•IMF projects 4.2% expansion, below sub-Saharan Africa’s 4.5%
•Warns Nigerian banks over bad loans, government debt risks
From Uche Usim, Bangkok, Thailand
Although Nigeria’s economy is expected to grow by 4.2 per cent in 2026, it is trailing the projected performance of several African countries as the continent’s economies expand at different speeds.
This is according to the International Monetary Fund’s (IMF) submission.
The projection, contained in the IMF’s October 2026 World Economic Outlook, falls below the 4.5 per cent growth forecast for sub-Saharan Africa, highlighting Nigeria’s struggle to match the pace of some of its regional peers.
Although the Nigerian economy is expected to perform better than in 2025, when growth was estimated at four per cent, the improvement remains modest compared with the stronger expansion projected for several African countries.
Ethiopia is expected to lead with 9.2 per cent growth, followed by Rwanda at 7.4 per cent and Benin at seven per cent.
Uganda’s economy is projected to expand by 6.2 per cent, while Côte d’Ivoire and Tanzania are expected to grow by six per cent each. Ghana is forecast to record 5.7 per cent growth, while Kenya’s economy is projected to expand by 4.5 per cent.
South Africa, however, is expected to record weaker growth of one per cent.
The IMF projects Nigeria’s economy to grow by 4.3 per cent in 2027, still below the 4.5 per cent forecast for sub-Saharan Africa. The outlook points to a major challenge for Africa’s largest economy: turning ongoing reforms and improved economic stability into faster growth, more jobs and better living conditions for its citizens.
Despite the projected expansion, the Fund warned that high living costs remain a major concern, with rising prices continuing to put pressure on households, particularly low-income earners.
Nigeria’s average inflation rate is projected to decline from 23 per cent in 2025 to 15.6 per cent in 2026 and 14.7 per cent in 2027. However, a slower rate of inflation does not mean that prices will fall. Rather, the cost of goods and services will continue to rise, but at a slower pace.
The IMF’s projections also show that Nigeria’s economic growth will translate into a smaller improvement in average output per person. Output per capita is expected to rise by 2.1 per cent in 2026 and 2.2 per cent in 2027, below the overall growth rates projected for the economy.
This gap highlights the difficulty of ensuring that economic expansion translates into meaningful improvements in the welfare of ordinary Nigerians.
The Fund expects Nigeria’s current account surplus to increase to seven per cent of gross domestic product in 2026, from 4.8 per cent in 2025, before falling to 4.4 per cent in 2027.
The projected increase suggests an improvement in the country’s external earnings relative to payments, providing some support for economic stability.
However, the broader growth outlook shows that Nigeria still faces significant challenges, including high living costs, poverty and the need to expand productive activities.
The IMF has advocated targeted cash transfers to protect vulnerable households from rising prices, alongside stronger public spending, improved revenue collection and measures to strengthen domestic supply chains.
According to analysts, the challenge for Nigeria is not only to grow its economy but also to ensure that the benefits reach more households through better jobs, stronger purchasing power and reduced poverty.
Meanwhile, IMF has urged Nigerian regulators to tighten controls on banks following the recent recapitalisation exercise, warning that stronger capital bases alone cannot guarantee financial stability.
The Fund called for closer monitoring of banks’ exposure to government debt, adequate cash reserves to meet obligations and faster identification of bad loans to prevent risks from building up in the financial system.
The Assistant Director in the IMF’s Monetary and Capital Markets Department, Jason Wu,
gave the advice during a briefing on the Fund’s Financial Stability Report at the ongoing IMF and World Bank annual meetings in Bangkok, Thailand.
Wu said emerging economies needed appropriate regulations after recapitalisation to ensure that risks did not accumulate within their banking systems.
He identified adequate capital and liquidity requirements, early recognition of credit losses and non-performing loans, and closer monitoring of banks’ exposure to government debt as important measures for protecting the sector.
He noted that the link between government borrowing and banking sector stability was particularly important in Africa, where regulators needed to understand how much risk banks faced through their investments in government debt.
The IMF’s warning comes after Nigeria’s banking sector recapitalisation exercise, which was designed to strengthen lenders’ financial positions and improve their ability to support businesses and economic growth.
While the exercise increased banks’ capital, the Fund stressed that effective supervision and sound risk management were necessary to ensure that stronger balance sheets translated into lasting financial stability.
It also called for sustained compliance with regulatory standards to prevent vulnerabilities that could threaten financial institutions.
Separately, Athanasios Vamvakidis, Deputy Director in the IMF’s Monetary and Capital Markets Department, warned that emerging markets could face fresh financial pressure if global borrowing costs rise.
He said emerging economies had benefited from relatively favourable market conditions, including historically low risk spreads, supported by sound domestic policies and economic fundamentals.
However, he warned that the combination of high yields and narrow risk spreads was unusual and could change as developments in advanced economies and fresh energy price shocks push borrowing costs higher.
Vamvakidis said even countries with strong economic fundamentals needed to prepare for less favourable global financial conditions.
He added that external shocks could make it more expensive for emerging economies to borrow from international markets, underscoring the need for sound domestic policies and stronger financial safeguards.
The IMF official also highlighted debt transparency as essential to maintaining investor confidence and ensuring continued access to international financing.
He said clear disclosure of governments’ outstanding debt obligations could reassure investors and help countries, including those in Africa, retain access to foreign-currency borrowing.
The Fund’s position highlights the need for Nigeria to sustain banking sector reforms by strengthening supervision, improving liquidity management, identifying bad loans promptly and keeping banks’ exposure to government debt under close watch.
These measures, it said, would help protect the financial system against domestic weaknesses and external shocks.
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