The International Monetary Fund (IMF) has backed Nigeria’s decision to ease monetary policy, saying the country has made significant progress in reducing inflation, although the fight against rising prices remains unfinished.
The Fund said Nigeria’s decision to begin normalising interest rates was appropriate after a period of high inflation and elevated borrowing costs, while cautioning that the country’s monetary policy stance remains tight.
Zeine Zeidane, director, African Department, IMF, made the remarks while responding to questions during the release of the Fund’s October 2026 Regional Economic Outlook Update for Sub-Saharan Africa at the ongoing IMF and World Bank Group Annual Meetings in Bangkok, Thailand.
“In the case of Nigeria, they have made significant progress toward lowering inflation, because it has been coming from a high level, and they have a high interest rate,” the official said.
“They decided to normalise the monetary policy to go to something to lower that interest rate, which is appropriate.”
Zeine Zeidane, however, stressed that monetary conditions remained restrictive, indicating that the easing of interest rates does not mean the inflation challenge has been fully resolved.
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The comments come as policymakers weigh the need to support economic activity against the risk that renewed increases in energy, transport and other import costs could undermine progress in controlling inflation.
In its regional outlook update, the IMF warned that rising fuel and transport costs, alongside more expensive fertiliser, could put renewed pressure on consumer prices and food security across sub-Saharan Africa.
The Fund projected median inflation in the region to rise from 3.4 percent in 2025 to 4.3 percent in 2026 and five percent in 2027.
The renewed inflation risks could complicate monetary policy decisions, particularly for countries facing higher import bills and limited fiscal capacity to cushion households against rising living costs.
The IMF said monetary tightening might be necessary in many countries to prevent temporary price increases from persistent inflation, while exchange-rate flexibility could help absorb external shocks and preserve foreign exchange reserves where countries’ exchange-rate regimes permit.
Nigeria has undertaken major economic reforms, including foreign exchange market liberalisation and the removal of petrol subsidies, alongside tight monetary policy aimed at restoring macroeconomic stability.
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These measures have helped strengthen the country’s policy framework, although the impact of reforms on household welfare and the cost of living remains a key concern.
The IMF’s position suggests that while lower interest rates could provide some relief to borrowers and support economic activity, the pace of further monetary easing would need to take account of inflation developments and risks to price stability.
The Fund also emphasised the importance of protecting vulnerable households through targeted support rather than broad-based subsidies, which can impose significant costs on public finances.
It argued that governments should direct limited resources towards those most in need while preserving fiscal stability and productive investment.
For Nigeria, the policy challenge is to sustain the progress made in reducing inflation without undermining the broader recovery or allowing renewed price pressures to erode household purchasing power.
The IMF’s remarks did not prescribe a specific interest-rate decision for the Central Bank of Nigeria, but underscored the need to balance economic recovery with continued vigilance against inflation.
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