IMF Praises Nigeria’s Reforms but Warns of Debt, Oil, and Revenue Risks at World Bank Meetings

Nigeria drew both praise and caution at the 2025 Annual Meetings of the International Monetary Fund (IMF) and World Bank in Washington, as global financial leaders lauded the country’s bold reforms but warned that rising debt costs, oil price volatility, and fiscal fragility could threaten progress.

In its latest World Economic Outlook and Fiscal Monitor, the IMF upgraded Nigeria’s 2025 growth forecast to 3.9%, up from 3.4% in July, citing stronger fundamentals, improved oil production, and growing investor confidence. But the Fund cautioned that “fiscal pressures and growing debt costs” remain key vulnerabilities.

“Nigeria’s policy reforms have been significant — exchange rate unification, subsidy removal, and fiscal coordination are all steps in the right direction,” said Abebe Selassie, Director of the IMF’s African Department. “But the next phase requires policy consistency, revenue efficiency, and credible debt management to ensure these hard-won gains are not reversed.”

Cardoso: Reform momentum must continue

Leading Nigeria’s delegation, CBN Governor Olayemi Cardoso reaffirmed the government’s commitment to sustaining reforms despite domestic challenges.

“We will not allow reform fatigue to set in,” Cardoso told reporters. “This is a marathon, not a sprint — Nigerians will begin to feel the benefits as inflation trends down and growth strengthens.”

He noted that inflation had fallen for six straight months — from above 30% in 2024 to 18.02% in September 2025, its lowest in three years — while the naira has stabilised, with the gap between official and parallel exchange rates narrowing to under 2%. Foreign reserves, he added, now stand at $43 billion, covering more than 11 months of imports.

“Our monetary tightening, exchange rate reforms, and fiscal coordination are showing measurable results,” Cardoso said. “We are strengthening fiscal discipline and aligning public finances with growth and inclusion.”

IMF: Progress real, but fragile

The IMF acknowledged Nigeria’s reform-driven rebound but stressed that vulnerabilities persist.

“Nigeria’s growth resilience reflects supportive fiscal reforms, higher oil output, and improved investor confidence,” said Denz Igan, IMF Research Department Division Chief.

Inflation, the Fund projected, will ease to 23% in 2025 and 22% in 2026, supported by better policy coordination. IMF Financial Counsellor Tobias Adrian described Nigeria’s FX reforms as “a difficult but necessary correction,” noting that a flexible exchange rate would improve competitiveness.

“A depreciating currency is not inherently bad,” Adrian explained. “With credible policy and transparency, it supports exports and investment.”

Debt and fiscal concerns persist

Despite the optimistic outlook, the IMF warned that Nigeria’s fiscal deficit could widen from 2.9% of GDP in 2025 to 3.7% in 2026, driven by higher interest payments and spending pressures.

“Debt servicing is crowding out development spending,” said Davide Furceri, IMF Fiscal Affairs Division Chief. “The focus must shift to better-quality spending and stronger non-oil revenue mobilisation through tax digitalisation and rationalised incentives.”

The report placed Nigeria’s public debt at 39.3% of GDP in 2024, projected to moderate slightly to 36.4% in 2025, assuming disciplined borrowing.

Selassie warned that rising debt service costs across Africa are undermining key sectors.

“Nigeria’s progress is commendable, but debt costs are consuming fiscal space,” he cautioned. “Strong institutions and credible oversight are essential to sustain reforms.”

Oil, illicit flows, and diversification

The Fund also warned that declining oil prices could strain Nigeria’s finances, urging accelerated diversification and tax reform. IMF Managing Director Kristalina Georgieva emphasised the importance of combating illicit financial flows.

“Tracing illicit flows can help plug fiscal leakages that undermine sustainable growth,” Georgieva said. “We’re integrating financial surveillance and anti-money laundering measures to strengthen transparency.”

She also warned that digital currencies and crypto assets could enable evasion if oversight lags behind innovation.

Nigeria’s trade surplus, new policy direction

Cardoso revealed that Nigeria has achieved a trade surplus of around 6% of GDP, driven by export diversification and domestic production. He also disclosed plans to restructure the country’s currency swap deal with China, saying earlier arrangements “did not work well.”

“Now that our currency is more competitive, we’re developing a new framework to make trade settlements mutually beneficial,” he said.

He added that ongoing bank recapitalisation and partnerships with fintechs would make Nigeria’s financial system more resilient.

“Innovation and regulation must progress together,” Cardoso said. “Our fintechs are ambassadors of Nigerian creativity.”

Government pledges inclusive growth

Minister of State for Finance Dr. Uzoka-Anite said Nigeria’s reforms are translating into job creation and youth empowerment.

“We are investing in infrastructure, agriculture, and the digital economy to create jobs — especially for young people and women entrepreneurs,” she stated.

Elumelu: Africa must seize the AI opportunity

At a separate session, Tony Elumelu, Chairman of UBA and Heirs Holdings, urged African governments to leverage Artificial Intelligence (AI) for inclusive growth.

“Africa must leapfrog through AI in agriculture, energy, and healthcare,” he said. “Let’s ensure AI democratises prosperity, not concentrates wealth.”

Final message from Washington

Summing up, Cardoso said Nigeria’s participation projected a message of “credibility, consistency, and confidence.”

“Our story is one of resilience — aligning courage with conviction to build a more competitive, innovative, and inclusive economy,” he said.

IMF chief Georgieva concluded with cautious optimism:

“Nigeria is on the right path. The reforms are difficult but essential. Staying the course will determine how much of today’s progress translates into jobs, prosperity, and hope for tomorrow.”

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