The International Monetary Fund (IMF) has called on the Central Bank of Nigeria (CBN) to reduce its reliance on what the Fund described as, “expensive portfolio inflows that pose a rollover risk.”
The IMF, which made the call in its latest Article IV Consultation report on Nigeria released on Tuesday, noted that although, “portfolio inflows have resumed,” thus boosting the country’s external reserves, Nigeria should focus on diversifying foreign exchange earnings and accelerating structural reforms that will attract, “more stable Foreign Direct Investment (FDI).”
Specifically, the report said: “Gross international reserves of $46 billion at end-2025 are estimated at 157 percent of the IMF’s Assessment of Reserve Adequacy (ARA) metric, above the 100–150 percent range considered broadly adequate for precautionary purposes.
“Large foreign holdings of Open Market Operations (OMOs) represent roll-over risks and carry elevated yields. Policy priorities should include gradually reducing reliance on OMO-related investment while encouraging a shift toward other domestic assets (government securities, equities), diversifying foreign exchange earnings (including further strengthening remittance inflows through official channels), and advancing structural reforms to attract more stable FDI.”
The Bretton Woods institution commended the reforms introduced by the country’s authorities over the past three years which it said, “have strengthened macroeconomic stability and resilience,” however, noted that, “Poverty reached 63 percent (national poverty line) and 27 million Nigerians are estimated to have faced food insecurity in the fall of 2025.”
It also cautioned that rising global prices of fuel, food, and fertilizer could intensify inflationary pressures and worsen hardship for vulnerable households.
According to the Fund: “Inflation is projected to tick up to 17.0 percent year-on-year at end-2026, from 15.2 percent in 2025, before returning to the disinflation path in the outer years as tight monetary policy is maintained, fiscal discipline is preserved through a neutral fiscal stance, and supply conditions, including a stronger harvest and improved domestic food production.”
Despite persistent inflationary pressures, the Nigerian economy, according to the IMF, is projected to strengthen modestly from 4.0 percent in 2025 to 4.1 percent in 2026, and 4.3 percent in 2027 led by agriculture, real estate, information and communication, and oil and gas.
Although it said that the reforms have led to the country recording improvements in some macroeconomic indicators, the IMF said Nigeria’s consolidated fiscal deficit widened to 4.4% of GDP in 2025.
According to the report, non-oil revenue collections met targets, but oil revenues underperformed budget expectations.
The shortfall was partly offset by lower-than-expected capital expenditure implementation, while some additional capital projects executed outside the formal budget framework were later incorporated through repeal and reenactment bills.
The IMF Executive Board also welcomed Nigeria’s recent tax reforms but noted that additional tax measures may still be required over the medium term, especially to fund expanded cash transfer programmes targeted at vulnerable Nigerians.
In addition, it expressed concerns over off-budget spending and complex financing structures, urging Nigerian authorities to strengthen public financial management systems, fiscal reporting standards, transparency, and accountability mechanisms.
On its outlook for Nigeria, the IMF said: “The uncertain external environment weighs on the outlook and gives rise to risks. The war in the Middle East impacts Nigeria through higher commodity prices and possibly a sustained risk-off sentiment.
“As an oil producer, elevated crude oil and gas prices will boost export and fiscal revenues. At the same time, higher fuel, fertilizer and food prices will push up inflation and likely aggravate poverty and food insecurity. Staff’s projections assume that the war will have limited duration, intensity, and scope, such that disruptions will fade by mid-2026.”
