The International Monetary Fund (IMF) has sounded a clear alarm to Nigeria, urging the government to “recalibrate its 2025 budget” in response to the sharp drop in global oil prices. The Fund’s latest Article IV consultation, released Wednesday, underscores the urgent need for Nigeria to adapt its fiscal plans and ramp up social protections as economic headwinds intensify.
Nigeria, Africa’s largest oil producer, had based its 2025 budget on an oil price of $75 per barrel. However, Brent crude futures have fallen to just above $68, creating a significant revenue shortfall and threatening the government’s ambitious spending plans. The IMF warns that this mismatch could widen Nigeria’s fiscal deficit and undermine recent economic gains.
“The international economic environment that Nigeria lives in and operates in is marked by the 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 Schimmelpfennig, IMF Mission Chief for Nigeria.
Despite recent reforms—including the removal of fuel subsidies, a halt to monetary financing of deficits, and improvements in the foreign exchange market—poverty and food insecurity have risen.
The IMF notes that while investor confidence has improved, the benefits have not yet reached ordinary Nigerians.
Economic Outlook and IMF Recommendations
GDP Growth: The IMF projects Nigeria’s real GDP will expand by 3.4% in 2025, buoyed by a new domestic refinery, higher oil production, and robust services.
Inflation: Inflation is expected to remain high but could moderate with sustained tight macroeconomic policies and easing retail fuel prices.
Fiscal Deficit: Fiscal pressures are likely to persist due to rising debt service costs and limited revenue mobilization, requiring urgent fiscal consolidation and enhanced revenue generation.
Social Protection: The IMF strongly urges Nigeria to scale up cash transfers and social safety nets to shield its most vulnerable citizens from the impact of economic shocks.
“Turning to our policy messages, the key challenge now is to tackle high poverty and food insecurity,” the IMF emphasized.
Critical Fiscal Challenges Ahead
Analysts highlight that Nigeria’s 2025 budget faces multiple hurdles:
Revenue generation is improving but the ambitious ₦36.35 trillion target is unlikely to be met due to oil revenue constraints and a low tax base.
Debt sustainability remains a concern, with debt-to-GDP ratios above recommended thresholds and a proposed fiscal deficit exceeding statutory limits.
Persistent inflation and exchange rate volatility continue to strain household incomes and business planning.
Quote of the Day
“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.”
As Nigeria navigates these turbulent economic waters, the IMF’s message is unequivocal: swift fiscal recalibration and targeted social support are essential to safeguard stability and protect the nation’s most vulnerable citizens. The coming months will test the government’s resolve and ability to adapt to a rapidly changing global landscape.
