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IMF upgrades growth forecast amid reforms, trade gains, and strong Q1 GDP data
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Warns Nigeria to phase out subsidies to avoid future fiscal crises
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Forecast sees growth sliding in 2026 without structural economic changes
The International Monetary Fund has raised Nigeria’s 2025 economic growth forecast to 3.4 percent, citing improved global trade conditions, financial sector resilience, and recent structural reforms by the Tinubu-led administration.
The revision marks a 0.4 percentage point increase from its April projection of 3.0 percent, signalling cautious optimism about the nation’s economic direction.
The IMF made the adjustment in its July 2025 World Economic Outlook update, noting that Nigeria’s growth is being driven by positive trends in trade, an improving services sector, and an uptick in industrial activity.
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However, the global lender issued a firm warning to the Federal Government, stressing the urgent need to completely phase out petroleum and electricity subsidies to prevent long-term distortions in the economy.
According to the IMF, while the country’s economic rebound is commendable, Nigeria still risks underperforming compared to the Sub-Saharan African regional average of 4.0 percent projected for 2025. South Africa’s outlook remains sluggish at 1.0 percent, further highlighting Nigeria’s relative performance advantage.
The Fund’s concern centres on the continuation of subsidies that have strained public finances and hampered critical investments in infrastructure, health, and education.
It warned that the failure to remove these subsidies could erode current gains, especially as global trade momentum may taper off in 2026 due to front-loaded export flows and tariff uncertainties.
The IMF also flagged Nigeria’s weak social protection systems, calling on the government to improve safety nets for vulnerable citizens who may suffer the most from the eventual withdrawal of subsidies. The Fund said such measures are crucial to sustaining inclusive growth and long-term stability.
Recent GDP data from the National Bureau of Statistics supported the IMF’s upward revision. The report showed that Nigeria’s real GDP grew by 3.13 percent in the first quarter of 2025, up from 2.31 percent in the same quarter of 2024.
In nominal terms, the economy expanded by 18.3 percent year-on-year, with a total value of ₦94.05 trillion, aided in part by the recent rebasing of national accounts to reflect 2019 as the new base year.
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Despite these gains, the IMF projects a slight dip in Nigeria’s GDP growth to 3.2 percent by 2026, reinforcing its warning that the current momentum may not be sustainable without bold policy moves and subsidy reform.
Nigeria’s government has yet to issue an official response to the IMF’s latest recommendations, but top economic advisers have previously argued that subsidy removal remains a politically sensitive issue that must be handled cautiously to prevent public backlash and social unrest.
The IMF’s position, however, is clear: without firm steps to end fuel and power subsidies and invest in inclusive growth measures, Nigeria’s fiscal space will remain limited, and its growth potential constrained.
