By 
WASHINGTON, DC — Strong economic reforms implemented by Nigerian authorities over the past three years have successfully bolstered the nation’s macroeconomic stability and built vital economic resilience. However, the International Monetary Fund (IMF) warns that these gains are being tested by a harsh external environment, leaving millions of Nigerians facing severe cost-of-living challenges.
Following the conclusion of the Article IV consultation with Nigeria on June 1, 2026, the IMF Executive Board released an assessment detailing a complex economic landscape. While systemic structural improvements are visible, escalating global commodity prices threaten to aggravate domestic poverty and food insecurity.
Economic Growth and the Inflationary Tug-of-War
Nigeria’s economic growth is managing to maintain a steady trajectory despite significant domestic headwinds. The IMF estimates the country’s economic growth at 4 percent for 2025 and projects a slight uptick to 4.1 percent in 2026. This expansion, however, remains constrained by soaring food and transportation costs that continue to heavily weigh on broader economic activity.
The most pressing immediate threat to Nigerian households is the resurgence of inflation. After following a encouraging downward trend for more than a year, inflation nudged back up to 15.4 percent year-on-year in March 2026. This reversal is primarily attributed to a sharp spike in international fuel and food prices, which has begun to filter into the domestic market.
IMF Outlook on Inflation: While this external shock is expected to drive prices higher in the short term, the IMF projects that Nigeria’s broader disinflation path will resume and continue into the second half of 2026.
Fiscal Dynamics and External Reserves
On the fiscal front, higher global prices for fuel, food, and fertilizer present a double-edged sword: they are actively improving Nigeria’s export profile and boosting fiscal revenues, but they simultaneously compound domestic inflationary pressures.
The consolidated government’s overall deficit expanded to an estimated 4.4 percent of GDP in 2025. This widening deficit was driven by oil revenues falling short of budget expectations, even though non-oil revenues hit their targets. The fiscal gap was balanced by under-executing reported capital expenditures, alongside the inclusion of previously off-budget capital spending through recent repeal and re-enactment bills.
Concurrently, Nigeria’s external buffers saw significant reinforcement:
- Gross International Reserves: Climbed to US$46 billion in 2025, up from US$40 billion at the end of 2024. This growth was driven by a healthy current account surplus, a Eurobond issuance, and net purchases of central bank open market operations by non-residents.
- Net International Reserves: Rose substantially to US$35 billion at the end of 2025, compared to US$23 billion at the end of 2024.
Policy Recommendations for Stability and Inclusive Growth
To preserve hard-won economic stability, the IMF Executive Directors underscored the necessity of tight macroeconomic policies and continued structural reforms.
Fiscal Discipline and Social Safety Nets
The IMF called for a neutral fiscal stance in 2026 to temper inflation and support macroeconomic stability, while ensuring that priority social spending remains protected. Directors lauded recent tax reforms but noted that further tax policy measures will likely be required over the medium term. These additional revenues are deemed vital to fund a scaled-up cash transfer program aimed at providing relief to the 63 percent of Nigerians living below the national poverty line. Furthermore, Directors urged authorities to accelerate reforms to public financial management, citing concerns regarding off-budget spending and complex financing instruments.
Monetary Rigor and Exchange Rate Flexibility
Praising the Central Bank of Nigeria’s (CBN) historical success in curbing inflation, the IMF recommended maintaining a tight, data-dependent monetary policy stance until disinflation is firmly entrenched. The Board welcomed the CBN’s ongoing shift toward formal inflation targeting and reiterated its commitment to a flexible exchange rate regime, noting that foreign exchange interventions should only play a complementary role under specific circumstances. Additionally, the IMF advised phasing out remaining multiple currency practices and exchange restrictions as conditions allow.
Banking Sector Resilience and Regulation
The IMF acknowledged the underlying resilience of Nigeria’s financial system, which has been bolstered by recent bank recapitalization efforts. However, it advised ongoing vigilance regarding rising non-performing loans (NPLs) and the sovereign-bank nexus. Regulators are encouraged to accelerate Basel III implementation and bring stablecoin and other crypto-asset activities firmly into the regulatory perimeter. On a positive note, the IMF celebrated Nigeria’s removal from the FATF grey list, emphasizing that sustained implementation will be crucial to securing financial integrity moving forward.
Looking Ahead: Risks and Priorities
The road ahead for Nigeria is fraught with both domestic and international vulnerabilities. Externally, an uncertain global environment and volatile fuel and food prices pose persistent risks to the economic outlook. Domestically, ongoing security challenges continue to threaten citizens and disrupt economic productivity.
Ultimately, the IMF emphasizes that long-term, inclusive growth hinges on aggressive diversification and targeted structural overhauls. Priorities must center on governance, security, infrastructure, human capital, electricity, and agriculture. If Nigeria can achieve quick gains in domestic revenue mobilization, it will unlock the critical budget space needed to fund these growth-enhancing priorities and secure a more stable future for its population.
