OPINION: Interrogating IMF’s 2026 Article IV Consultation Report On Nigeria

The International Monetary Fund (IMF) has remained an important development partner to Nigeria over the years, providing policy advice, technical assistance, surveillance, and analytical insights aimed at strengthening macroeconomic management. While not all IMF prescriptions have been universally accepted, its Article IV Consultations often offer useful perspectives on the strengths and weaknesses of the Nigerian economy. The 2026 Article IV Consultation Report deserves commendation for acknowledging the significant reforms undertaken by the Nigerian government over the past three years and their contribution to improved macroeconomic stability and resilience.

Indeed, the gains recorded in exchange rate reforms, fiscal consolidation efforts, banking sector recapitalization, reserve accumulation, and improved external balances demonstrate that difficult but necessary policy adjustments have begun to yield results. However, as the IMF rightly observed, these improvements have yet to translate into widespread welfare gains for ordinary Nigerians, many of whom continue to grapple with rising poverty, food insecurity, and a high cost of living.

The Fund’s concerns regarding off-budget spending, complex financing arrangements, and weaknesses in fiscal transparency are particularly relevant. Sustainable economic development requires strong institutions, transparent budgeting processes, credible fiscal reporting, and effective public financial management systems. Investors, development partners, and citizens alike require confidence that public resources are managed efficiently and accountably.

Strengthening fiscal governance will not only improve resource allocation but also reduce waste, and corruption that often undermine macroeconomic stability. Equally commendable is the IMF’s emphasis on strengthening fiscal risk management frameworks, as hidden liabilities and opaque financing structures have historically contributed to fiscal vulnerabilities in many emerging economies.

The recommendation to reduce reliance on portfolio flows with significant rollover risks is equally well-founded. While foreign portfolio investments provide short-term liquidity and help support external reserves, they are inherently volatile and highly sensitive to changes in global financial conditions. Nigeria’s experience has repeatedly shown that sudden reversals of portfolio capital can exert severe pressure on the exchange rate, external reserves, and financial markets.

It is a no-brainer that sustainable economic development cannot be built on speculative capital inflows. Rather, the focus should remain on attracting long-term foreign direct investment into productive sectors such as manufacturing, agriculture, technology, infrastructure, mining, and renewable energy. Such investments create jobs, transfer technology, strengthen domestic productive capacity, and generate more stable sources of foreign exchange earnings.

Similarly, the IMF’s call for stronger supervision of stablecoins and other crypto-assets deserves support. The rapid growth of digital financial assets presents both opportunities and risks. While financial innovation should be encouraged, inadequate regulation could expose the financial system to risks relating to money laundering, terrorism financing, cybercrime, consumer protection failures, and financial instability. Bringing these activities within an appropriate regulatory framework would strengthen market integrity while allowing innovation to flourish responsibly.

In the same vein, Nigeria’s removal from the Financial Action Task Force (FATF) grey list represents a significant achievement that should not be taken for granted. Sustained implementation of anti-money laundering and counter-terrorism financing reforms will be essential in preserving investor confidence, improving Nigeria’s international reputation, and facilitating smoother integration into the global financial system.
The IMF is also correct in emphasizing the importance of structural reforms aimed at promoting inclusive growth and economic diversification. For decades, Nigeria’s excessive dependence on crude oil revenues has exposed the economy to recurrent external shocks. Diversification is therefore not merely desirable but essential.

Governance reforms, improvements in security, expansion of electricity access, modernization of agriculture, infrastructure development, and investments in human capital are all critical components of a sustainable development strategy.
In particular, improving security conditions across the country would unlock agricultural productivity, encourage domestic and foreign investment, reduce food inflation, and stimulate economic activity. Likewise, resolving longstanding electricity challenges would significantly lower production costs, enhance competitiveness, and support industrialization. Investments in education, healthcare, and skills development are equally important because no country can achieve sustained economic transformation without a productive and well-trained workforce.

While the IMF deserves credit for many of its recommendations, some of its policy prescriptions warrant closer scrutiny within the peculiar realities of the Nigerian economy. One such recommendation is the suggestion that additional tax policy measures may be required over the medium term, including possible increases in the Value Added Tax (VAT), extension of VAT to fuel products, rationalization of tax expenditures, reduction of exemptions, and introduction of telecommunications excise duties.

Although the objective of enhancing revenue mobilization is understandable, the timing and context of such proposals raise legitimate concerns. Nigeria is currently experiencing one of the most severe cost-of-living crises in recent history. Households are already contending with elevated food prices, transportation costs, energy costs, housing expenses, and declining purchasing power. Increasing indirect taxes under such circumstances would likely exacerbate economic hardship, weaken consumer demand, and further strain household welfare.
Tax policy must not be evaluated solely through the lens of revenue generation but also through its broader social and economic consequences. Before contemplating additional tax burdens, greater efforts should be directed toward improving tax administration, widening the tax net, reducing leakages, enhancing compliance, and stimulating economic growth, which naturally expands the revenue base. The cheering news is that all these have been addressed in the ongoing tax reforms.

The proposal becomes even more problematic when viewed against the backdrop of the Federal Government’s reported plans to secure a USD5 billion loan from an Abu Dhabi financial institution under terms that reportedly require collateral valued at about 133.3 percent of the loan amount. Such financing arrangements raise serious questions regarding debt sustainability, asset security, and long-term fiscal prudence. While governments often require external financing to bridge fiscal gaps and fund development projects, borrowing should not come at the expense of excessive collateralization that potentially compromises strategic national assets or future fiscal flexibility.

The IMF’s concerns regarding complex financing instruments and fiscal transparency become especially relevant in this context. Nigeria must avoid financing arrangements that may appear attractive in the short term but carry disproportionate long-term risks. Greater transparency regarding loan terms, collateral arrangements, repayment structures, and contingent liabilities is therefore essential.

The IMF’s recommendation that the Central Bank of Nigeria should maintain a tight monetary policy stance until disinflation becomes firmly entrenched also deserves a more nuanced assessment. There is little disagreement with the principle that monetary policy should remain data-driven and responsive to evolving economic conditions. However, Nigeria’s inflation challenge is fundamentally different from the classic demand-pull inflation often addressed through aggressive monetary tightening.

It goes without saying that much of the inflationary pressure confronting Nigeria today is structural and cost-push in nature. Food inflation is heavily influenced by insecurity, climate-related disruptions, logistics bottlenecks, inadequate storage facilities, and low agricultural productivity. Energy costs are affected by fuel prices, exchange rate movements, infrastructure deficits, and global commodity market developments. Transportation costs are driven by poor infrastructure and rising fuel prices.

These factors lie largely outside the direct control of the central bank. Consequently, while monetary tightening may help moderate inflation expectations and stabilize financial markets, excessively restrictive monetary policy risks suppressing investment, increasing borrowing costs, slowing private sector expansion, and constraining economic growth without adequately addressing the root causes of inflation. A more balanced policy mix that combines prudent monetary management with aggressive structural reforms would likely produce better outcomes.

The IMF’s support for scaling up cash transfer programs to address rising poverty similarly warrants reconsideration. Although social protection remains important, evidence from Nigeria’s experience suggests that cash transfers alone have not delivered transformative reductions in poverty. In many cases, implementation challenges, targeting weaknesses, limited coverage, inadequate monitoring mechanisms, and concerns regarding sustainability have undermined effectiveness.

It is common knowledge that poverty in Nigeria is fundamentally linked to unemployment, low productivity, inadequate infrastructure, weak human capital development, insecurity, and limited economic opportunities. Addressing these structural drivers requires investments that generate jobs, expand productive capacity, improve education and healthcare, support small businesses, and enhance agricultural productivity. While targeted social assistance may provide temporary relief for vulnerable households, it should not become the centerpiece of the country’s anti-poverty strategy. Long-term poverty reduction is more likely to be achieved through inclusive economic growth than through recurrent transfer programs.

Equally important is the IMF’s endorsement of a flexible exchange rate regime. While exchange rate flexibility offers advantages in terms of external adjustment and reserve preservation, a completely free-floating exchange rate may not be optimal for an economy such as Nigeria’s, where foreign exchange earnings remain heavily dependent on volatile oil revenues. Sharp fluctuations in global oil prices can generate significant exchange rate volatility, with adverse consequences for inflation, business planning, investment decisions, and overall economic stability.

Under such circumstances, a managed float system may represent a more appropriate framework. Such an approach would allow market forces to determine the broad direction of the exchange rate while permitting measured central bank interventions to smooth excessive volatility and prevent disorderly market conditions. This middle-ground approach recognizes both the benefits of market-based price discovery and the realities of Nigeria’s structural vulnerabilities.

Overall, the IMF’s 2026 Article IV Consultation presents a balanced assessment of Nigeria’s economic situation. The report appropriately recognizes the significant progress made in restoring macroeconomic stability while drawing attention to the persistent challenges of poverty, food insecurity, fiscal transparency, and structural transformation.

Many of its recommendations regarding governance reforms, fiscal accountability, financial sector regulation, economic diversification, security, infrastructure, and human capital development deserve strong support.

Nevertheless, policy prescriptions must always be adapted to local realities. Calls for additional taxation amid severe economic hardship, continued reliance on aggressive monetary tightening despite predominantly structural inflation drivers, expansion of cash transfer programs as a primary anti-poverty tool, and unwavering commitment to a fully flexible exchange rate regime merit further debate.

All said, Nigeria’s development challenge requires a carefully calibrated policy framework that balances macroeconomic stability with growth, social welfare, competitiveness, and structural transformation. The ultimate objective should not merely be the achievement of favorable macroeconomic indicators, but the creation of an economy that delivers broad-based prosperity, rising living standards, and meaningful opportunities for all Nigerians.

-Professor Uche Uwaleke is the Director of the Institute of Capital Market Studies at the Nasarawa State University Keffi and President of the Capital Market Academics of Nigeria