The International Monetary Fund (IMF), in its recently published 2025 Article IV Consultation for Nigeria, assessed the government’s economic policies and reforms over the past two years. The major reforms thus far include the full removal of fuel subsidies, liberalization of the FX market, tighter monetary policy, and, more recently, a tax law overhaul. According to the IMF, these reforms have contributed to greater macroeconomic stability and strengthened the economy’s capacity to absorb shocks, thereby helping to restore investors’ confidence. Evidently, there have been increased FPI flows, upgrade in Nigeria’s sovereign credit ratings by Moody’s, and successful issuance of a Eurobond.
Assessment of the Stage of the Reforms
The IMF highlighted that the economy grew by 3.4% in 2024, driven by strong performance in the non-oil sector and a modest recovery in oil production. The non-oil sector led the pack, benefiting from the liberalization of the FX market, which enabled businesses to access foreign exchange for importing critical raw materials and machinery, while exporters gained better opportunities to export their goods.
Owing to the CBN’s tight monetary policy stance and improved forex stability, inflation also eased to 22.97% in May 2025. These reforms have enhanced market transparency, further strengthening investors’ confidence. Supporting this is the successful re-entry into the Eurobond market and rising portfolio inflows.
Analysis of the Reforms
On the fiscal front, the IMF observed stronger revenue performance, driven by higher oil revenues and improved non-oil tax collections, both supported by FX liberalization. The fiscal deficit narrowed to 4.1% of GDP in 2024, although public debt rose to 53% of GDP, mainly due to currency depreciation following FX reforms. Additionally, interest payments now consume nearly half of federal revenue.
Though the four tax bills recently assented to by the government were not assessed by the IMF but it is a step in the right direction in improving the fiscal development. A more comprehensive evaluation will give a better assessment of the economy. However, while applauding these reforms, the IMF stressed the importance of better budget execution and targeted spending to ensure long-term fiscal sustainability.
The Fund commended the CBN for its commitment to monetary tightening and its efforts to restore policy credibility. Although inflation remains elevated, the IMF recommended a gradual transition to a formal inflation-targeting regime to be supported by greater central bank independence and stronger communication strategies. On the exchange rate, the IMF encouraged Nigeria to maintain a flexible regime that allows the currency to adjust to shocks, while intervening only to smooth excessive volatility, especially given shallow FX markets and exposure to short-term flows.
Financial Sector Soundness and Reform Needs
Nigeria’s financial sector was assessed to remain generally stable, with a capital adequacy ratio of 15.3% and improving liquidity. The ongoing recapitalization of banks, implementation of Basel III standards, and enhanced CBN supervision of financial institutions were welcomed. The IMF, however, flagged rising risks from under-regulated non-bank financial institutions and growing exposure to fintech and crypto assets. To this, it urged Nigerian authorities to strengthen oversight frameworks and adopt a more risk-based supervisory approach to maintain system-wide stability.
Structural Weaknesses and Social Gaps
Despite the progress in policy implementation, structural issues continue to constrain Nigeria’s long-term potentials. Persistent inefficiencies in the power sector, low agricultural productivity, and poor execution of public investment projects cast a shadow over inclusive growth. Bureaucratic bottlenecks and inadequate infrastructure are also seen as major barriers to private sector expansion. The IMF emphasized that macroeconomic stabilization must be complemented by robust social investments. With over 46% of Nigerians living below the poverty line and more than 30 million facing food insecurity, the Fund recommended urgent action in scaling up targeted social protection programs and increasing investments in education, health, and agriculture.
Economic Outlook and Risks
Looking ahead, the IMF projects Nigeria’s economy to grow by 3.4% in 2025, supported by improved oil production, private investment, and the benefits of ongoing reforms, particularly in tax administration. Inflation is expected to moderate further in the medium term, aided by stable exchange rates, lower fuel prices, and sustained monetary discipline. However, downside risks persist, including external shocks from oil price volatility, tighter global financial conditions, reform fatigue, and climate-related disruptions.
Conclusion
The 2025 Article IV Review presents Nigeria as a country at a critical juncture. The IMF’s commendation of Nigeria’s reform agenda presents a window of opportunity, reflecting growing international confidence, but also underscores the urgency of sustaining reform momentum. The country is assessed to have taken difficult but necessary steps toward stabilization, yet the dividends of reform will only be realized through consistent implementation, inclusive policymaking, and stronger institutions. With global conditions remaining uncertain and domestic needs pressing, Nigeria must seize this moment to solidify its progress and chart a path toward sustainable and inclusive growth.