The International Monetary Fund (IMF) has issued a stark warning to Nigeria, urging the Federal Government to urgently revise the 2025 federal budget or risk plunging into a deeper economic crisis. The caution came through its latest Article IV Consultation Report, which highlights major fiscal vulnerabilities threatening the country’s economic stability.
According to the report, Nigeria’s fiscal deficit could hit 4.7% of GDP—far exceeding official budget targets—due to declining oil prices, underwhelming oil production, execution challenges, and ambitious spending plans that outpace current revenue realities.
“Absent policy actions, the fiscal deficit in 2025 would exceed budget expectations,” the IMF stated, emphasizing that adjustments must focus on recurrent spending to preserve growth-enhancing investments.
The 2025 budget, signed into law by President Bola Tinubu, is the highest in Nigeria’s history at ₦54.99 trillion, and was based on optimistic assumptions including $75 per barrel crude oil, 2.06 million barrels per day in oil production, and a ₦1,400/$ exchange rate. However, with oil prices sliding since April and production still below projections, the IMF says the assumptions are no longer tenable.
The IMF stressed that the entire budget structure is now misaligned with prevailing macroeconomic conditions. Hydrocarbon revenues, once expected to deliver significant inflows, have underperformed due to both price volatility and structural weaknesses in Nigeria’s oil sector.
“The 2025 budget was based on optimistic hydrocarbon revenue projections, even before the price decline,” the report noted.
Worse still, the expected fiscal savings from the removal of fuel subsidies, estimated at 2% of GDP, may not fully materialize in the second half of the year. This, coupled with delays in tax reforms, increases pressure to cut recurrent expenditures or risk ballooning debt.
While Nigeria’s 2025 fiscal plan prioritizes capital projects with an allocation of ₦23.96 trillion, the IMF expressed doubt over implementation capacity, citing a history of underperformance in executing large-scale infrastructure projects.
“Budgeted capital expenditure is likely to exceed implementation capacity,” the IMF warned, potentially derailing efforts to spur economic growth and job creation.
Nigeria’s public debt rose to 53% of GDP in 2024, up from 49% in 2023, driven by sustained deficits and naira depreciation. The IMF cautioned that without urgent fiscal recalibration, debt sustainability will worsen, undermining efforts at long-term economic recovery.
To manage this, the IMF recommended alternative financing models, including public-private partnerships, while warning that any new borrowing should be cautiously structured to avoid compounding debt vulnerabilities.
In response, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, reassured the public that the government is committed to adjusting the budget framework in line with evolving economic realities.
“We are proactively implementing the 2025 budget with a focus on economic stability. Government remains committed to monitoring oil market developments and taking responsive action,” Edun said in a statement via Mohammed Manga, Director of Public Relations.
The government also reaffirmed its commitment to key reforms such as fuel subsidy removal, tax modernization, and improving domestic revenue mobilisation. Authorities are reportedly considering budget adjustments to align spending with lower oil revenues and broader macroeconomic conditions.
Earlier, the World Bank also flagged the 2025 budget as “overly ambitious” during the launch of its Nigeria Development Update report. The institution warned that revenue shortfalls might force the government to rely on the CBN’s Ways and Means facility, a move critics say could exacerbate inflation and deficit financing issues.
> “Even with strong revenue performance in 2024, the 2025 targets are hard to meet,” said Alex Sienaert, the World Bank’s Lead Economist for Nigeria.
Policy analysts and economists have echoed the IMF and World Bank’s sentiments, urging the government to focus on realistic fiscal planning, diversification from oil, and social safety nets to cushion economic shocks. The IMF also urged the Nigerian government to prioritise accurate forecasting, improved public investment management, and broadened tax bases to reduce over-reliance on oil.
The report concluded with a recognition of Nigeria’s recent economic reforms, including tighter monetary policy and improved forex market stability, but warned that without clear budget revisions and strong execution, those gains remain at risk.