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…Urges Nigeria, others to fortify banks
From Uche Usim, Bangkok, Thailand
The International Monetary Fund (IMF) has warned that the widening scale of artificial intelligence (AI) investments and complex financing arrangements could threaten global financial stability if expected returns fail to materialise.
The Fund said some AI-related financing structures could expose companies and investors to significant losses, with potential consequences for global markets and economic growth.
In its October 2026 Global Financial Stability Report released yesterday at the ongoing IMF-World Bank AnnualMeetingsinBangkok, Thailand, the IMF disclosed that it examined 14 public transactions involving about $300 billion in equity investments and $650 billion in debt investments, including off-balance-sheet vehicles, in exchange for $1.4 trillion in future revenue commitments.
The report raised concerns about the scale of the commitments and the circular nature of some financing arrangements.
It warned that problems in one part of the system could spread through interconnected investments.
The IMF gave the warning as it urged policymakers to strengthen financial safeguards, particularly in emerging economies, to prepare for possible shocks from tighter financial conditions, currency pressures and refinancing risks.
Speaking at a press briefing on the report, the Assistant Director, Monetary and Capital Markets Department, IMF, Jason Wu said the financial markets had been supported by strong corporate earnings, positive growth surprises and optimism about AI, but warned that such resilience did not necessarily mean the markets were safe.
Wu identified three major risks to financial stability to include; changes in financial conditions, a possible correction in AI-related markets and the growing concentration of investments around expectations of future earnings and economic growth.
He warned that if companies failed to meet increasingly ambitious earnings forecasts, investor confidence could weaken, triggering a market correction and tightening financial conditions.
The IMF, however, stressed that it was not predicting an imminent market crash but highlighting vulnerabilities that could make any correction more damaging.
It also cautioned that companies could struggle to service their debts if anticipated AI revenues and returns failed to materialise, potentially exposing lenders and equity investors to losses.
The report further identified cyber threats and the concentration of critical technology services among a small number of providers as emerging risks to financial stability.
The Fund said disruptions or cyberattacks affecting major technology service providers could spread across financial institutions and markets, underscoring the need for stronger preparedness, regulatory coordination and a better understanding of operational dependencies.
On Nigeria, the IMF said the moderation in inflation could support a less restrictive monetary policy stance, but stressed that the Central Bank of Nigeria (CBN) must base its decisions on economic data and communicate its policies transparently.
Responding to questions on whether the CBN should significantly reduce interest rates as inflation eases, Wu said recent developments on the inflation front appeared positive.
The representative, however, emphasised the importance of credibility, noting that the central bank must be able to explain its decisions clearly and continue relying on data to contain inflationary pressures.
On Nigeria’s banking sector, the IMF Assistant Director said recapitalisation should be followed by appropriate regulations to prevent risks from accumulating and protect the industry against future shocks.
The Fund recommended adequate capital and liquidity requirements, as well as the timely recognition of credit losses and bad loans.
The Fund also identified the relationship between banks and government borrowing as an important area of concern in African economies, stressing the need to understand banks’ exposure to sovereign risks.
These measures, it said, would help strengthen the resilience of Nigeria’s banking industry following the recapitalisation exercise.
On Nigeria’s access to international debt markets, the IMF representative said the Eurobond market remained open, with financing activities continuing.
The representative referred further questions on financing discussions to the IMF’s African Department.
The IMF also advised emerging economies to strengthen their ability to withstand external shocks, including by allowing exchange rates to absorb pressures where appropriate.
It said policymakers must identify financial vulnerabilities early, address existing imbalances and ensure that their economies are prepared for sudden changes in global market conditions.
