THE combined impact of the Middle East conflict, persistent inflation and growing geopolitical tensions are likely to deepen economic hardship across Africa, with Nigeria expected to record only modest growth despite recent macroeconomic reforms.

In its July 2026 World Economic Outlook Update, the Fund projected a slower global economy in 2026, pegging global growth at 3.0 per cent down from 3.5 per cent recorded in both 2024 and 2025.

The world Inflation is expected to climb from 4.1 per cent in 2025 to 4.7 per cent this year, reversing the disinflation trend that had persisted since early 2024. Text.pdf

Although Sub-Saharan Africa is forecast to expand by 4.3 per cent in 2026, the IMF said the regional average conceals wide disparities, as higher energy and food prices, declining development assistance and weak participation in the artificial intelligence (AI)-driven technology boom continue to weigh heavily on many economies.

For Nigeria, the Fund retained its growth forecast at 4.1 per cent in 2026, rising slightly to 4.3 per cent in 2027, attributing the outlook to improving macroeconomic stability and stronger terms of trade.

However, in a masked likely impact of the ongoing unsettled Middle-East as peace between Iran and United States and Israel remains fragile, the IMF cautioned that the gains made so far would be overshadowed by rising prices of essential goods, warning that inflationary pressures could worsen poverty and food insecurity.

The report said: “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 report also suggests that while Nigeria’s reforms are beginning to stabilise the economy, households may continue to struggle as elevated food and energy prices erode purchasing power.

Across the continent, oil-importing economies are expected to bear the brunt of higher fuel and fertiliser costs, while countries with limited fiscal space could face worsening external imbalances, exchange rate pressures and rising debt servicing costs.

The Fund warned that higher food and energy prices could heighten the risk of social unrest and political instability, particularly in vulnerable Sub-Saharan African countries with weak policy buffers or approaching election cycles. Text.pdf

On the global stage, the IMF attributed the weaker outlook to two opposing forces: the disruption caused by the Middle East war and the rapid expansion of AI-led technology investment.

While technology-intensive economies are benefiting from booming semiconductor and AI-related exports, many developing economies, including several in Africa, remain largely excluded from the gains because of inadequate electricity supply, digital infrastructure and skilled labour.

The Fund projected world trade growth to slow sharply from 5.0 per cent in 2025 to 3.5 per cent in 2026, reflecting trade fragmentation, tariffs and disruptions to global supply chains before recovering to 4.3 per cent in 2027.

Energy markets are expected to remain under pressure throughout the year.

According to the report, 2026 will continue to be a good year for the government of Nigeria in terms of earning as crude oil is projected to sell about $89 for

Most part of the current year. However, this translates to Nigerians paying more for PMS at the pump.

The IMF forecasts average crude oil prices of about $89 per barrel in 2026, representing a 32 per cent increase over 2025, while natural gas prices are expected to rise by 22 per cent, fertiliser prices by 26 per cent and global food prices by 8 per cent.

The report warned that such increases would disproportionately affect low-income economies that depend heavily on imported fuel and fertiliser, particularly in Africa.

Despite the difficult outlook, the IMF noted that stronger reform implementation has improved prospects for some African economies.

Several large African economies will continue to benefit from earlier macroeconomic stabilisation efforts.

The Fund urged African governments to avoid broad fuel subsidies and untargeted fiscal interventions, recommending instead temporary and targeted support for vulnerable households while rebuilding fiscal buffers.

It also called for accelerated investment in renewable energy, digital infrastructure, skills development and AI readiness, arguing that such reforms would enable African economies to participate more meaningfully in the emerging technology-driven global expansion. (The Guardian)

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