The International Monetary Fund (IMF) has urged the Federal Government to revise its proposed 2025 budget of ₦54.99 trillion, cautioning that the spending plan relies on overly optimistic oil price projections and may lead to a wider fiscal deficit if global economic conditions worsen.....KINDLY READ THE FULL STORY HERE▶

In its latest Article IV Consultation report released this week, the International Monetary Fund (IMF) commended Nigeria for recent macroeconomic reforms, including the elimination of fuel subsidies, the end of Central Bank financing of government deficits, and the liberalisation of the foreign exchange (FX) market. However, it warned that the positive momentum remains fragile and unevenly distributed among the population.

“The 2025 budget must be adjusted to reflect lower oil price projections,” IMF directors cautioned, warning that maintaining the current ₦54.99 trillion spending plan without revisions could push the fiscal deficit from 4.1% to roughly 4.7% of GDP. Such a shift, the IMF noted, would increase debt pressures and strain the exchange rate.

Oil continues to dominate Nigeria’s economic structure, accounting for most of its export earnings and fiscal revenues. While the country has seen a modest recovery—buoyed by improved oil output and a projected GDP growth rate of 3.4% in 2024—the IMF expressed concern over persistently weak per capita growth and dangerously high inflation.

“Growth remains steady, but insufficient on a per capita basis, and inflation is still elevated,” the report stated. Although inflation fell to 22.97% year-on-year in May 2025—down from an average of 31% in 2024—it remains one of the highest globally.

The IMF advised the Central Bank of Nigeria (CBN) to maintain a tight monetary policy stance until inflation shows consistent moderation, stressing the importance of positive real interest rates to anchor price stability and restore confidence in the naira.

On foreign exchange, the Fund acknowledged recent steps to enhance market liquidity and transparency but underscored the need for a clear, rule-based framework to manage volatility—particularly in light of Nigeria’s reliance on short-term capital inflows.

“The naira must continue to function as a shock absorber for external disruptions,” the IMF said, pointing out that FX reserves have risen, aided by a current account surplus and recent market stabilisation. Nonetheless, it warned that significant external rollover obligations call for agile and strategic FX management.

The report also called for sustained fiscal reforms. While praising recent tax measures and savings from subsidy removals, the IMF urged improvements in public spending efficiency, budget execution, and rapid deployment of targeted cash transfers to protect vulnerable Nigerians facing rising food insecurity.

In the financial sector, the Fund welcomed the CBN’s recapitalisation initiative and the adoption of Basel III standards but flagged concerns over emerging risks in high-growth segments like mortgage lending, fintech, consumer credit, and crypto-assets. It emphasised the need for stronger risk-based supervision in these areas.

Despite macro-level improvements, the IMF stressed that the economic rebound has yet to meaningfully improve living standards. It called for greater investment in infrastructure, education, healthcare, agriculture, and climate resilience, while urging immediate action to tackle food insecurity and deep-rooted poverty.

“The benefits of recent reforms have yet to reach all Nigerians,” the report concluded, calling for urgent efforts to address entrenched structural issues, including low agricultural productivity and ongoing security challenges.

As the government moves to finalise its 2025 budget, the IMF’s findings underscore the need for realistic planning, sound fiscal management, and inclusive policies that translate reforms into real gains for the Nigerian people.