The International Monetary Fund (IMF) has hailed Nigeria’s recent macroeconomic reforms as “bold” and transformative, stating that the policy overhaul has positioned the country for long-term resilience and growth. However, the Fund also warned that an unpredictable external environment, especially declining oil prices and elevated global risk, could undermine the nation’s fragile recovery.
The IMF’s verdict followed the conclusion of its 2025 Article IV Consultation Mission to Nigeria, which took place from April 2 to 15, involving engagement with key federal officials, including Minister of Finance Wale Edun and Central Bank Governor Yemi Cardoso, alongside civil society, private sector stakeholders, and academia.
In its statement, the IMF emphasised that while Nigeria had made commendable strides including ending deficit financing by the Central Bank of Nigeria (CBN), eliminating fuel subsidies, and improving the foreign exchange market Nigeria’s Oil Production Target Faces Challenges – CBNsignificant socio-economic challenges remained.
“Gains have yet to benefit all Nigerians as poverty and food insecurity remain high,” said Axel Schimmelpfennig, IMF Mission Chief. “The reforms have created stronger foundations, but uncertainty around global oil prices and risk sentiment remain a threat.”
Fiscal Gaps Widen Despite Gains in Capital Inflows
According to the CBN’s January 2025 Economic Report, Nigeria recorded a notable $2.06 billion in foreign capital inflow, up from $1.57 billion in December 2024. Trade surplus also improved sharply to $2.20 billion from $1.06 billion, driven by increased export earnings.
However, the country’s fiscal deficit widened due to lower government revenue, despite the uptick in export receipts and a 29.09 per cent growth in exports to $5.37 billion. Import bills rose slightly by 2.26 per cent to $3.17 billion.
Portfolio investment, particularly in money market instruments, surged to $1.85 billion from $1.23 billion, signalling growing investor confidence. Nonetheless, Foreign Direct Investment (FDI) dipped to $0.07 billion from $0.12 billion, and loan inflows also dropped.
Oil Revenues Falter Despite Production Gains
Crude oil and gas exports climbed to $4.80 billion in January, up from $3.62 billion in December, thanks to improved crude oil prices ($80.76 per barrel) and a production uptick to 1.54 million barrels per day. Crude oil export earnings specifically jumped to $3.86 billion from $2.68 billion.
Yet, federally collected revenue plunged by 31.35 per cent compared to December. The oil revenue component was particularly weak, falling by 45.45 per cent to ₦0.61 trillion as a result of aging infrastructure and pipeline shut-ins. It also missed the monthly target by 65.55 per cent.
Despite the slump in oil earnings, non-oil revenue remained dominant at 68.67 per cent of total revenue but was also 22.18 per cent below December levels. The Federation Account grossed ₦1.94 trillion, significantly lower than the benchmark and previous month.
Tight Monetary Policy Endorsed as Inflation Threat Persists
The IMF urged the Nigerian authorities to stay the course on monetary tightening to anchor inflation expectations, suggesting a well-communicated disinflation path as a near-term policy focus.
“A tight monetary stance is required to firmly guide inflation down,” the Fund stated. “Announcing a disinflation path to serve as an intermediate target can help anchor expectations.”
The CBN concurred, projecting a gradual moderation of inflation pressures due to tighter monetary policy, stable petrol prices, and improved security in agricultural zones. Still, it warned that risks such as exchange rate depreciation, rising money supply, and insecurity could derail these efforts.
Capital Outflows, FX Fluctuations Raise Red Flags
The report also revealed a worrying rise in capital outflows, which increased to $1.20 billion from $1.06 billion, largely due to higher loan repayments and capital reversals. Dividends repatriation, however, plunged by 66.67 per cent to just $0.01 billion.
Meanwhile, Nigeria’s external reserves dropped to $38.88 billion in January from $40.19 billion in December. Still, the reserves remained robust enough to cover 8.82 months of total imports or 13.20 months of goods-only imports.
Net foreign exchange inflow declined to $4.79 billion from $5.01 billion. Inflows via the CBN fell sharply to $2.33 billion from $4.09 billion, while autonomous sources rose to $7.31 billion from $6.08 billion, signalling increasing reliance on non-governmental FX sources.
Outlook for 2025: Positive But Precarious
Despite the mounting risks, the CBN maintained a cautiously optimistic outlook for 2025, citing continued reforms in the oil sector and forex market as key growth drivers. But the road ahead remains uncertain.
“The macroeconomic outlook is marked by significant uncertainty,” the IMF reiterated. “Reforms since 2023 have placed the economy on a stronger footing, but sustaining momentum is critical to ensure inclusive, private sector-led growth.”
The IMF advised the federal government to implement the 2025 budget in a manner responsive to oil price shocks and to reinvest fuel subsidy savings into critical growth-enhancing infrastructure and expanded cash transfer programmes.