•Report validates positive impacts of tough choices, says Oyedele
The International Monetary Fund (IMF) has, again, endorsed Nigeria’s ongoing economic reforms, citing improvements in macroeconomic stability and growth prospects.
But it warned that worsening poverty and food insecurity continue to pose significant social and economic risks.
In its 2026 Article IV Consultation report on Nigeria, released yesterday after the IMF Executive Board concluded its review on June 1, the Fund acknowledged progress in key reform areas but cautioned that the benefits have yet to reach a large segment of the population.
It said poverty and food insecurity could deepen in the near term as households continue to grapple with elevated living costs.
The report, which the Federal Government described as a further validation of the reforms and hard choices made by the current administration, said that Nigeria’s economy is estimated to have expanded by four per cent in 2025 and is projected to grow by 4.1 per cent in 2026, supported by strong performances in agriculture, real estate, information and communications technology as well as the oil and gas sector.
The Fund noted that rising food and transportation costs are beginning to weigh on economic activities.
Despite the recent uptick in inflation, the IMF expects disinflation to resume in the second half of the year, provided monetary policy remains tight and domestic supply conditions improve.
The IMF painted a stark picture of living conditions across the country, notwithstanding the improved macroeconomic outlook.
According to the report, poverty has climbed to 63 per cent based on Nigeria’s national poverty line, while an estimated 27 million people faced food insecurity in the latter part of 2025.
It warned that the indicators could worsen if food and fuel prices remain elevated, underscoring the need for stronger social protection measures.
It acknowledged that 9.2 million households have so far been enrolled in the national cash transfer programme developed with support from the World Bank, against a target of 15 million households.
Beneficiaries have received no more than three transfers of N25,000 each since 2023.
The IMF urged the Federal Government to ensure adequate and sustained funding for the
programme, describing targeted social support as critical to mitigating the adverse effects of ongoing economic adjustments on vulnerable households.
It also highlighted growing fiscal pressures, estimating that the consolidated government deficit widened to 4.4 per cent of GDP in 2025 as oil revenues underperformed budget projections despite stronger non-oil revenue collection.
A statistical discrepancy equivalent to 2.7 per cent of GDP raised concerns about expenditure that may not have been captured in official fiscal accounts.
The IMF further drew attention to the Federal Government’s January 2026 Repeal and Re-enactment Bills, which retroactively incorporated previously unbudgeted expenditures into the national budget.
While acknowledging the move as an attempt to improve transparency, it stressed that the practice of executing spending outside approved budget frameworks should be discontinued.
Debt servicing remains another source of concern. Interest payments consumed an estimated 53 per cent of Federal Government revenues in 2025, up from 41 per cent in the previous year, significantly limiting fiscal space for infrastructure development and social spending.
The IMF also expressed reservations over plans to finance part of the 2026 budget deficit through a $5 billion total-return swap arrangement with an international bank, warning that the structure could expose the country to margin-call risks if the naira weakens further or global interest rates rise.
Although the Central Bank of Nigeria (CBN) reduced the Monetary Policy Rate by 50 basis points to 26.5 per cent in February 2026 and lowered the Cash Reserve Ratio by five percentage points to 45 per cent, the IMF signalled that current inflationary pressures require a cautious policy stance.
The Fund advised the apex bank to maintain a data-dependent approach and remain prepared to sterilise excess liquidity arising from potential foreign exchange inflows linked to higher oil earnings.
It welcomed ongoing efforts to strengthen the monetary policy framework and move toward inflation targeting but observed that monetary policy transmission remains weak. The report also noted that some recent policy signals, including the announcement of a double-digit inflation target, differed from recommendations provided through IMF technical assistance programmes.
Nigeria’s external position improved considerably during the review period. Gross international reserves rose to $46 billion in 2025 from $40 billion at the end of 2024, supported by a current account surplus, non-resident participation in CBN open market operations and a Eurobond issuance.
Net international reserves increased to $35 billion from $23 billion over the same period.
While assessing Nigeria’s external position as stronger than warranted by underlying economic fundamentals, the IMF warned that significant foreign participation in short-term open market instruments presents rollover risks and recommended a gradual reduction in dependence on such flows.
The Fund commended the banking sector recapitalisation programme, noting that 33 of the country’s 37 banks had met revised capital requirements by the end of March 2026.
However, it flagged a rise in non-performing loans to eight per cent in the third quarter of 2025, exceeding regulatory thresholds following the withdrawal of COVID-19-era forbearance measures.
The IMF also devoted significant attention to the rapid growth of stablecoins in Nigeria, describing the country as one of the world’s most active markets for digital dollar-linked assets.
According to the report, increased adoption of dollar-denominated stablecoins could weaken monetary sovereignty, complicate capital flow management and heighten risks associated with illicit financial transactions. It therefore called for closer regulatory coordination between the CBN and the Securities and Exchange Commission.
The IMF reaffirmed the importance of reforms aimed at improving security, expanding electricity supply, strengthening infrastructure and boosting agricultural productivity.
However, it acknowledged that the approach of the January 2027 presidential election could narrow the political space for major policy initiatives. As a result, the Fund said its near-term engagement with Nigeria would focus largely on technical support and capacity development rather than politically sensitive reforms.
The IMF’s assessment presents a mixed picture: macroeconomic reforms are beginning to deliver greater stability and stronger growth, but fiscal vulnerabilities remain elevated, inflationary risks persist, and the social burden of adjustment continues to fall disproportionately on low-income households.
In his reaction, Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the report was another independent validation that the bold and necessary reforms undertaken under the leadership of President Bola Ahmed Tinubu are “strengthening macroeconomic stability, restoring confidence and laying the foundation for sustainable and inclusive growth”.
“The government is particularly encouraged by the IMF’s recognition that the difficult but necessary decisions to end fuel subsidies, eliminate deficit monetisation, liberalise the foreign exchange market, and strengthen fiscal discipline have contributed significantly to reducing vulnerabilities and rebuilding confidence in the economy,” the minister said in a statement shared on X.
He said the government would continue to strengthen targeted social protection programmes, including direct cash transfers to vulnerable households, support for small businesses and student financing through the Nigerian Education Loan Fund (NELFUND).