The International Monetary Fund (IMF) has backed the Central Bank of Nigeria’s (CBN) monetary policy adjustment, describing it as appropriate amid declining inflation.
The Director of the IMF’s African Department, Zeine Zeidane, said this at the African Department newd briefing during the ongoing IMF/World Bank Annual Meetings in Bangkok, Thailand.
Zeidane said that Nigeria had made significant progress in reducing inflation, creating room for the CBN to normalise monetary policy without adopting an accommodative stance.
He said that the adjustment would lower the real interest rate but stressed that the overall monetary policy stance remained tight.
Zeidane said that the adjustment did not amount to monetary easing, the CBN’s overall policy stance remained restrictive.
Beyond monetary policy, he highlighted improvements in Nigeria’s macroeconomic conditions, supported by higher oil prices, increased foreign exchange receipts and rising external reserves.
Zeidane urged the government to increase non-oil revenue to create fiscal space for critical sectors, including education, healthcare and infrastructure.
He said that Nigeria’s large market, young entrepreneurs and technology-savvy population offered significant investment opportunities if structural constraints were addressed.
Zeidane stressed the need for reforms in governance, the business environment and economic integration to accelerate growth and create jobs.
On energy subsidies, he advised the government to direct savings from subsidy reforms towards vulnerable households rather than maintaining broad-based support.
Zeidane said that energy subsidies often benefited wealthier segments of the society disproportionately, limiting the support available to people who needed it the most.
He urged governments to phase out subsidies gradually and ensure the resulting savings were targeted at vulnerable households.
The Deputy Director of the IMF’s African Department, Montfort Mlachila, said that improved external conditions had strengthened Nigeria’s growth prospects.
He said that higher oil prices had increased foreign exchange receipts and reserves, contributing to improved liquidity in the economy.
Mlachila said that the IMF projected Nigeria’s economy to grow by 4.2 per cent this year, up from 4.0 per cent in 2025, with growth expected to reach 4.3 per cent next year.
He attributed the projected growth partly to favourable external conditions, adding that the services sector remained the main driver of economic activity.
Mlachila also said that declining inflation since 2025 had improved Nigeria’s macroeconomic conditions and foreign exchange availability.
He said that sustaining stronger growth would require deeper structural reforms, improved domestic revenue mobilisation and a better business environment to attract private investment.
In its latest Regional Economic Outlook, the IMF said that foreign exchange market reforms and fuel subsidy reductions in Nigeria and Ethiopia had supported more stable macroeconomic conditions.
The report added that the improvements in fiscal revenue and monetary frameworks had created a clearer basis for private investment across the region.
NAN