Maintain tight monetary policy as inflation persists - IMF urges Nigeria

The International Monetary Fund (IMF) has called on Nigerian authorities to maintain a tight monetary policy in order to bring inflation under control and strengthen the country’s economic resilience.

Axel Schimmelpfennig, the IMF’s mission chief for Nigeria, made the recommendation in a statement released on Friday following a two-week consultation visit to Lagos and Abuja. The visit, which took place from April 2 to 15, was part of the IMF’s 2025 Article IV Consultations with Nigeria.

In his remarks, Schimmelpfennig acknowledged that the Nigerian government had made “important strides” in stabilising the economy. He noted that financing of the fiscal deficit by the Central Bank had been discontinued, fuel subsidies removed, and the operations of the foreign exchange market had shown improvement.

However, he was quick to point out that these gains had not yet translated into widespread benefits for the population, as poverty and food insecurity remained pressing concerns.

“Although reforms since 2023 have better positioned the Nigerian economy to weather external shocks, the outlook remains fraught with uncertainty,” Schimmelpfennig said. “Elevated global risk sentiment and declining oil prices continue to weigh on economic prospects.”

He explained that while progress had been made, more work was required to build resilience and foster conditions that could spur private sector-led growth. The IMF team was informed that the federal government intended to implement the 2025 budget with consideration for falling international oil prices.

“A neutral fiscal stance would complement monetary policy efforts to bring inflation down,” he said. “It is essential that fiscal savings resulting from the fuel subsidy removal are fully reflected in the budget.”

He further urged that government spending should protect key investments that drive growth, and that efforts to expand and speed up the World Bank-backed cash transfer programme were critical in addressing food insecurity.

“A disciplined approach to monetary policy is essential to firmly steer inflation downward,” Schimmelpfennig added. He commended the Central Bank of Nigeria’s data-driven decision-making, stating that it had served the country well during periods of macroeconomic turbulence.

“Setting a clear disinflation path as an intermediate target could help anchor inflation expectations,” he said, encouraging more predictable policy signalling to bolster investor and consumer confidence.

The IMF’s latest position underlines a cautious but hopeful outlook for Nigeria’s economic trajectory, while reaffirming the need for sustained policy discipline in both fiscal and monetary arenas.