Economic experts have reacted to a recent report by the International Monetary Fund (IMF) suggesting Nigeria’s economic outlook is marked by significant uncertainty.

While agreeing with the report, experts called for a proactive step on the part of the government to hedge against the uncertainty triggered by declining oil prices and the ongoing tariff war.

 

The IMF had hinged its report on “elevated global risk sentiment and lower oil prices” which, it noted, impact the Nigerian economy.

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The IMF’s statement was the observation of its staff who recently completed their 2025 Article IV Mission to Nigeria.

The IMF Article IV mission is an annual visit where the designated staff assesses a member country’s economic health and provides policy recommendations.

 

The visiting team usually collects data, and discusses economic developments with officials while the findings are then presented to the IMF Executive Board.

The team, led by Axel Schimmelpfennig, IMF mission chief for Nigeria, visited Lagos and Abuja on April 2–15 to hold discussions for the 2025 Article IV Consultations with Nigeria.

They met with the Minister of Finance and Coordinating Minister of the Economy, Wale Edun; the Minister of Agriculture and Food Security, Abubakar Kyari, the Central Bank of Nigeria Governor, Yemi Cardoso, senior government and CBN officials, the Ministry of the Environment, the private sector, academia, labor unions and the civil society.

 

In a statement after the mission, the team noted that the Nigerian authorities had taken important steps to stabilize the economy, enhance resilience, and support growth.

 

According to the team, these reforms have put Nigeria in a better position to navigate the external environment.

It, however, observed that “the macroeconomic outlook is marked by significant uncertainty. Elevated global risk sentiment and lower oil prices impact the Nigerian economy.”

“Macroeconomic policies need to further strengthen buffers and resilience, reduce inflation and support private sector-led growth,” the IMF said in the report.

 

‘Fuel subsidy removal, other reforms yet to benefit Nigerians’
The IMF observed that the gains of fuel subsidy removal and other reforms being embarked upon by the government had not benefitted Nigerians.

 

The IMF said, “The authorities communicated to the mission that they will implement the 2025 budget in a manner that is responsive to the decline in international oil prices. A neutral fiscal stance would support monetary policy to bring down inflation.

“To safeguard key spending priorities, it is imperative that fiscal savings from the fuel subsidy removal are channeled to the budget.

“In particular, adjustments should protect critical, growth-enhancing investment, while accelerating and broadening the delivery of cash transfers under the World Bank-supported program to provide relief to those experiencing food insecurity.”

 

The IMF also added that in line with the briefing received from officials, “the financing of the fiscal deficit by the central bank has ceased, costly fuel subsidies were removed, and the functioning of the foreign exchange market has improved.”

“Gains have yet to benefit all Nigerians as poverty and food insecurity remain high,” the Bretton wood institution said.

 

The statement added, “Elevated global risk sentiment and lower oil prices impact the Nigerian economy. The reforms since 2023 have put the Nigerian economy in a better position to navigate this external environment. Looking ahead, macroeconomic policies need to further strengthen buffers and resilience, while creating enabling conditions for private sector-led growth.”

 

‘Tight monetary policy required to tackle inflation’
The IMF staff called for a neutral fiscal stance to support monetary policy to bring down inflation, adding, “A tight monetary policy stance is required to firmly guide inflation down.

“The Monetary Policy Committee’s data-dependent approach has served Nigeria well and will help navigate elevated macroeconomic uncertainty. Announcing a disinflation path to serve as an intermediate target can help anchor inflation expectations.”

 

Nigeria must be proactive – Economist Muda Yusuf
Economist and Chief Executive Officer of the Centre for Promotion of Private Enterprises (CPPE), Dr Muda Yusuf, said the IMF’s advisory was a call for the managers of Nigeria’s economy to be proactive “to forestall any serious shock on the economy, especially shocks resulting from the current tariff war.”

 

He said: “Nigeria’s economy is highly vulnerable to development around commodity prices particularly crude oil price. We are vulnerable because we are highly dependent on crude oil.

“So if as a result of the current developments in the global economy, there’s a major global downturn, if the current decline in crude oil prices persist, then it has very serious implications for our foreign exchange earnings and revenue.

“So it’s important for us to think on how to adjust to this development so that the shock on the economy would not be too much.

“I think that’s the context in which the IMF was advising Nigeria’s economic managers and I agree perfectly with their proposition.”

 

He, however, expressed optimism that the federal government was responding to global economic development.

Yusuf disagreed with the IMF on the call for further tightening of the monetary policy which could see the interest rate increase further.

 

According to the economist, any further tightening could strangulate businesses already burdened by high interest rates by as much as 35 per cent.

He called for a scenario plan to appropriately respond to the global economic volatilities triggered by the tariff war.

 

He said, “In any event the government through the Finance Minister has also hinted at plans to respond to current global developments especially the elevated risk around crude oil prices and implications for our revenue, implication for our exchange rate.

“You know that our crude oil is benchmarked at $75 per barrel. Now we have seen it dropped to around $64, at a point it was $60 per barrel. So these are very challenging scenarios and I think the government is already taking steps to respond to it.

“This is the time to begin to look at possible scenarios and have a kind of scenario plan to determine how we are going to manage the budget, maybe scaling down on whatever or vary the assumptions so that we have a budget that is a lot more realistic, a budget that would not pose any major macroeconomic risk.

“We don’t want to witness a situation of high fiscal deficits which may create a major upset in the macroeconomic environment.

 

“I think it’s very good advice that the IMF has given. However I’m not in support of the proposal that the monetary authority should position itself to continue to tighten monetary policy.

“Already the interest rate is about 30 per cent. In some cases it’s about 35 per cent. In extreme cases it’s getting close to about 40 per cent for businesses, how much more tightening do we still want to do?

“I don’t understand this recommendation of the IMF that we should continue to tighten. Our cash reserve ratio (CRR) is 50 per cent, it’s the highest in the whole world.

“Our MPR is 27.5 per cent, it is one of the highest in the whole world. So what more tightening is the IMF suggesting? I don’t understand.

 

“We have better policy options around the fiscal policy environment rather than the monetary policy environment. We don’t want to see any further tightening of monetary policy otherwise we completely strangulate the financial intermediation role of our banking system. We don’t want that to happen and the interest rate is bad and prohibitive enough that people are borrowing at 35 per cent.”

 

‘Gains of subsidy removal should be channeled to improve business environment’

However, he advised that the gains of the fuel subsidy removal should be channeled towards improving the business environment in a way to reduce the cost of production. He said cash handouts should be de-emphasised as it is prone to corruption and abuse.

 

He added, “Of course the IMF also made a very valid proposition about channeling the gains of the fuel subsidy removal to improve the environment for businesses but more importantly to improve the conditions of living of the ordinary people particularly the vulnerable segment of the society, that’s extremely very important.

 

IMF not far from truth – Paul Alaje
Another foremost economist, Paul Alaje, said the IMF’s position on Nigeria’s macroeconomic outlook is not far from the truth.

 

In a chat with our correspondent, the Chief Economist at SPM Professionals said Nigeria should be looking at going beyond oil to hedge against the present global uncertainties.

 

He said: “IMF is looking far more into the macro environment and it knows that the possible reduction in oil prices are as a result of the global tariff war started by America have significant negative impact on the Nigerian revenue side, if this happens it’s going to have fiscal implication on Nigeria and it may eventually affect government’s ability to discharge its responsibility especially in terms of capital expenditure and by extension recurrent expenditure.

“It calls for worry, the kind of fiscal environment in the reality of what is going on around the world certainly calls for worry, if you look at how much Nigeria has estimated for 2025 budget, I think about $75 per barrel is what Nigeria has estimated, with the variation and you can see we are not doing up to output already, we are not getting the actual output of about 2 million barrels a day and we are also not meeting up with the price then we have a lot of concerns.

 

“IMF is not far from the truth, I saw another agency that said Nigeria environment has been moved from something to stable, I can only but laugh because that report is void of what the true picture is and I hope that in the coming period, those who are rating agencies will go beyond sentiment and declare what the situation is so we can all work at it and get the very best of our Nation.”

 

Alaje said it is high time Nigeria deepened its focus on the non-oil sector of the economy, stating, “We need to go beyond oil, we need to start looking at viable alternatives outside oil and the viable alternatives to my mind include other mineral resources apart from oil because what we have stayed on for a long time has been oil but we have not been able to do that.

 

‘Now is not the time to increase interest rates’

Alaje however advised the CBN to retain the rates for now “because the policy environment is so dicey,” adding, “we have seen Nigeria Bureau of Statistics have rebased and this rebasing or adjustment of methodology has led inflation to shift downward even though it did not reduce but there is a complete shift in inflation curve from 34% to 24%, it went down marginally to 23% and went back up to 24%.

“As a result it would be difficult for us to say that inflation actually reduced in the true sense of it, what we know is that you can tell that inflation is still very high and in conversing in inflation we need to adopt other methodology and using monetary tools, these methods will be rooted on supply strategy that we have not adopted for a long time.”

 

He added, “I agree completely that fiscal savings must be channeled completely towards the national budget, otherwise we will make a mess of the whole thing. It would just be a joke, but when we channel it properly then we can be sure that there is a positive impact on what you have done and I hope that in the coming period NNPCL, among other organizations that are directly affected will follow suit appropriately as the law requires for our country today.”