The International Monetary Fund (IMF) has advised the Nigerian government to revise its proposed 2025 budget of N54.99 trillion, citing unrealistic assumptions about global oil prices. According to the IMF’s Article IV Consultation report, Nigeria’s optimistic revenue expectations could push the fiscal deficit from 4.1% to 4.7% of GDP if market conditions worsen. While acknowledging Nigeria’s recent macroeconomic reforms—such as subsidy removal, exchange rate liberalisation, and ending Central Bank deficit financing—the IMF warned that these gains remain fragile and unevenly distributed across the population.
The IMF expressed concern over Nigeria’s over-reliance on oil, which continues to dominate government revenue and export earnings. While a 3.4% GDP growth in 2024 suggests recovery, weak per capita growth and persistently high inflation pose major threats. Inflation has declined from 31% in 2024 to 22.97% in May 2025, but it remains one of the highest globally. To maintain price stability, the IMF encouraged the Central Bank of Nigeria (CBN) to sustain its tight monetary policy and keep real interest rates positive to restore investor confidence in the naira.
On the foreign exchange front, the Fund acknowledged recent efforts to improve market liquidity and transparency but stressed the need for a clear FX intervention framework to handle volatility. The IMF supported letting the naira serve as a buffer against external shocks and noted that reserves have improved due to a current account surplus. Still, it highlighted Nigeria’s vulnerability to external rollover risks and called for agile FX management.
The report also urged Nigeria to deepen fiscal reforms. While praising recent tax reforms and savings from subsidy removal, the IMF called for better budget execution and improved public spending, especially in delivering targeted cash transfers. With food insecurity rising, the Fund emphasized the need to protect vulnerable households and maintain social support systems that directly benefit the poorest segments of society.
In addition to economic recommendations, the IMF underscored the importance of structural reforms in critical sectors. It welcomed the CBN’s banking sector recapitalisation and Basel III adoption but warned of growing risks in fintech, mortgage lending, and consumer credit. Lastly, the IMF encouraged Nigeria to increase investment in infrastructure, education, healthcare, agriculture, and climate resilience, stressing that current economic improvements have yet to substantially improve the standard of living for most Nigerians.
Source: The Sun