IMF Flags Rising Cost of Living and Debt Risks for Nigeria Despite Oil Price Windfall

The International Monetary Fund (IMF) has warned that Nigeria faces increasing economic strain in the short term as food and transportation costs surge, putting pressure on household incomes amid lingering global disruptions.

At the same time, the Fund expressed concern over Nigeria’s rising debt profile, even as international crude oil prices climbed above $113 per barrel, potentially strengthening government revenues.

Nigerian crude currently trades about $53 higher than the $60 per barrel benchmark in the 2026 budget. Brass River crude was priced at $113.82 per barrel, while Qua Iboe sold at $113.72. The rally reflects geopolitical tensions, particularly uncertainties surrounding US–Iran negotiations linked to Middle East instability. Prices have risen steadily from $64.85 at the beginning of the year to $68.05 by late January before surging further.

Speaking at the IMF/World Bank Spring Meetings in Washington DC, IMF Director for Africa, Abebe Selassie, said the impact of global shocks is already visible across Nigeria and the wider region.

“The immediate effect will be quite a bit of pressure, including on food security… as transportation costs have gone up, it’s going to raise the cost of food and so quite a bit of dislocation,” he said.

He also noted rising hardship: “We are already seeing quite a bit of a pinch from the crisis on people. It is making life difficult for people.”

Selassie stressed that governments must sustain reform efforts despite limited fiscal space, noting that past steps to stabilise deficits and debt have created some resilience.

He cautioned: “We are pleading that these interventions are consistent with the medium-term objectives… because that would be a double whammy for countries.”

On borrowing, he said debt sustainability should remain the priority, adding that the key issue is maintaining manageable debt relative to repayment capacity.

The IMF’s Fiscal Monitor projected Nigeria’s debt-to-GDP ratio will rise to 33.1 percent by 2027, down slightly from earlier forecasts but still above 2026 estimates. Nigeria’s total debt stock reached N159.27 trillion in Q4 2025, according to official figures.

IMF Fiscal Affairs Director Rodrigo Valdés warned that global fiscal risks are increasing, noting that rising debt pressures could weaken inflation control efforts and cautioning against costly subsidy regimes.

He urged stronger revenue mobilisation and more efficient public spending, alongside difficult policy trade-offs and improved communication with stakeholders.

Analysts warn that while rising oil prices may provide temporary relief, structural challenges remain. Highcap Securities’ David Adonri said debt service sustainability is the real concern, warning that Nigeria may not fully benefit from oil windfalls if revenues are absorbed by debt servicing and consumption.

Economist Clifford Egbomeade said Nigeria’s debt metrics appear moderate globally but warned that a narrow formal tax base and pre-election fiscal pressures could complicate sustainability.

OGSPAN President Mazi Colman Obasi said higher oil prices could increase government revenue but also raise fuel and transport costs, potentially worsening inflation and deepening hardship for citizens.

Across reactions, experts agree that Nigeria’s fiscal outlook remains a balancing act between short-term oil gains and long-term debt vulnerability.

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