WASHINGTON, D.C. / ABUJA — July 8, 2025 | IDNN GLOBAL ECONOMICS DESK
The International Monetary Fund (IMF) has issued a blunt warning to Nigeria, stating that inflation remains dangerously high and urging the government to deepen economic reforms, tighten fiscal discipline, and ensure transparency in the use of subsidy savings.
In a country-focused advisory titled “How Nigeria Can Unleash Its Economic Potential,” the IMF said President Tinubu’s reform drive—including the fuel subsidy removal and unification of exchange rates—was a step in the right direction, but warned that more decisive action is required to curb inflation, stabilize the naira, and build trust with investors.
“The country needs stronger and more sustained growth to lift millions of people out of poverty and food insecurity,” the IMF stated.
Despite the redirection of over ₦4 trillion from subsidy removal into infrastructure and safety nets, the Fund warned that inflation above 20% continues to erode gains.
Structural Weaknesses Still Hold Nigeria Back
The IMF identified key obstacles: weak electricity supply, a fragile social safety net, slow revenue growth, and limited infrastructure. It also flagged the urgency of an effective budgeting and reporting framework.
“Delivering effective investments in people and infrastructure requires strong expenditure management and transparent implementation,” the report emphasized.
Fiscal Space Gained Must Be Used Wisely
The IMF praised Nigeria’s removal of fuel subsidies but urged that the “substantial financial savings flow to the government to fund priority spending” rather than disappear into bureaucratic inefficiency.
“Too much revenue still goes to interest payments. What’s left for growth is too little,” the Fund noted.
The IMF advised Nigeria to accelerate its tax reforms and begin realigning tax rates to regional benchmarks once social protection programs are stabilized.
Inflation Control: CBN Must Stay Firm
On monetary policy, the IMF backed the Central Bank of Nigeria’s (CBN) recent tightening moves but urged consistency in taming inflation and managing foreign exchange volatility.
“Monetary policy should continue to decisively tackle inflation and reduce economic uncertainty,” the Fund urged.
This includes reducing excess liquidity in the system, improving forex supply transparency, and addressing food inflation by removing bottlenecks in agricultural logistics.
Domestic Revenue, Not Debt, is the Key
The report highlighted Nigeria’s massive funding needs in areas like climate resilience, electricity, agriculture, and transportation—and insisted that relying on debt will no longer be viable.
“The government must boost domestic revenue. Without that, development goals will remain out of reach,” the Fund warned.
It welcomed recent tax administration reforms but stressed that implementation and compliance remain weak, particularly among wealthy elites and the informal sector.