By Chinwendu Obienyi
The International Monetary Fund (IMF) has called on the Federal Government to revise its 2025 budget of N54.99 trillion, warning that it is based on overly optimistic oil price assumptions and could widen the fiscal deficit if global conditions deteriorate.
In its latest Article IV Consultation report released this week, the fund praised Nigeria’s recent macroeconomic reforms, including the removal of fuel subsidies, the cessation of Central Bank financing of fiscal deficits and liberalisation of the foreign exchange (FX) market. However, it warned that these gains remain fragile and unevenly felt by the population.
“The 2025 budget needs to be recalibrated to lower oil prices,” IMF directors stated, noting that implementing the current spending plan without adjustment could push the fiscal deficit from 4.1 per cent to around 4.7 per cent of GDP.
Such a scenario, the fund warned, could increase the country’s debt burden and pressure the exchange rate.
Oil continues to dominate Nigeria’s economic landscape, accounting for the majority of export earnings and government revenue. While improved oil production and GDP growth of 3.4 per cent in 2024 signal some recovery, the IMF cautioned that per capita growth remains weak and inflation dangerously high.
Growth has been steady but too low in per-capita terms and inflation remains high. Inflation dropped to 22.97 per cent year-on-year in May 2025, down from an average of 31 per cent in 2024, yet still ranks among the highest globally”, the report noted.
The Fund advised the Central Bank of Nigeria (CBN) to maintain its tight monetary policy stance until inflation shows sustained deceleration, emphasising the importance of keeping real interest rates positive to support price stability and rebuild confidence in the naira.
On the foreign exchange front, the IMF welcomed steps taken to improve price discovery and liquidity in the market. However, it stressed the urgent need for a well-defined and transparent intervention framework to manage volatility, especially given the country’s exposure to short-term capital flows.
“The naira should remain a shock absorber in response to external disturbances,” the IMF stated, adding that reserves had improved due to a current account surplus and stabilisation in the FX market. Nonetheless, the Fund warned that elevated external rollover needs require careful and agile FX management.
The report also highlighted the need for continued fiscal reforms. The IMF commended recent tax policy changes and subsidy savings but urged the government to enhance spending quality, improve budget execution, and accelerate the delivery of targeted cash transfers to protect vulnerable households amid rising food insecurity.
In the financial sector, the Fund welcomed the CBN’s recapitalisation drive and adoption of Basel III standards but flagged the need for stronger risk-based supervision of fast-growing segments such as mortgage lending, fintech, consumer credit, and crypto-assets.
Despite macroeconomic improvements, the IMF noted that Nigeria’s economic recovery has yet to significantly impact living standards. It urged increased investment in infrastructure, education, healthcare, agriculture, and climate resilience, while also calling for urgent action to address food insecurity and widespread poverty.
“Gains have yet to benefit all Nigerians,” the IMF cautioned, reiterating the need to tackle long-standing structural challenges, particularly low agricultural productivity and persistent security threats.
As the government prepares to finalise its 2025 spending plan, the IMF’s recommendations add urgency to efforts aimed at safeguarding economic stability and ensuring that recent reforms deliver meaningful improvements in the lives of ordinary Nigerians.