The International Monetary Fund (IMF) has advised Nigeria to adjust its 2025 budget in response to falling oil prices and increase support for its poorest citizens through cash transfers to help fight hunger and poverty. In its regular "Article IV" review of Nigeria's economy, the IMF noted that while the country's economy is growing, the pace is too slow when measured per person, and inflation remains high. It expects Nigeria's economy to grow by 3.4% in 2025 and 3.2% in 2026.
Nigeria, being Africa's top oil producer, is feeling the pressure from weak global oil prices, which were around $68 per barrel on Wednesday.
"The international economic environment that Nigeria lives in and operates in is marked by very, very large uncertainty, and in particular, international oil price volatility impacts Nigeria directly through the fiscal and the external balances as well as inflation," said Axel Schimmelpfenning, the Fund's mission chief for Nigeria.
Given these uncertainties, the IMF stressed the need for the government to prepare for possible shocks by building financial buffers.
The Nigerian government has been giving direct cash support to its poorest citizens since 2007, but it has had trouble expanding the program due to limited data and the fact that many people don't have bank accounts.
The 2025 budget is based on an assumed oil output of 2 million barrels per day and an oil price of $75 per barrel. While oil prices brief jumped due to tensions in the Middle East, they have come under pressure again due to OPEC+'s focus on increasing market share instead of cutting supply.
"Achieving the government's 2025 budget targets will require additional measures, largely reflecting the drop in oil prices compared to when the budget was approved," Schimmelpfennig said in a briefing to journalists.
"Keeping the fiscal deficit at a percent of GDP unchanged compared to 2024, will be important to support the fight against inflation," he added.
The IMF said that Nigeria could raise more local revenue by saving on fuel subsidies and improving tax collection. It also advised the Central Bank to keep interest rates high enough to help bring inflation down.
Savings from fuel subsidies are expected to reach about 2% of the country's GDP in 2024.
On Nigeria's currency and foreign exchange system, Schimmelpfennig said recent government and central bank reforms have made a positive difference.
"When we talk to investors, they're happy. They can invest in Nigeria, and when they want, they can bring their proceeds out," he said. "You look at the parallel market and the official rate, they're aligned."
