptions.
“The task ahead is to move from coping to rebuilding,” she said, calling for the restoration of fiscal space, stronger supply-side resilience and policies that would help economies absorb future shocks.
The IMF identified rising energy and commodity prices as major pressures on economic activity, while investment associated with artificial intelligence had provided some support for global growth.
However, it cautioned that the interaction between geopolitical tensions and technology investment was producing uneven outcomes across economies.
Countries benefiting from technology-related investment and favourable commodity trade conditions have received some support, while others face higher import bills, exchange-rate pressures and declining real incomes.
The Fund warned that prolonged geopolitical tensions could keep energy and food prices elevated, reignite inflationary pressures, worsen fiscal and external balances and weaken 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, largely reflecting the temporary impact of higher energy and food prices.
AI investment boom poses financial risks
The IMF also warned that the surge in investment linked to artificial intelligence could become a source of financial instability if expectations of future profits and productivity gains failed to materialise.
Although AI-related investment has supported economic activity and international trade, the Fund said the gains remained concentrated in a relatively small number of firms, sectors and economies.
It cautioned that a reassessment of expected returns from AI investments could trigger a sharp decline in investment, falling equity prices and tighter financial conditions.
The report warned that such a correction could spread beyond technology companies to economies integrated into technology supply chains and financial markets with significant exposure to technology stocks.
The concerns add another layer of uncertainty to the global outlook, already threatened by geopolitical conflicts, trade tensions and rising commodity prices.
The Fund noted that the global economy had weathered repeated shocks but warned that the room for adjustment was not unlimited.
IMF urges fiscal discipline
Against the backdrop of rising inflationary risks and financial uncertainty, the IMF urged governments to rebuild fiscal buffers, safeguard financial stability and strengthen private-sector dynamism.
It said fiscal policy should help contain demand pressures, particularly at a time when higher energy and food prices threaten to push inflation upwards.
The Fund also stressed the importance of monetary policy focused on price stability, noting that central bank independence remained critical to achieving that objective.
For Nigeria, the revised growth forecast signals an improvement in the Fund’s expectations for economic activity in 2026, but the warning over rising essential commodity prices highlights the challenges facing households already struggling with the cost of living.
The IMF’s outlook suggests that stronger growth alone may not be sufficient to ease economic hardship if food and energy costs continue to rise.
The Fund called on countries to strengthen their capacity to withstand future disruptions while pursuing policies that support sustainable growth and preserve economic stability.
