The International Monetary Fund (IMF) has commended Nigeria’s recent wave of bold economic reforms—particularly those spearheaded by the Central Bank of Nigeria (CBN)—but has warned that a comprehensive overhaul of the 2025 budget is necessary to guard against growing fiscal vulnerabilities amid falling oil prices and persistent revenue challenges.
In its just-released Article IV Consultation Report on Nigeria, the IMF lauded the CBN’s efforts to stabilise the foreign exchange market, increase dollar liquidity, and restore market confidence, while urging the fiscal authorities to recalibrate spending and boost non-oil revenue to stay within deficit targets.
The Fund highlighted that Nigeria’s fiscal projections for 2025 are at risk due to lower-than-expected oil prices, underwhelming crude production, and challenges in executing capital projects. To avert budgetary slippage, the IMF advised that Nigeria should urgently revise its fiscal plans to reflect current economic realities.
“If the fuel subsidy savings are not fully realised in the second half of 2025, and tax reforms fail to deliver significant short-term revenue gains, spending cuts will be inevitable,” the Fund noted. “The adjustment should prioritise recurrent expenditures to protect growth-enhancing capital investment.”
Under the leadership of Governor Olayemi Cardoso, the CBN has implemented a raft of far-reaching reforms since late 2023, including the elimination of the multiple exchange rate regime and introduction of a “willing-buyer, willing-seller” FX trading platform (B-Match). These measures have significantly improved price discovery, reduced arbitrage opportunities, and narrowed the gap between the official and parallel market rates—from over 60% to less than 3%.
According to the IMF, these FX reforms—combined with improved market transparency—have triggered a surge in investor confidence, resulting in $6.9 billion in foreign portfolio inflows in Q1 2025, while external reserves climbed to $40.9 billion by end-2024, providing over eight months of import cover.
The report also praised the CBN’s move to recapitalise commercial banks by March 2026, describing it as a critical step towards building resilience in the financial sector and supporting the projected growth of Nigeria’s economy to $1 trillion.
“The recapitalisation initiative will enable banks to absorb future shocks, expand credit, and support economic diversification,” the report said.
The IMF also commended the recent signing into law of four tax reform bills by President Bola Tinubu, describing them as vital instruments for improving revenue generation and expanding Nigeria’s fiscal space. These bills include the Nigeria Fair Taxation Act, the Tax Administration Act, the Revenue Service Establishment Act, and the Joint Revenue Board Act.
While noting this legislative progress, the IMF warned that these measures are unlikely to deliver immediate revenue windfalls in 2025, reinforcing the need to reallocate budget spending to avoid widening the fiscal deficit.
The Fund urged Nigerian authorities to accelerate the rollout of cash transfer programmes aimed at cushioning the impact of economic reforms on vulnerable groups. Inflation, while decelerating, still remains high and continues to erode household purchasing power.
The IMF directors also emphasized the importance of addressing structural challenges—including security, red tape, low agricultural productivity, poor electricity supply, and weak health and education infrastructure—to unlock sustained growth and reduce inequality.
Despite the risks, the IMF projected Nigeria’s real GDP to grow by 3.4% in 2025, supported by higher oil output, domestic refinery operations, and robust service sector performance. Medium-term growth is expected to remain at around 3.5%, anchored by reforms in fiscal policy, foreign exchange, and financial governance.
The Fund highlighted the positive impact of Nigeria’s return to the Eurobond market after a four-year hiatus and its strengthened FX buffers as signs of restored credibility and external sector resilience.
According to data from the CBN, Net Foreign Exchange Reserves (NFER) rose to $23.11 billion by the end of 2024—up from just $3.99 billion at the close of 2023. The apex bank’s drive to streamline FX flows has been bolstered by new diaspora-focused products, licensing more International Money Transfer Operators (IMTOs), and ensuring timely naira liquidity for remittance channels.
The Association of Bureaux De Change Operators of Nigeria and international FX experts have attributed the improved liquidity and confidence to Cardoso’s disciplined policies and technological upgrades in the FX market.
In conclusion, the IMF’s endorsement of Nigeria’s economic reform agenda is a significant milestone, but the Fund stressed that continued coordination between monetary and fiscal authorities is critical. By aligning budgetary decisions with macroeconomic conditions, Nigeria can position itself for inclusive growth, fiscal sustainability, and long-term economic resilience.