The International Monetary Fund (IMF) has projected that Nigerians are likely to face higher prices for essential goods in 2026, warning that the rising cost of living could deepen poverty and food insecurity even as the country's macroeconomic environment shows signs of improvement.

The projection is contained in the IMF's July 2026 World Economic Outlook (WEO) Update, which assessed global and regional economic trends.

According to the Fund, Nigeria's economy is benefiting from improved macroeconomic stability and favourable terms of trade. However, it cautioned that increasing prices of food, energy and other essential commodities remain a major threat to household welfare.

"Nigeria is supported by improved macroeconomic stability and favourable terms-of-trade effects, though higher prices for essentials are expected to further aggravate poverty and food insecurity," the IMF stated.»

Global Energy Crisis Driving Inflation

The IMF attributed the inflationary outlook largely to the ongoing global energy crisis, which continues to push up the prices of fuel, transportation and essential commodities across many economies, particularly countries that depend heavily on energy imports.

According to the report, global headline inflation is expected to rise from 4.1 percent in 2025 to 4.7 percent in 2026, before moderating to 3.9 percent in 2027. The upward revision was driven mainly by higher food and energy prices.

The Fund also raised its earlier inflation forecast released in April 2026 by 0.3 percentage point for 2026 and 0.2 percentage point for 2027, reflecting stronger-than-expected inflationary pressures worldwide.

Inflation Outlook Differs Across Countries

The report explained that inflation will not affect all economies equally. Factors such as exchange rate movements, labour market conditions, persistent services inflation and country-specific economic policies will determine how severely individual countries experience rising prices.

The IMF noted that inflation is expected to decline only gradually in several advanced economies, including the United Kingdom, the United States, Japan and the euro area, while China is also projected to witness a modest increase in inflation from current low levels.

Geopolitical Tensions Pose Major Risk

Beyond inflation, the Fund warned that renewed geopolitical tensions—especially in the Middle East—remain the biggest threat to the global economy.

According to the IMF, any escalation of conflict could disrupt global supply chains, increase commodity prices, weaken currencies, trigger financial market volatility and ultimately slow global economic growth.

However, the report observed that a smoother reopening of the Strait of Hormuz and lower commodity prices than currently anticipated could improve global growth prospects while easing inflationary pressures.

AI Could Boost Growth—but Risks Remain

The IMF also highlighted artificial intelligence (AI) as a potential driver of stronger global economic growth if investments in AI infrastructure continue.

Nevertheless, it warned that excessive optimism surrounding AI and rapidly rising financial markets could create new macro-financial risks if not carefully managed.

IMF Recommends Fiscal Discipline

To strengthen economic resilience, the IMF advised governments benefiting from higher commodity revenues and technological growth to avoid excessive public spending.

Instead, it recommended rebuilding fiscal buffers through prudent debt management, improved tax administration and more efficient public expenditure.

The Fund also urged increased investment in infrastructure, education, renewable energy, digital technology and targeted social protection programmes to promote inclusive and sustainable economic growth.

Finally, the IMF called for stronger international cooperation to address commodity price pressures, debt vulnerabilities and global trade challenges. It also cautioned against export bans, warning that such measures often worsen supply shortages and increase price volatility.

For countries facing severe debt challenges, the Fund reiterated that timely debt restructuring under the G20 Common Framework, alongside continued IMF financial support where necessary, remains critical to maintaining economic stability.