S&P Cuts Nigeria’s Growth Projection, Raises Inflation Expectation
S&P Global has lowered Nigeria’s 2026 economic growth projection by 30 basis points, citing persistent inflation pressures in emerging markets (EM), according to details in its third quarter (Q3) Economic Outlook.
The global ratings agency said its expectation that inflation will remain high means it doesn’t expect most EM central banks to loosen monetary policy, and that some may tighten it.
Ahead of the 2027 election, a slew of economists and analysts told MarketForces Africa it is unlikely that Nigeria will anchor inflation significantly due to pre-election spending, making it nearly impossible for the monetary authority to cut interest rates.
In its non-rating report, S&P Global Ratings said it expects persistent inflationary pressures to weigh on most emerging markets in the coming months.
“We anticipate that higher costs for refined energy products and food will sustain elevated inflation. While crude oil prices have receded, the reopening of the Strait of Hormuz faces implementation uncertainties that keep a risk premium on the prices of transiting goods”, S&P said.
It noted in addition that the emergence of El Niño and rising fertiliser costs threaten to drive food prices higher. “We expect central banks to maintain or increase interest rates to combat these rising costs. If the U.S. Federal Reserve raises rates, emerging markets may face even tighter financial conditions”.
Economic growth across major emerging markets should moderate in 2026 compared with 2025. S&P analysts expect real GDP growth for emerging markets, excluding China, to slow to 4.2% from 4.9% in 2025, before improving to 4.6% in 2027.
“We also made significant downward revisions to our 2026 expectations for the Philippines and Saudi Arabia due to the Middle East war”.
Strong demand for AI infrastructure will benefit several emerging markets, especially those in Asia. Hyperscalers continue to invest heavily in data centres, driving significant U.S. semiconductor and related component imports from emerging-market suppliers.
This technology-driven investment should help certain economies to outperform.
“Compared with our March baseline, we have raised our inflation projections and lowered our growth forecasts for most EM economies in Europe, the Middle East, and Africa (EMEA).
“Energy inflation has picked up broadly across the region, particularly in Nigeria and Turkiye, and we expect food inflation to increase over the coming months due to higher transportation and fertiliser costs.
“We lowered our GDP growth expectations for Nigeria by 30 bps for both 2026 and 2027, to 3.7% and 3.5, respectively.
“Among key EM EMEA economies, we raised our inflation forecast for Nigeria the most to 16.9% in 2026 from 15.0%, reflecting a stronger-than-expected pass-through from oil prices to domestic energy inflation.
“Given the large share of household consumption in the economy, higher inflation underpins our lower GDP projections. Despite these revisions, economic growth will remain resilient, supported by higher oil production and a stable exchange rate outlook.”
S&P said its GDP forecasts for South Africa are now 20 bps lower for 2026 and 2027, at 1.3% and 1.5%, respectively. Analysts raised the average inflation forecast to 4.3% from 3.5%.
“We expect the central bank to hike interest rates at least one more time this year, since we expect inflation to exceed 5% in the second half of 2026.” OPEC Estimates 23% Global Energy Demand Growth
