The International Monetary Fund (IMF) on Wednesday disclosed that Nigeria needed to adapt its 2025 budget to lower oil prices and scale up cash transfers to shield the most vulnerable segments of its population facing hunger and poverty.
In its routine “Article IV” assessment of Nigeria’s economic policies, IMF said economic growth had been steady but too low in per capita terms, with inflation remaining high. The fund predicted the country’s economy would expand at 3.4 per cent this year and 3.2 per cent in 2026.
It said as Africa’s largest oil producer, Nigeria was under strain from relatively low international crude prices, which traded around $68 a barrel on Wednesday. But the 2025 budget was squeezed by Nigeria’s assumption of oil production of two million barrels per day and an oil price of $75 a barrel.
“The international economic environment that Nigeria lives in and operates in is marked by the very, very large uncertainty, and in particular, international oil price volatility impacts Nigeria directly through the fiscal and the external balances as well as inflation,” said IMF’s mission chief for Nigeria, Axel Schimmelpfennig.
The complex outlook made it especially important for policymakers to build and maintain buffers while being ready to respond to shocks or seize opportunities, Reuters reported.
“Turning to our policy messages, the key challenge now is to tackle high poverty and food insecurity,” Schimmelpfennig said.
The Nigerian government had supported the poorest part of its population through direct cash transfers since 2007, but had struggled to scale them up because of lack of data on their impact and as large numbers of the population had no bank accounts.
International Brent crude futures spiked higher last month in response to tension in the Middle East, but are under pressure from a shift in policy by the OPEC+ group, of which Nigeria is a member, to regain market share rather than curtail supply.
“Achieving the government’s 2025 budget targets will require additional measures, largely reflecting the drop in oil prices compared to when the budget was approved,” Schimmelpfennig said in a briefing to journalists.
“Keeping the fiscal deficit a per cent of Gross Domestic Product (GDP) unchanged, compared to 2024 will be important to support the fight against inflation,” he added.
IMF said recouping fuel subsidy savings and making administrative gains could mobilise some domestic revenues, but the Central Bank of Nigeria (CBN) needed to maintain a tight stance and a positive real rate to bring down inflation and support stability. It said savings from fuel subsidies would amount to two per cent of 2024 GDP.
Asked about the naira and Nigeria’s foreign exchange (FX) markets, Schimmelpfennig said reforms by the government and CBN had been far reaching and fundamental.
“When we talk to investors, they’re happy. They can invest in Nigeria, and when they want, they can bring their proceeds out,” he said. “You look at the parallel market and the official rate, they’re aligned,” he added.
IMF projected Nigeria’s fiscal deficit to reach 4.7 per cent of GDP in 2025, exceeding budget expectations, due to optimistic hydrocarbon revenue projections and declining oil prices.
It recommended a “neutral fiscal stance” to safeguard economic stability, and urged the government to speed up cash transfers to the poor, who had been hurt by high inflation.
“The 2025 budget was based on optimistic hydrocarbon revenue projections, even before the price decline since April,” IMF said. It added, “Absent policy actions, the fiscal deficit in 2025 would exceed budget expectations.”
Nigerian lawmakers approved a N55 trillion or $35.9 billion spending plan in February based on an oil price of $75 per barrel and output of 2.06 million barrels per day. Prices had since fallen below $70 and crude production had averaged about 1.5 million barrels a day.
IMF, in its report, recommended Nigeria should adopt a “neutral fiscal stance” to safeguard economic stability that cut spending and focused investment on projects that made the biggest contributions to growth and employment.
However, IMF’s mission chief for Nigeria said the finance minister was working to trim spending and boost revenue and if those measures succeeded, the country “will get back to a place where the deficit is roughly the same percentage as last year”.
IMF commended the bold economic reforms undertaken by Nigeria over the past two years, crediting them with helping to stabilise the macroeconomic environment and rebuilding investor confidence.
But it warned that persistent structural challenges from poor electricity supply and insecurity, to limited credit access, continued to weigh on the country’s long-term growth prospects.
The fund also commended the authorities for ending CBN’s monetary financing of fiscal deficits, a tight monetary stance, and improving foreign exchange market operations.
IMF stated, “The Nigerian authorities have implemented major reforms over the past two years, which have improved macroeconomic stability and enhanced resilience.
“The authorities have removed costly fuel subsidies, stopped monetary financing of the fiscal deficit and improved the functioning of the foreign exchange market.
“Investor confidence has strengthened, helping Nigeria successfully tap the Eurobond market and leading to a resumption of portfolio inflows. At the same time, poverty and food insecurity have risen, and the government is now focused on raising growth.”
It added, “Agriculture remained subdued, owing to security challenges and sliding productivity. Real GDP is expected to expand by 3.4 per cent in 2025, supported by the new domestic refinery, higher oil production and robust services.
“Against a complex and uncertain external environment, medium-term growth is projected to hover around 3.5 per cent, supported by domestic reform gains.
“Gross and net international reserves increased in 2024, with a strong current account surplus and improved portfolio inflows. Reforms to the fx market and foreign exchange interventions have brought stability to the naira.”
To lift Nigeria’s growth trajectory, IMF urged decisive action on multiple fronts tackling insecurity, removing bureaucratic bottlenecks, and closing infrastructure gaps, particularly in power supply. It also stressed the urgency of unlocking private credit to support economic expansion and job creation.
On the monetary side, it endorsed CBN’s tight monetary policy and urged it to be sustained until inflation eased further.
Reacting to the IMF report after the Article 1V Consultation, Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, expressed appreciation for the fund’s recognition of the federal government’s ongoing reform efforts and the tangible progress achieved over the past two years.
In a statement issued by Director, Information and Public Relations in the Ministry of Finance, Mohammed Manga, the minister said the reforms had contributed to notable improvements in Nigeria’s fiscal and external positions, bolstering investor confidence and strengthening the resilience of the economy.
He welcomed the release of the IMF findings on Nigeria, following the conclusion of the Article IV Consultation in April 2025.
Edun also welcomed “the fund’s acknowledgement of advancements in the agricultural sector, particularly increased food production, which has contributed to moderating inflation”.
He added, “As of May 2025, headline inflation eased to 22.9 per cent, while food inflation declined to 21.4 per cent – both improvements from the higher levels recorded during the IMF mission.”
Edun underlined IMF’s positive outlook, which affirmed that Nigeria’s economic reforms had positioned the country to better withstand external shocks.
In response to the downside risks highlighted in the IMF report, particularly uncertainties in the global economy, the minister reaffirmed the government’s proactive stance.
He emphasised that the implementation of the 2025 budget was being carried out with a focus on safeguarding reform gains and ensuring economic stability.
The statement said, “The government continues to monitor developments in the international oil market and global trade environment and is taking responsive measures to mitigate potential risks, while maintaining momentum toward inclusive growth.”
Similarly, the senate on Wednesday commended CBN for the progress in Nigeria’s financial and monetary sectors over the past six months.
The red chamber, through its Committee on Banking, Insurance, and Other Financial Institutions, gave the commendation during a statutory engagement with CBN Governor, Mr. Yemi Cardoso, in Abuja.
The committee is chaired by Senator Adetokunbo Abiru (APC, Lagos East).
In his opening remarks, Abiru emphasised the importance of such engagements, stating that CBN plays a critical role in maintaining macroeconomic stability and fostering a sound financial system.
He said the session was vital for enhancing transparency, ensuring adherence to statutory mandates, and improving policy communication.
According to Abiru, key economic indicators have shown noticeable improvement since the committee’s last meeting with CBN in December 2024.
He stated, “Since our last engagement, we have observed encouraging trends, including a moderation in the inflation rate, which declined to 22.97 per cent in May 2025, from 23.71 per cent in April. We’ve also seen a gradual increase in external reserves and relative stability in the exchange rate, with a notable convergence between official and parallel market rates.”
Abiru attributed the positive trend to CBN’s reform measures, including the introduction of the FX Matching System and FX Code, which had improved transparency and discipline in the foreign exchange market.
The committee also lauded the Monetary Policy Committee (MPC) of the CBN for maintaining the Monetary Policy Rate at 27.5 per cent during its February and May 2025 meetings. Abiru stated that this marked a shift from the aggressive rate hikes of 2024 and signalled a more measured approach to balancing inflation control and economic growth.
The senate committee further commended CBN’s regulatory flexibility in granting limited forbearance to Deposit Money Banks amid the ongoing recapitalisation exercise.
According to Abiru, the policy reflects a pragmatic approach to easing transitional challenges for banks without exposing the system to undue risk.
He also praised the renewal of the bilateral currency swap agreement between Nigeria and China.
Abiru said the agreement strengthened local currency trade settlements and supported efforts to diversify Nigeria’s external reserves away from overreliance on the U.S. dollar.
Other notable initiatives acknowledged by the committee included the launch of Non-Resident Bank Verification Number (NRBVN) framework.
The senator said the move enhanced Know-Your-Customer (KYC) protocols and improved access to banking for Nigerians abroad, while promoting financial system integrity.
However, Abiru stated that some areas still required attention and would be discussed during an executive session with the CBN governor.
Earlier, Cardoso outlined key achievements of the bank over the period, linking them to the broader national goal of achieving a $1 trillion GDP by 2030.
He emphasised the importance of the ongoing banking sector recapitalisation, describing it as a strategic move to strengthen the financial system and drive economic growth.
Ndubuisi Francis, Emmanuel Addeh, James Emejo, Sunday Aborisade and Nume Ekeghe
Follow us on:
