The Nigerian economy has been facing significant challenges due to the impact of global risk sentiment and lower oil prices. However, the government has implemented important reforms to stabilize the economy, enhance resilience, and support growth. These reforms have put Nigeria in a better position to navigate the external environment.
An International Monetary Fund team recently visited Nigeria for the 2025 Article IV Consultations. During the visit, discussions were held with key government officials, including the Minister of Finance and Coordinating Minister of the Economy, the Minister of Agriculture and Food Security, and the Central Bank of Nigeria Governor. The team also met with representatives from the private sector, academia, labor unions, and civil society.
According to Axel Schimmelpfennig, the IMF mission chief for Nigeria, the Nigerian authorities have made significant progress in stabilizing the economy. The financing of the fiscal deficit by the central bank has been discontinued, fuel subsidies have been removed, and the foreign exchange market has improved. However, challenges remain as poverty and food insecurity are still prevalent in the country.
Looking ahead, macroeconomic policies need to further strengthen buffers and resilience while promoting private sector-led growth. The IMF team emphasized the importance of implementing the 2025 budget in response to declining international oil prices. A neutral fiscal stance is recommended to support monetary policy in reducing inflation. It is crucial that fiscal savings from the removal of fuel subsidies are directed towards critical investments and cash transfers to address food insecurity.
In terms of monetary policy, a tight stance is necessary to bring down inflation. The IMF team suggested announcing a disinflation path as an intermediate target to anchor inflation expectations. The Monetary Policy Committee’s data-dependent approach was praised for its effectiveness in navigating macroeconomic uncertainty.
Overall, the IMF commended Nigeria for the progress made in stabilizing the economy and enhancing resilience. However, continued efforts are needed to address ongoing challenges and support sustainable economic growth. By implementing prudent macroeconomic policies and prioritizing key spending areas, Nigeria can further strengthen its economy and improve the well-being of its citizens.
