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The International Monetary Fund (IMF) has urged the Federal Government to introduce targeted cash transfers and temporary income support for vulnerable households to cushion the impact of rising living costs in Nigeria.
The Fund said the measures would help reduce poverty, improve food security and protect low-income households struggling with the high cost of essential goods, particularly food and energy.
The IMF also called for improved public expenditure management and stronger revenue collection, stressing that social protection measures should be implemented alongside fiscal reforms to reduce public debt without worsening economic hardship.
Chief of the IMF Research Department’s World Economic Studies Division, Deniz Igan, made the recommendations during a briefing on the Fund’s World Economic Outlook at the ongoing IMF/World Bank Annual Meetings in Thailand.
Igan noted that despite Nigeria’s economic growth and status as an energy-exporting country, many citizens continued to face high living costs and difficulties meeting their basic needs.
“Although economic growth has held up in Nigeria, given that it is an energy exporter, living costs are still very high, and we are very mindful that the population is suffering,” she said.
She explained that rising prices of essential commodities had placed additional pressure on households because food and energy account for a significant share of household expenditure.
Targeted support for vulnerable households
According to Igan, targeted and temporary financial assistance would help cushion the effects of rising prices on the most vulnerable Nigerians.
“In this environment, we advocate cash transfers and targeted, temporary income support for the most vulnerable households in Nigeria,” she said.
She added that such interventions could help reduce poverty and improve food security while providing immediate relief to households affected by economic pressures.
However, the IMF official stressed that cash transfers alone would not address the broader fiscal challenges facing the country.
She said the government should establish a credible medium-term fiscal framework focused on improving the quality of public expenditure and strengthening revenue collection.
The framework, she explained, would help the government maintain essential social spending while putting public debt on a sustainable downward path.
Monetary policy and inflation
Igan also addressed the challenges confronting central banks when external shocks, such as rising oil prices, push up inflation while simultaneously restricting economic activity.
She explained that such situations require policymakers to balance the need to control inflation against the potential impact of monetary tightening on economic growth.
According to her, an increase in inflation caused by supply-side pressures differs from one driven by strong consumer demand, meaning that policymakers must carefully assess the underlying causes before deciding on an appropriate response.
“This is a classic case of a policy trade-off. Inflation is high, but economic activity is being constrained or reduced by the shock. This is where the central bank needs to manage the trade-off,” she said.
She nevertheless maintained that central banks must remain focused on price stability and ensure inflation returns to its target within the policy horizon, which the IMF typically considers to be two to three years.
Igan added that monetary policy should remain sufficiently restrictive to bring inflation under control, while authorities consider the consequences for economic activity.
She said the appropriate response would depend on the nature of the shock and the circumstances of each economy, including labour-market conditions, prevailing inflation and the economy’s exposure to external pressures.
The IMF’s recommendations highlight the need for Nigeria to combine fiscal reforms and measures to maintain price stability with targeted support for households bearing the brunt of rising living costs.
The Fund maintained that improved spending efficiency, stronger revenue mobilisation and temporary income support could help protect vulnerable citizens while supporting efforts to achieve long-term fiscal sustainability.
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