The International Monetary Fund (IMF) has called on Nigeria to recalibrate its 2025 budget to account for lower global oil prices and scale up cash transfer programs to protect vulnerable populations grappling with poverty and food insecurity.
The recommendation comes as part of the IMF’s Article IV consultation, released on July 2, 2025, which projects Nigeria’s economic growth at 3.4% in 2025 and 3.2% in 2026, driven by improved oil production and a robust services sector.
Challenges from Oil Price Volatility
Nigeria, Africa’s largest oil producer, faces fiscal strain due to Brent crude prices falling to around $68 per barrel, below the $75 per barrel assumed in the 2025 budget of N54.99 trillion.
The budget also projected oil production at 2 million barrels per day, while current output averages 1.5 million.
Axel Schimmelpfennig, the IMF’s mission chief for Nigeria, highlighted the impact of global oil price volatility, stating,
“The international economic environment is marked by very large uncertainty, directly affecting Nigeria’s fiscal and external balances as well as inflation.”
The IMF warns that without adjustments, the fiscal deficit could widen to 4.7% of GDP in 2025, exceeding the 2024 estimate of 4.1%.
Addressing Poverty and Food Insecurity
Despite macroeconomic reforms, including fuel subsidy removal and foreign exchange market liberalization, poverty and food insecurity remain critical challenges, with 46% of Nigerians living below the poverty line in 2023 and 19 million facing food insecurity.
The IMF emphasized the need to accelerate cash transfers, noting that Nigeria’s program, in place since 2007, has been limited by insufficient data and low banking penetration.
“The key challenge now is to tackle high poverty and food insecurity,” Schimmelpfennig said, urging the government to channel savings from fuel subsidies estimated at 2% of 2024 GDP—into social support and growth-enhancing investments.
Fiscal and Monetary Recommendations
The IMF advocates a neutral fiscal stance to support the Central Bank of Nigeria’s (CBN) tight monetary policy, which has helped reduce inflation from 31% in 2024 to 23.7% in April 2025.
The Fund recommends prioritizing expenditure cuts in recurrent spending to protect critical investments while boosting revenue through administrative reforms, such as improved tax collection and excise policies.
The CBN’s efforts to stabilize the naira and rebuild reserves have also been praised, with the IMF urging continued tight monetary measures until disinflation is entrenched.
Government Response
Finance Minister Wale Edun welcomed the IMF’s findings, affirming the government’s commitment to monitoring global oil markets and implementing the budget to safeguard economic stability.
“We are taking responsive measures to mitigate risks while maintaining momentum toward inclusive growth,” Edun said in a statement.
The government aims to leverage increased oil output, a new domestic refinery, and a resilient services sector to meet growth targets, though analysts caution that structural challenges like insecurity and power supply issues could hinder progress.
Broader Economic Context
The IMF’s report underscores Nigeria’s vulnerability to external shocks, including oil price declines and rising financing costs, which could exacerbate exchange rate pressures and fiscal strain.
While reforms have boosted investor confidence, evidenced by Nigeria’s return to the Eurobond market, the benefits have yet to reach all citizens.
The Fund calls for agile policymaking to address insecurity, improve infrastructure, and enhance financial inclusion to ensure inclusive growth and long-term stability.
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