IMF says Nigerians still face hardship despite macroeconomic stability

…signals tax rate increases likely needed beyond 2026
…backs CBN’s tight monetary stance until disinflation is entrenched and inflation expectations anchored
…urges tighter crypto oversight while flagging rising banking risks

Nigeria has made significant progress in restoring macroeconomic stability over the past three years, but millions of its citizens continue to face acute hardship, with poverty and food insecurity remaining elevated despite improving external and fiscal buffers, the International Monetary Fund (IMF) has said.

In its 2026 Article IV consultation released Tuesday, the Fund said policy reforms—including the removal of fuel subsidies, tighter monetary conditions, exchange rate liberalisation, and efforts to reduce deficit monetisation—had strengthened macroeconomic resilience and helped rebuild investor confidence.

Nigeria has also regained access to international capital markets, while external buffers have improved notably.

However, the IMF stressed that these gains have yet to translate into broad-based improvements in living standards.
“Still, conditions for many Nigerians remain difficult,” the Fund said, noting that poverty is estimated at 63% under the national poverty line, while about 27 million people experienced food insecurity in the second half of 2025.

The report comes at a time when Nigeria is navigating renewed inflationary pressures driven by higher global fuel, food and fertilizer prices, which are simultaneously improving export earnings but worsening domestic price conditions.

Inflation, which had been on a steady downward trend for more than a year, rose to 15.69 percent year-on-year in April 2026 after external shocks filtered into domestic fuel and food prices.

The IMF projected growth of 4% in 2025 and 4.1% in 2026, but said activity would remain constrained by higher transport and food costs, alongside structural weaknesses in productivity and infrastructure.

While inflation is expected to remain elevated in the near term, the Fund said the disinflation path is likely to resume in the second half of 2026 as policy tightening and base effects take hold.

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It noted that risks remain skewed to the downside, including volatile global commodity prices and persistent domestic security challenges that continue to weigh on agriculture, investment and oil output.

On fiscal policy, the IMF said Nigeria should maintain a neutral stance in 2026 to support macroeconomic stability and help anchor disinflation, while ensuring that priority and social spending are preserved.

It noted that while revenue performance has improved, oil receipts have underperformed budget assumptions, and fiscal pressures remain elevated.

It also signaled that deeper revenue reforms will be required over time, particularly as spending needs rise, including politically sensitive tax measures.

“Domestic revenue mobilization is appropriately focused on administrative gains in 2026, while tax rate increases will likely be needed over the medium term,” the IMF said, adding that any additional fiscal space should be directed toward priority spending, including expanded social protection.

It said Nigeria’s current social protection framework, while expanded in recent years, remains insufficient given the scale of need, and urged authorities to ensure sustainable funding for targeted transfers.

The Fund also called for stronger fiscal discipline, warning that off-budget spending, complex financing arrangements and weak reporting practices continue to complicate transparency and accountability. It urged reforms to strengthen public financial management, improve budget execution, and enhance fiscal risk oversight.

The IMF said the Central Bank of Nigeria( CBN) should maintain a tight, data-dependent stance until inflation is decisively contained and expectations are firmly anchored.

“The Central Bank of Nigeria should maintain a tight monetary policy stance with a data-dependent approach until disinflation is entrenched and inflation expectations are anchored,” it said.

The Fund also encouraged faster progress toward inflation targeting, stronger communication, and improved monetary transmission to reinforce policy credibility.

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Nigeria’s external position continued to strengthen in 2026, with gross reserves rising over $50 billion as at 5th of June, supported by a current account surplus, portfolio inflows and Eurobond issuance. Net reserves also increased sharply, reflecting improved external resilience and FX market functioning.

On the financial sector, the IMF welcomed recent bank recapitalisation efforts, saying the system remains broadly stable. However, it warned of rising non-performing loans and increasing linkages between banks and sovereign exposure, which could amplify risks in a stress scenario.

It urged authorities to accelerate implementation of Basel III standards, including capital buffers and liquidity coverage ratios, and to strengthen supervisory frameworks to address emerging vulnerabilities.

The Fund also stepped up its warning on financial innovation risks, calling for stronger oversight of digital assets.

It said stablecoins and other crypto-asset activities should be brought fully within the regulatory perimeter to safeguard financial integrity, monetary control and investor protection as adoption expands.

Nigeria’s recent removal from the Financial Action Task Force grey list was welcomed, with the IMF noting that sustained compliance with anti-money laundering and counter-terrorism financing standards will be key to preserving credibility and investor confidence.

Beyond macroeconomic stabilisation, the Fund stressed the need for deeper structural reforms to sustain growth and improve living standards.

It pointed to persistent challenges in electricity supply, transport infrastructure, agriculture, human capital and governance as key constraints on long-term development.

Security risks were also highlighted as a major drag on investment and output, particularly in farming regions and oil-producing areas, where disruptions continue to weigh on production and incomes.

The IMF said improving macroeconomic statistics, governance frameworks and institutional capacity will be critical to effective policymaking, while also noting that climate considerations are becoming increasingly relevant for resilience planning.

While acknowledging policy progress, the Fund warned that gains remain unevenly distributed and that many Nigerians have yet to benefit from improved macroeconomic conditions.

“Poverty and food insecurity are likely to worsen in the current external environment,” it said, underscoring the need for stronger social protection and sustained reform momentum to ensure stability translates into inclusive growth.