Nigerians still suffer high cost of living, despite economic growth — IMF

The International Monetary Fund (IMF) has said that despite Nigeria’s economic growth and status as an energy exporter, the cost of living remained high, leaving many Nigerians struggling to meet their basic needs.

The fund advocated targeted cash transfers and temporary income support for vulnerable households in Nigeria to cushion the impact of high living costs, reduce poverty and improve food security.

The IMF, also warned of tougher times as global growth slows to 3.1%, even as it

upgraded its forecast for Nigeria’s economic growth for 2026 to 4.2 per cent but warned that rising energy and food prices, geopolitical tensions and potential market corrections linked to artificial intelligence (AI) threaten the global economic outlook.

The new forecast was contained in the IMF World Economic Outlook report October 2026, titled Resilience Under Strain, Urgent Choices,” released yesterday during the ongoing annual meetings of the IMF/World Bank in Bangkok, Thailand.

Furthermore, the new forecast represents a one percentage points above the 4.1 per cent, earlier projects by the IMF in the July 2026 edition of its WEO.

According to the IMF, “Growth in sub-Saharan Africa is expected to remain stable at 4.5 percent in 2026, though this masks substantial divergence across countries, reflecting differences in policy space, reform implementation, commodity exposure, climate shocks, and access to external financing.

“Oil-importing, non-resource-intensive economies are more adversely affected by higher energy and food prices, whereas some larger economies continue to benefit from earlier stabilization and reform efforts, even though they are largely absent from the AI-driven global technology upswing and face headwinds from declines in official development assistance.

“Nigeria is supported by improved macroeconomic stability and favorable terms-of-trade effects, though higher

prices for essentials are expected to further aggravate poverty and food insecurity.”

Global growth under pressure

However, the IMF warned that the global economy’s resilience was under increasing pressure, with growth projected 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 press briefing on the WEO report Sylvana Tenreyro, the IMF’s Economic Counsellor and Director of the Research Department, said: “The global economy has been resilient, but that resilience is under strain, with risks tilted to the downside.”

She added: “The task ahead is to move from coping to rebuilding,” stressing the need to restore fiscal space, strengthen supply-side resilience and improve countries’ capacity to withstand future economic shocks.

Explaining the global outlook, Tenreyro identified energy and commodity price increases as major factors weighing on economic activity, while investment associated with artificial intelligence had provided support for growth.”

The IMF report noted that the global economy had withstood repeated shocks, including geopolitical conflicts and trade tensions, but cautioned that “these margins of adjustment are not unlimited.”

According to the IMF, the interaction between geopolitical tensions and technological investment has created divergent growth outcomes across countries.

While economies benefiting from technology-related investment and favourable commodity trade conditions have received some support, others face higher import bills, exchange-rate pressures and weaker real incomes.

The Fund warned that prolonged geopolitical tensions could keep energy and food prices elevated, revive inflationary pressures, worsen fiscal and external balances, and weigh on 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, with higher energy and food prices driving the temporary increase.

AI boom raises fresh risks

The IMF also cautioned that the technology investment boom, particularly in artificial intelligence, could become a source of financial instability.

Although AI-related investment has supported economic activity and international trade, the Fund warned that investment gains were concentrated in a relatively small number of firms, sectors and economies.

It cautioned that “a reassessment of AI-related profitability and productivity prospects could sharply reduce investment, trigger equity market corrections, and tighten financial conditions.”

Such a correction, the report said, could spill over into economies integrated into technology supply chains and markets with significant exposure to technology stocks.

Urges fiscal discipline

Against this backdrop, Tenreyro called on governments to rebuild fiscal buffers, safeguard financial stability and strengthen private-sector dynamism.

“Fiscal policy must be restrained and help contain demand pressures at a time of heightened inflationary risks,” the IMF chief economist said in the report.

The Fund also stressed the importance of monetary policy focused on price stability, adding that “central bank independence is instrumental in achieving that goal.”

Advocates cash transfers to cushion hardship in Nigeria

The Fund advocated targeted cash transfers and temporary income support for vulnerable households in Nigeria to cushion the impact of high living costs, reduce poverty and improve food security.

The Fund said the intervention should be accompanied by improved public expenditure quality and stronger revenue collection to help the Federal Government achieve fiscal consolidation and put public debt on a sustainable downward path without worsening the hardship faced by ordinary Nigerians.

Chief of the IMF Research Department’s World Economic Studies Division, Deniz Igan, stated this during a press briefing on the Fund’s World Economic Outlook at the ongoing IMF/World Bank Annual Meetings in Thailand.

Igan said that despite Nigeria’s economic growth and status as an energy exporter, the cost of living remained high, leaving many Nigerians struggling to meet their basic needs.

“Although economic growth has held up in Nigeria, given that it is an energy exporter, living costs are still very high, and we are very mindful that the population is suffering,” she said.

She noted that the pressures were particularly severe because of the rising cost of essential goods, especially food and energy, which account for a significant proportion of household consumption.

“In our chapter on fiscal policy, we also examine the pressures countries are facing from the rising cost of living, particularly increases in the prices of essential goods, which account for a significant proportion of the consumption basket,” Igan said.

Against this backdrop, she said the IMF was advocating targeted and temporary support for the most vulnerable households to cushion the impact of risingprices.

“In this environment, we advocate cash transfers and targeted, temporary income support for the most vulnerable households in Nigeria,” she said.

According to her, the intervention would help address the immediate effects of economic hardship on poor households.

“Such transfers can help reduce poverty and improve food security,” she said.

However, Igan stressed that social protection measures must be accompanied by fiscal reforms to ensure that governments can sustainably finance public spending and gradually reduce their debt burden.

“This should be accompanied by a credible medium-term fiscal framework. That framework should focus on improving the quality of public expenditure and strengthening revenue collection,” she said.

Responding to the broader policy challenge, specifically how fiscal and monetary policies could be better positioned to ensure that the burden of economic stabilisation did not fall disproportionately on ordinary citizens while preserving price stability and investor confidence, Igan explained that monetary authorities must also balance the need to control inflation against the effects of policy measures on economic activity, particularly when economies face supply-side shocks.

On how central banks should respond to an oil price shock that pushes up inflation without a corresponding increase in demand, she said: “This is a classic case of a policy trade-off. Inflation is high, but economic activity is being constrained or reduced by the shock. This is where the central bank needs to manage the trade-off.”

She explained that such a situation differs from one in which inflation is driven by strong demand, requiring policymakers to consider the underlying causes of price increases before deciding on the appropriate response.

“This is a different situation from what we see in economies experiencing a demand-driven shock,” she said.

Central banks’ focus

According to Igan, central banks must nevertheless maintain their focus on price stability and ensure that inflation returns to target within the policy horizon.

“It must ensure that inflation returns to target within the policy horizon, which we typically consider to be two to three years,” she said.

She added that monetary policy should remain sufficiently restrictive to bring inflation back to target, while policymakers take account of the implications for economic activity.

“In such circumstances, the central bank must continue to focus on price stability and ensure that its monetary policy stance remains sufficiently restrictive to bring inflation back to target, while also taking account of the effects on economic activity,” Igan said.

She noted that the appropriate policy response would depend on the nature of the shock and the circumstances of each economy, including labour-market conditions, the initial level of inflation and the economy’s exposure to the shock.

For Nigeria, the IMF’s recommendations underscore the need to combine measures to restore fiscal sustainability and maintain price stability with targeted interventions to protect vulnerable households from rising living costs.

The approach, as outlined by Igan, would require improved public spending efficiency, stronger revenue mobilisation and temporary income support for households most affected by economic pressures.