The International Monetary Fund (IMF) has urged Nigeria to adopt a neutral fiscal stance in 2026, warning that poverty and food insecurity could worsen despite recent macroeconomic gains.
In its 2026 Article IV consultation report, the IMF said reforms over the past three years have improved resilience and strengthened economic outcomes. However, it stressed that many households continue to face severe hardship, with poverty and hunger still widespread.
“Strong reforms over the past three years have yielded improved macroeconomic outcomes and built resilience. Still, conditions for many Nigerians remain difficult. Poverty reached 63 percent (national poverty line) and 27 million Nigerians are estimated to have faced food insecurity in the fall of 2025,” the IMF said.
The fund projected Nigeria’s economy to grow by 4.1 percent in 2026, slightly higher than the estimated 4 percent in 2025, but cautioned that external pressures remain a key risk. It noted that rising global fuel and food prices are already feeding into domestic inflation.
“After being on a declining trend for over a year, inflation nudged up to 15.4 percent year-on-year in March 2026 as the jump in international fuel and food prices started hitting Nigeria,” the fund said.
The IMF advised fiscal restraint, urging authorities to prioritise stability while protecting essential investments in growth and social welfare. It also warned against election-related spending pressures and reaffirmed opposition to any return of fuel subsidies.
Currency and debt concerns
The IMF raised specific concerns over a proposed $5 billion total return swap in Nigeria’s draft 2026 budget framework, cautioning that it could expose public finances to exchange rate and interest rate shocks.
“The arrangement exposes the government to margin calls if the fx value of the naira securities drops (naira depreciation, higher interest rates) and could thus give rise to political constraints on monetary or exchange rate policy,” the institution added.
It further warned that complex financing tools could increase fiscal vulnerabilities and restrict policy flexibility.
“Staff cautions that complex financing instruments that involve high collateral and possible margin calls introduce additional fiscal risks and could give rise to political constraints on monetary or exchange rate policy,” the IMF said.
The fund also urged the federal government to set realistic capital spending targets.
On monetary policy, it backed the tight stance of the Central Bank of Nigeria, saying positive real interest rates remain appropriate amid persistent inflation risks.
It recommended maintaining a flexible exchange rate system, reducing reliance on short-term portfolio inflows, phasing out remaining exchange restrictions, and deepening reforms aimed at attracting foreign direct investment.
The IMF added that structural reforms in governance, security, electricity, agriculture, infrastructure, and human capital development remain essential for stronger and more inclusive growth.
