IMF commends CBN’s broader economic reforms which have restored macroeconomic stability

The International Monetary Fund (IMF) has praised the Central Bank of Nigeria (CBN) for maintaining a tight monetary policy stance, describing it as a crucial step in reducing inflationary pressures and stabilizing the economy.

In its 2025 Article IV Consultation report on Nigeria, the IMF noted that this disciplined approach should continue until disinflation is firmly achieved.

The IMF directors observed that the CBN’s actions over the past two years have supported broader economic reforms, which have helped restore macroeconomic stability and build resilience.

The report commended measures to strengthen the banking system, including the ongoing recapitalisation exercise, as well as the central bank’s initiatives to deepen financial inclusion and expand the capital market.

It also pointed to the need for robust risk-based supervision covering mortgage lending, consumer credit, fintech operations, and cryptocurrencies to preserve financial sector stability.

The directors welcomed Nigeria’s progress in improving its anti-money laundering and counter-financing of terrorism (AML/CFT) framework; while urging the authorities to address remaining gaps so the country can exit the Financial Action Task Force (FATF) grey list.

Further reforms by the CBN, such as ending the direct financing of fiscal deficits and steps to strengthen governance, were seen as laying the groundwork for an eventual move to formal inflation targeting.

The report noted that improvements in the foreign exchange market have helped support price discovery and boost liquidity. Directors also recommended that Nigeria put in place a clear foreign exchange intervention strategy to contain excess volatility, adding that the exchange rate plays a vital role as a shock absorber.

Looking at the broader reform agenda, the IMF observed that the removal of costly fuel subsidies, halting monetary financing, and changes to foreign exchange policy have increased investor confidence. This renewed trust has allowed Nigeria to return successfully to the Eurobond market and attracted new portfolio inflows.

Growth in 2024 accelerated to 3.4 per cent, driven by stronger oil output and a vibrant services sector. However, agriculture continued to face challenges linked to security and falling productivity.

For 2025, the IMF projects another 3.4 per cent increase in real GDP, supported by higher oil production, the new domestic refinery, and continued strength in services. Over the medium term, growth is forecast to remain around 3.5 per cent, helped by reform momentum despite global uncertainty.

The report noted that gross and net international reserves rose in 2024, underpinned by a strong current account surplus and higher portfolio inflows. Reforms to the FX market and targeted interventions also helped stabilise the naira.

Inflation, which averaged 31 per cent in 2024 based on the rebased CPI data from the Nigerian Bureau of Statistics, dropped to 23.7 per cent year-on-year in April 2025. The IMF expects further moderation in inflation over time, supported by continued tight policies and lower retail fuel prices.

On the fiscal side, revenue performance improved in 2024, helped by naira depreciation, better tax administration and higher grants, despite increased interest payments and overhead costs. Directors advised that fiscal policy remain broadly neutral to protect macroeconomic stability and channel resources into growth-enhancing investments.

The IMF also warned of potential downside risks, including volatile global markets, possible declines in oil prices, higher financing costs, and security challenges. These risks, if realised, could weaken fiscal and external positions, raise exchange rate pressures, and affect food security.

To help address these risks and ensure the reform benefits reach more Nigerians, the IMF recommended agile policy responses, including the timely delivery of cash transfers to support vulnerable households. It also encouraged phasing out capital flow management measures in a gradual and carefully planned manner.

The directors welcomed the progress on the tax reform bill, describing it as an important step toward mobilising more domestic revenue and creating space for development spending, while keeping debt sustainable.

Beyond macroeconomic policy, the report noted the need to improve security, address bureaucratic bottlenecks, raise agricultural productivity, invest in infrastructure—especially power—and improve health and education outcomes. The IMF also stressed the importance of making the economy more resilient to climate-related shocks.

Finally, it called for easing barriers to private credit expansion to stimulate growth, and pointed to the Fund’s capacity development work in support of Nigeria’s reforms. The directors said improving data quality remains essential for effective, evidence-based policymaking.