The International Monetary Fund (IMF) has called on Nigeria to revise its 2025 budget in response to declining global oil prices and intensify cash transfers to cushion the impact of inflation and food insecurity on its most vulnerable citizens.
This was revealed in the Fund’s latest Article IV consultation report released on Wednesday, which noted that while Nigeria’s economic growth has remained steady, it continues to lag in per capita terms, with inflation still high. The IMF projected Nigeria’s economy to grow by 3.4% in 2025 and 3.2% in 2026.
The Fund warned that Nigeria’s budgetary assumptions—based on oil output of 2.06 million barrels per day and a benchmark price of $75 per barrel—were overly optimistic, especially as oil prices have dipped below $70 and actual production has hovered around 1.5 million barrels per day.
“The international economic environment is marked by significant uncertainty, particularly oil price volatility, which directly affects Nigeria’s fiscal and external balances as well as inflation,” said Axel Schimmelpfennig, IMF Mission Chief for Nigeria.
He emphasized the need for Nigeria to build fiscal buffers and respond swiftly to economic shocks, noting that “the key challenge now is to tackle high poverty and food insecurity.”
While Nigeria has operated a direct cash transfer scheme since 2007, Schimmelpfennig noted that expansion had been hindered by a lack of data and widespread financial exclusion.
The IMF estimated that Nigeria’s fiscal deficit could reach 4.7% of GDP in 2025—exceeding projections—due to optimistic hydrocarbon revenue expectations and falling oil prices. It advised a “neutral fiscal stance” to maintain macroeconomic stability, and encouraged the government to prioritize growth-driven projects.
The Fund also called on the Central Bank of Nigeria (CBN) to maintain a tight monetary policy and positive real interest rates to help bring inflation under control. It projected fuel subsidy savings could reach 2% of GDP in 2024.
On the foreign exchange front, Schimmelpfennig said the CBN’s ongoing reforms, including aligning the official and parallel market exchange rates, had improved investor confidence. “Investors are happy. They can invest and repatriate their proceeds when they want,” he added.
The IMF commended Nigeria’s economic reforms over the past two years, highlighting steps such as ending monetary financing of the deficit, removing fuel subsidies, and stabilizing the foreign exchange market as key to rebuilding investor trust.
However, it warned that structural challenges—such as unreliable power supply, insecurity, and limited access to credit—still impede long-term economic growth. It also urged the government to address infrastructure gaps and unlock private sector lending to spur job creation.
In response, Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, welcomed the IMF’s findings and acknowledged the need for continued reform implementation. In a statement by the ministry’s spokesperson, Mohammed Manga, Edun said the government remained committed to safeguarding recent economic gains.
He noted that the reforms had improved Nigeria’s fiscal and external positions, with headline inflation falling to 22.9% and food inflation declining to 21.4% as of May 2025—down from higher levels during the IMF review period.
“The 2025 budget is being implemented with a focus on economic stability and inclusive growth,” Edun stated, adding that the government is closely monitoring global oil market trends and taking responsive measures.
Meanwhile, the Senate Committee on Banking, Insurance, and Other Financial Institutions praised the CBN for its monetary reforms and recent gains in the financial sector.
During a session with CBN Governor Yemi Cardoso in Abuja, Committee Chairman Senator Adetokunbo Abiru noted improvements in inflation moderation, rising external reserves, and exchange rate stability.
Abiru attributed these trends to key CBN reforms, including the introduction of the FX Matching System and FX Code, and lauded the Monetary Policy Committee’s decision to retain the policy rate at 27.5% in February and May, signalling a balanced approach to inflation and growth.
He also commended the CBN’s flexible regulatory approach during the ongoing banking sector recapitalisation and welcomed the renewal of Nigeria’s currency swap agreement with China, saying it would strengthen local currency trade and reduce reliance on the U.S. dollar.
The Senate additionally acknowledged CBN’s rollout of the Non-Resident Bank Verification Number (NRBVN) framework, which aims to improve banking access for Nigerians abroad and enhance financial system integrity.
Governor Cardoso, in his presentation, reiterated the bank’s commitment to supporting Nigeria’s goal of achieving a $1 trillion GDP by 2030, and described the recapitalisation of the banking sector as a crucial step toward strengthening financial stability and growth.
