The International Monetary Fund (IMF) has backed the Central Bank of Nigeria’s (CBN) sustained tight monetary policy stance, describing it as a critical tool in managing inflation and safeguarding macroeconomic stability.
In its latest 2025 Article IV Consultation Report on Nigeria, the IMF stated that the CBN’s disinflationary measures are appropriate and should be maintained until inflation expectations are firmly anchored.
The Fund’s Directors expressed broad support for Nigeria’s monetary policy framework while urging continued fiscal and structural reforms to complement these efforts.
“Directors agreed that the Central Bank of Nigeria is appropriately maintaining a tight monetary policy stance, which should continue until disinflation becomes entrenched,” the IMF stated.
Policy Measures and Market Stabilization
At its landmark 300th Monetary Policy Committee (MPC) meeting held on May 20, 2025, the CBN held the Monetary Policy Rate (MPR) at 27.50%. The Cash Reserve Ratio (CRR) remained elevated at 50% for commercial banks and 16% for merchant banks.
These policy tools are designed to tighten liquidity, reduce speculative pressures on the naira, and contain inflation, which has hovered at multi-decade highs in recent years.
The IMF commended the CBN for discontinuing deficit monetization, a practice that previously contributed to inflation, and welcomed the institution’s commitment to strengthening governance as a foundation for transparent inflation targeting.
Forex Reform and Exchange Rate Flexibility
The IMF lauded recent reforms in Nigeria’s foreign exchange (FX) market, highlighting that recent actions have improved price discovery, market liquidity, and investor sentiment.
“The Directors called for implementation of a robust foreign exchange intervention framework focused on containing excess volatility, stressing that the exchange rate is an important shock absorber,” the report added.
They urged Nigerian authorities to gradually phase out capital flow management (CFM) measures, in a carefully timed and sequenced manner, to unlock greater FX market efficiency while reducing distortions.
Fiscal and Structural Reform Recommendations
While supporting monetary tightening, the IMF also emphasized the importance of a neutral fiscal stance, suggesting that government spending should focus on growth-enhancing investments, including infrastructure, agriculture, and social welfare.
The Fund noted significant progress in areas such as tax reform, especially efforts to enhance revenue mobilization and create fiscal space for development projects without compromising debt sustainability.
“Directors commended the advancement of the tax reform bill—an important step in broadening Nigeria’s revenue base,” the IMF said.
On social protection, the IMF encouraged Nigerian authorities to accelerate the rollout of cash transfer programmes to cushion the impact of economic adjustment on vulnerable populations.
Financial Sector, AML Compliance, and Structural Bottlenecks
The report also acknowledged Nigeria’s progress in banking sector stability. Directors welcomed the ongoing recapitalization efforts aimed at increasing banks’ minimum capital, as well as initiatives to promote financial inclusion and deepen capital markets.
They also emphasized the need for robust risk-based supervision, particularly for mortgage schemes, consumer lending, and the growing fintech and crypto sectors.
In line with global compliance standards, the IMF praised Nigeria’s efforts in strengthening its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework but stressed the urgency of addressing remaining gaps to facilitate the country’s exit from the FATF grey list.
What You Should Know
To sustainably boost economic growth, the IMF called on Nigeria to tackle long-standing structural barriers. These include:
- Improving food security
- Enhancing electricity and infrastructure
- Reducing red tape and insecurity
- Expanding healthcare and education investments
- Building resilience to climate shocks
Furthermore, the Fund emphasized the importance of easing constraints on private sector credit to foster entrepreneurship and support inclusive growth.
