The International Monetary Fund (IMF) has advised the Nigerian government to maintain tight monetary policy stance to combat the surging inflation as well as fiscal discipline to ensure the nation’s sustainable economic growth.
The latest recommendation of the Washington D.C-based development finance institution is part of the concluding remarks following the IMF’s annual Article IV two-week consultation meetings with Nigerian authorities in Abuja and Lagos.
The IMF Mission Chief for Nigeria, Axel Schimmelpfennig, noted the country’s recent economic reforms but harped on the need for continued tight monetary measures to rein in inflation that continued to vitiate the citizens’ purchasing power.
The development finance expert said: “The Central Bank of Nigeria’s data-driven approach has been appropriate, but maintaining a tight monetary policy remains critical to anchor inflation expectations.”
Nigeria’s headline inflation surged to 34.80 per cent in December 2024 under the old base year before the National Bureau of Statistics (NBS) rebased the consumer price index (CPI) in January 2025, revising the rate downward to 24.48 per cent.
To anchor inflation expectations, the Central Bank of Nigeria (CBN) has continued to maintain a hawkish monetary policy stance, keeping the Monetary Policy Rate (MPR) unchanged at 27.50% at its February 2025 meeting. The committee also retained the asymmetric corridor at +500/-100 basis points, demonstrating its commitment to curbing inflation, despite the temporary relief suggested by the rebased figures.
The MPC’s decision reflected caution against premature policy easing, indicating the need for sustained disinflation before considering rate cuts. Apart from retaining the MPR, the apex bank has continued liquidity tightening measures, including aggressive Open Market Operations (OMO) and stringent cash reserve requirements, as it continued to urge the fiscal authorities to address supply-side constraints to complement monetary efforts in taming inflation.
In its latest recommendations, the IMF cautioned that while Nigeria had achieved some progress through fiscal reforms such as the fuel subsidy removal and foreign exchange market adjustments, these gains had not sufficiently translated into relief for ordinary Nigerians.
According to the Fund, food insecurity remains particularly acute, with rising prices putting additional strain on households grappling with economic hardship.
On fiscal policy, the IMF stressed the imperativeness for the Nigerian government to maintain discipline, especially in light of declining global oil prices that could pressure government revenues.
For instance, the IMF officials recommended that savings from subsidy removals be channelled into critical investments and expanded social safety nets, particularly cash transfer programs to help vulnerable populations cope with food price shocks.
The consultations involved high-level meetings with Finance Minister Wale Edun, Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, and other key policymakers while the discussions focused on policy coordination to navigate global economic uncertainties while protecting Nigeria’s fragile recovery.
The IMF team also engaged with private sector representatives, labour unions and civil society organisations to assess broader conditions.
While recognising Nigeria’s improved economic positioning since the 2023 reforms, the IMF maintained that sustained policy discipline would be crucial in the coming months to manage inflation, support growth and mitigate the severe impact of food insecurity on the population.
In addition, the Fund recommended that Nigerian authorities should consider announcing a clear disinflation path to help guide market expectations and reinforce policy credibility.
With Nigeria contending with multiple economic headwinds, including global crude oil market volatility and domestic price pressures, the IMF’s assessment underscored the delicate balancing act required to maintain stability while addressing urgent social needs.
It projected that the months ahead would be critical in determining whether current policies can deliver measurable relief to both the economy and Nigerian households.
