Nigeria on brink of fiscal breakthrough

Backs reform momentum

From Uche Usim, Washington DC

The International Monetary Fund (IMF) has expressed strong confidence in Nigeria’s reform-driven economic trajectory, noting that the country is on the verge of a major fiscal transformation.

The global lender’s latest assessment highlights that Nigeria’s ongoing policy realignments, fiscal discipline and transparency initiatives are already charting a sustainable growth path.

Speaking on the country’s outlook, Davide Furceri, Division Chief at the IMF’s Fiscal Affairs Department, confirmed that Nigeria remains in the “moderate risk” category, a position reflecting growing confidence in its reform efforts. He explained that the Fund’s fiscal projections have taken into account Nigeria’s recent borrowing plans and new policy direction, describing the government’s current fiscal stance as neutral and aligned with monetary policies aimed at reducing inflation.

“Currently, what we are projecting for Nigeria is a neutral fiscal stance, which we believe is consistent with monetary policies aimed at reducing inflation.

“On the revenue side, there is scope to improve collections through tax administration reforms and broader revenue mobilisation in ways that do not harm growth. Nigeria has made significant progress in recent years. Several laws have been passed to streamline the tax code, reduce tax expenditures, and ease the compliance burden for businesses. These are steps in the right direction,” Furceri said.

The IMF’s optimism for Nigeria is largely built on the strong potential for revenue mobilisation and expenditure efficiency. With General Government Revenue projected at 9.6 percent of GDP in 2025, and 9.2 percent by 2030, the country’s fiscal base remains below the ideal threshold of 15 percent of GDP for sustainable development. However, this gap represents immense opportunity rather than weakness. IMF experts argue that countries that expand their tax capacity beyond 15 percent of GDP typically record double-digit growth dividends over time. For Nigeria, that could mean unlocking its long-awaited growth acceleration simply by tightening revenue administration and widening the tax net.

The IMF’s fiscal framework also highlights the government’s ongoing efforts to improve the quality of expenditure. While overall public spending is expected to average 12.5 percent of GDP through 2030, efficiency remains the watchword. Furceri stressed the importance of channelling more funds into social spending to support vulnerable households and achieve inclusive growth. This, he said, aligns perfectly with the administration’s current drive to reduce waste, optimise capital projects, and strengthen accountability across ministries and agencies.

The phasing out of fuel subsidies, a long-standing fiscal burden, is one of the most significant reforms in this direction. The IMF considers it a vital structural change that will free up resources for productive sectors such as infrastructure, education, and healthcare. Replacing blanket subsidies with targeted social interventions, the Fund believes, will make growth more inclusive and sustainable over the long term.

Nigeria’s debt outlook also reflects improving stability and sound management. The IMF projects General Government debt at 36.4 percent of GDP in 2025, a level that remains comfortably below international risk thresholds. Even more encouraging is the Interest Rate–Growth Differential (IRD), projected at negative 5.8 percentage points between 2025 and 2030. This means that the country’s economic growth rate is expected to exceed the average interest rate on its debt, a clear signal of sustainability.

Furceri praised Nigeria’s increasing fiscal transparency, noting that its debt data now capture all layers of government, including overdrafts from the Central Bank of Nigeria (CBN) and liabilities from the Asset Management Corporation of Nigeria (AMCON). This comprehensive approach, he said, enhances credibility and investor confidence, especially with debt reported at current market value in line with global best practices.

Beyond the numbers, governance and institutional reforms remain the backbone of Nigeria’s fiscal renaissance. The IMF maintains that strong governance, transparency, and effective expenditure control are essential for sustained fiscal health. Nigeria’s moves to strengthen public financial management systems, enforce procurement discipline, and expand digital monitoring tools have already begun to yield results. These steps, coupled with the mandatory publication of budget reports and rollout of platforms like the Integrated Payroll and Personnel Information System (IPPIS), demonstrate the government’s commitment to accountability.

Despite a projected overall fiscal deficit of -2.9 percent in 2025, averaging -3.2 percent through 2030, the Fund believes Nigeria’s fiscal trajectory is firmly on a sustainable course. What stands out, however, is the strategic shift from dependency-driven budgeting to growth-centred fiscal planning, a transition that global analysts have long considered overdue.

With reforms gaining traction and stronger synergy between fiscal and monetary authorities, Nigeria’s macroeconomic outlook is brightening. The IMF’s position underscores that the country is now entering a critical phase where consistency, transparency, and institutional resilience will determine the pace of progress.

“Substantial gains can be achieved when countries enhance the efficiency and composition of their spending. The structural reforms being implemented in Nigeria are not only vital for macroeconomic stability but also for ensuring inclusive growth,” Furceri affirmed.

Experts noted that with renewed discipline in public finance, rising investor confidence and an increasingly reform-minded leadership, Nigeria appears set for a fiscal rebound that could redefine its economic destiny. The IMF’s endorsement, they added, offers both validation and encouragement as if Nigeria stays the course, the next decade could mark the beginning of its long-awaited fiscal takeoff.