Nigeria may face more difficult economic conditions in the near term as rising food and transportation costs continue to erode household purchasing power, the International Monetary Fund (IMF) has warned, even as surging global crude oil prices offer the country a potential revenue boost.
The warning comes amid a sharp increase in Nigerian crude oil prices on the international market, with benchmark grades such as Brass River and Qua Iboe trading above $113 per barrel. This represents a significant premium over the $60 per barrel benchmark set in Nigeria’s 2026 budget, raising hopes of stronger foreign exchange earnings and improved fiscal inflows.
Market data showed Brass River sold at about $113.82 per barrel, while Qua Iboe traded at approximately $113.72. Prices, which began the year in the mid-$60 range, have climbed steadily due to geopolitical tensions, particularly uncertainties surrounding peace negotiations involving the United States and Iran, as well as broader instability in the Middle East.
Analysts say the oil price surge could translate into higher government revenue if production levels remain stable, especially as Nigeria targets about 1.8 million barrels per day. However, they also caution that structural challenges in the oil sector may limit the extent of any windfall benefit.
At the IMF/World Bank Spring Meetings in Washington, IMF Director of the African Department, Abebe Selassie, said rising global shocks are already increasing economic pressure across Sub-Saharan Africa, including Nigeria.
He warned that higher transportation and input costs—particularly fertiliser—are driving up food prices and worsening living conditions.
“The immediate effect will be quite a bit of pressure, including on food security… transportation costs have gone up, it’s going to raise the cost of food and so quite a bit of dislocation,” Selassie said.
He added that inflationary pressures are already visible in both urban and rural areas, with households feeling the strain of rising transport fares and food costs.
“We are already seeing quite a bit of a pinch from the crisis on people. It is making life difficult for people,” he said.
Selassie urged governments, including Nigeria, to maintain reform momentum despite tightening fiscal space. According to him, recent steps taken to stabilise debt levels and reduce fiscal deficits have created some buffer to absorb shocks.
However, he cautioned against policy reversals, stressing that short-term interventions must align with long-term economic objectives.
“What we are pleading is that these interventions are consistent with the medium-term objectives that countries have,” he said, warning that policy inconsistency could create a “double whammy” effect on struggling economies.
On debt sustainability, Selassie said the key issue is not just whether countries borrow locally or externally, but whether debt levels remain manageable relative to repayment capacity. He praised Nigeria’s Debt Management Office but emphasized that macroeconomic conditions remain decisive.
He also highlighted the importance of revenue mobilisation, improved tax efficiency, and better public spending prioritisation, noting that governments must protect critical expenditures while improving fiscal discipline.
In a separate IMF Fiscal Monitor Report, the Fund projected that Nigeria’s debt-to-GDP ratio will rise to 33.1 percent by 2027, slightly lower than earlier estimates but still above 32.3 percent projected for 2026.
Nigeria’s total public debt rose to N159.27 trillion at the end of the fourth quarter of 2025, up from N153.29 trillion in the previous quarter, according to data from the Debt Management Office.
The IMF also warned of rising global fiscal risks, noting that geopolitical tensions could further strain public finances through higher food and fuel prices, tighter financial conditions, and increased defence spending.
“Global debt-at-risk three years ahead now stands near 117 percent of GDP,” the Fund noted, underscoring growing vulnerabilities in the global economy.
IMF Director of Fiscal Affairs, Rodrigo Valdés, also urged governments to rebuild fiscal buffers and avoid delaying necessary reforms, warning that prolonged postponement of fiscal consolidation worsens long-term risks.
He cautioned against broad-based subsidies, describing them as fiscally costly, regressive, and difficult to reverse.
Economists and industry experts in Nigeria have offered mixed reactions to the outlook. Some argue that while rising oil prices may improve revenue, weak structural capacity and high debt servicing obligations could limit the benefits.
Analysts warn that Nigeria’s dependence on oil revenue, combined with a narrow tax base and rising recurrent expenditure, could mean that any windfall is quickly absorbed by debt servicing and consumption spending rather than productive investment.
Others emphasise the need for stronger fiscal discipline, improved infrastructure investment, and reforms in the oil sector to ensure that higher prices translate into real economic gains.
Despite the optimism around crude oil trading above $113 per barrel, concerns remain that Nigeria’s fiscal position is still fragile, with rising debt levels and persistent inflation continuing to weigh heavily on economic stability.
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