IMF commends Nigeria’s reforms, urges sustained efforts on poverty, inflation

The International Monetary Fund (IMF) has commended Nigeria’s economic reforms over the past three years, saying they have strengthened macroeconomic stability and improved the country’s resilience.

This is contained in a statement released on Tuesday following the conclusion of the IMF Executive Board’s 2026 Article IV Consultation with Nigeria.

The board, however, cautioned that living conditions remained difficult for many Nigerians, with poverty and food insecurity likely to worsen amid current global economic challenges.

In its assessment, the Directors said tight macroeconomic policies and continued structural reforms, supported by technical assistance from the Fund and development partners, would be crucial to preserving stability and promoting inclusive growth.

The directors called for a neutral fiscal stance in 2026 to support macroeconomic stability and disinflation while safeguarding priority expenditures and social spending.

They welcomed Nigeria’s recent tax reforms but noted that additional tax policy measures might be required over the medium term, including funding for an expanded cash transfer programme to support the most vulnerable citizens.

The board also expressed concern over off-budget spending and complex financing arrangements, urging authorities to accelerate reforms to strengthen public financial management, fiscal reporting, transparency, accountability and fiscal risk management.

On monetary policy, the directors commended the authorities for reducing inflation, while acknowledging renewed inflationary pressures arising from higher international fuel and food prices.

They advised the Central Bank of Nigeria (CBN) to maintain a tight monetary policy stance and continue a data-driven approach until inflation is firmly on a downward trajectory and inflation expectations are fully anchored.

The directors also welcomed progress towards adopting an inflation-targeting framework and encouraged further efforts to strengthen monetary policy transmission and communication.

Regarding exchange rate management, the board endorsed the authorities’ commitment to a flexible exchange rate regime, noting that foreign exchange interventions could play a complementary role under specific circumstances.

The directors further called for a gradual reduction in reliance on portfolio inflows with rollover risks and urged the phased removal of remaining exchange restrictions, capital flow management measures and multiple currency practices when conditions permitted.

The IMF board noted that Nigeria’s financial system remained resilient, supported by the recent recapitalisation of banks, but urged continued vigilance over rising non-performing loans and links between banks and sovereign debt.

It also encouraged faster implementation of Basel III standards, including the countercyclical capital buffer and liquidity coverage ratio, while stressing the importance of stronger supervision of stablecoins and other crypto-asset activities within the regulatory perimeter.

The directors welcomed Nigeria’s removal from the Financial Action Task Force (FATF) grey list, noting that sustained implementation would be essential to maintaining recent gains in financial integrity.

They emphasised the need for broader reforms to promote inclusive growth and economic diversification, identifying governance, security, electricity, agriculture, infrastructure and human capital development as priority areas.

The board also called for improvements in macroeconomic statistics to support policymaking, while some directors highlighted the importance of integrating climate considerations into economic and development planning.

According to the IMF, Nigeria’s economic reforms have delivered stronger macroeconomic outcomes despite persistent social challenges.

The Fund estimated economic growth at 4.0 per cent in 2025 and projected it to rise slightly to 4.1 per cent in 2026, although higher food and transport costs were expected to weigh on economic activity.

It said inflation rose to 15.4 per cent year-on-year in March 2026 after declining for more than a year, reflecting the impact of higher global fuel and food prices.

The IMF, however, projected that the disinflation trend would resume in the second half of 2026.

The Fund reported that Nigeria’s gross international reserves increased to 46 billion dollars in 2025 from 40 billion dollars at the end of 2024, while net international reserves rose to 35 billion dollars from 23 billion dollars over the same period.

It also noted that the consolidated government’s overall fiscal deficit increased to 4.4 per cent of Gross Domestic Product (GDP) in 2025, largely due to lower-than-expected oil revenues.

The IMF warned that uncertainty surrounding global fuel and food prices, as well as domestic security challenges, posed significant risks to the country’s economic outlook.

It added, however, that stronger revenue mobilisation could create additional fiscal space for growth-enhancing and social expenditures.

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