Nigeria could record stronger oil revenues in 2026 as higher crude prices driven by the conflict in the Middle East improve earnings for oil-exporting countries, but the same development may also intensify domestic inflationary pressures by raising food, fertiliser and transportation costs, according to the International Monetary Fund (IMF).
In its latest global outlook, the IMF projected that oil prices would average $89.27 per barrel in 2026, representing a 32 per cent increase over the previous year and about nine per cent above its April forecast. The revision reflects supply disruptions linked to the conflict in the Middle East, particularly concerns over oil shipments through the Strait of Hormuz.
The Fund expects the Strait of Hormuz to begin reopening from mid-July 2026, with market conditions gradually returning to pre-conflict levels by March 2027. However, it warned that renewed escalation in the region remains the biggest downside risk to the outlook.
For Nigeria, one of Africa’s largest crude oil exporters, the higher price environment could improve government revenues, foreign exchange earnings and fiscal balances, provided production volumes remain stable.
The IMF cited favourable terms of trade arising from higher commodity prices as one of the factors supporting its 4.1 per cent economic growth forecast for Nigeria in 2026.
However, the Fund also projects that the same geopolitical tensions supporting higher oil prices will increase production costs across global food supply chains.
According to the IMF, global fertiliser prices are expected to rise by 26 per cent in 2026, while natural gas prices, a major input in fertiliser production, are projected to increase by 22 per cent. Global food prices are also forecast to rise by eight per cent, contributing to an increase in global headline inflation from 4.1 per cent in 2025 to 4.7 per cent in 2026.
The outlook comes as Nigeria continues to grapple with rising food prices despite recent macroeconomic reforms.
According to data released by the National Bureau of Statistics (NBS) as of May, food inflation has increased for five consecutive months, rising from 8.89 per cent in January to 16.96 per cent in May, driven largely by increases in the prices of staple foods, including tomatoes, pepper, onions, beans, yam and maize. Food and non-alcoholic beverages remained the largest contributors to headline inflation in the country.
The broader inflation trend has also remained under pressure.
In April, Nigeria’s headline inflation rose to 15.69 per cent, reflecting increases in food, transport, healthcare and restaurant services, underscoring the continued impact of higher logistics costs and imported inflation on household spending.
The pressure on household budgets is also reflected in food affordability.
Business Metrics recently reported that the average monthly cost of maintaining a healthy diet in Nigeria had risen to approximately N231,000, highlighting the growing gap between household incomes and the cost of adequate nutrition.
The IMF warned that higher energy prices could further increase production and transportation costs across agricultural value chains, particularly in low-income countries where farmers rely heavily on imported fertiliser and other agricultural inputs.
The Fund noted that while oil-exporting economies may benefit from stronger fiscal revenues, higher prices for essential goods could worsen poverty and food insecurity if governments are unable to cushion the impact on vulnerable households.
For Nigeria, the outlook reflects the dual nature of higher crude prices.
On one hand, stronger oil prices could support government revenues, improve external reserves and strengthen fiscal performance. On the other hand, rising energy costs could feed into domestic food inflation through higher fertiliser prices, transportation costs and agricultural production expenses.
muz to begin reopening from mid-July 2026, with market conditions gradually returning to pre-conflict levels by March 2027. However, it warned that renewed escalation in the region remains the biggest downside risk to the outlook.
For Nigeria, one of Africa’s largest crude oil exporters, the higher price environment could improve government revenues, foreign exchange earnings and fiscal balances, provided production volumes remain stable.
The IMF cited favourable terms of trade arising from higher commodity prices as one of the factors supporting its 4.1 per cent economic growth forecast for Nigeria in 2026.
However, the Fund also projects that the same geopolitical tensions supporting higher oil prices will increase production costs across global food supply chains.
According to the IMF, global fertiliser prices are expected to rise by 26 per cent in 2026, while natural gas prices, a major input in fertiliser production, are projected to increase by 22 per cent. Global food prices are also forecast to rise by eight per cent, contributing to an increase in global headline inflation from 4.1 per cent in 2025 to 4.7 per cent in 2026.
The outlook comes as Nigeria continues to grapple with rising food prices despite recent macroeconomic reforms.
According to data released by the National Bureau of Statistics (NBS) as of May, food inflation has increased for five consecutive months, rising from 8.89 per cent in January to 16.96 per cent in May, driven largely by increases in the prices of staple foods, including tomatoes, pepper, onions, beans, yam and maize. Food and non-alcoholic beverages remained the largest contributors to headline inflation in the country.
The broader inflation trend has also remained under pressure.
In April, Nigeria’s headline inflation rose to 15.69 per cent, reflecting increases in food, transport, healthcare and restaurant services, underscoring the continued impact of higher logistics costs and imported inflation on household spending.
The pressure on household budgets is also reflected in food affordability.
Business Metrics recently reported that the average monthly cost of maintaining a healthy diet in Nigeria had risen to approximately N231,000, highlighting the growing gap between household incomes and the cost of adequate nutrition.
The IMF warned that higher energy prices could further increase production and transportation costs across agricultural value chains, particularly in low-income countries where farmers rely heavily on imported fertiliser and other agricultural inputs.
The Fund noted that while oil-exporting economies may benefit from stronger fiscal revenues, higher prices for essential goods could worsen poverty and food insecurity if governments are unable to cushion the impact on vulnerable households.
For Nigeria, the outlook reflects the dual nature of higher crude prices.
On one hand, stronger oil prices could support government revenues, improve external reserves and strengthen fiscal performance. On the other hand, rising energy costs could feed into domestic food inflation through higher fertiliser prices, transportation costs and agricultural production expenses.
