Abuja: The Executive Board of the International Monetary Fund (IMF) has completed the Article IV Consultation with Nigeria, recognizing the significant reforms implemented by the Nigerian authorities over the past two years. These reforms have bolstered macroeconomic stability and resilience by removing costly fuel subsidies, halting the monetary financing of the fiscal deficit, and improving the foreign exchange market’s functionality. These changes have enhanced investor confidence, allowing Nigeria to successfully access the Eurobond market and resume portfolio inflows. However, challenges such as rising poverty and food insecurity persist, prompting the government to focus on growth.
According to International Monetary Fund, Nigeria’s growth accelerated to 3.4 percent in 2024, primarily driven by increased hydrocarbon output and a vibrant services sector, although agriculture remained subdued due to security challenges and declining productivity. The real GDP is projected to continue expanding by 3.4 percent in 2025, supported by a new domestic refinery, higher oil production, and robust services. Despite a complex external environment, medium-term growth is expected to stabilize around 3½ percent, underpinned by domestic reform gains.
The IMF staff highlighted increased downside risks amid global uncertainty. Potential declines in oil prices or increased financing costs could negatively impact growth, fiscal and external positions, financial stability, and exacerbate exchange rate pressures. Security deterioration could further affect growth and food insecurity.
Executive Directors agreed with the staff appraisal, commending the authorities on implementing significant reforms. They emphasized the need for agile policy-making to safeguard and enhance macroeconomic stability, create conditions to boost growth, and reduce poverty. They supported the Central Bank of Nigeria’s tight monetary policy stance, discontinuation of deficit monetization, and efforts to strengthen governance for inflation targeting. Additionally, they called for robust foreign exchange intervention frameworks and phasing out existing capital flow management measures.
The Directors advocated for a neutral fiscal stance to ensure macroeconomic stabilization, with investments prioritized to enhance growth and accelerate cash transfers to aid the poor. They praised advancements in the tax reform bill, which is crucial for revenue mobilization and development spending while maintaining debt sustainability.
The Directors acknowledged actions to strengthen the banking system and efforts to boost financial inclusion and capital market development, while stressing the importance of risk-based supervision for mortgage and consumer lending, fintech, and crypto sectors. They also noted progress in strengthening the AML/CFT framework and emphasized resolving remaining weaknesses to exit the FATF grey list.
To improve Nigeria’s growth outlook, food security, and reduce fragility, Directors highlighted tackling security, reducing red tape, enhancing agricultural productivity, addressing infrastructure gaps, and improving health and education spending. They also noted the importance of making the economy resilient to climate events and addressing structural impediments to private credit extension for growth support. They welcomed the IMF’s capacity development to support reform efforts and stressed the importance of enhancing data quality for sound policymaking.