The International Monetary Fund (IMF) has advised the Federal Government to maintain its current reform agenda and avoid reversing fuel subsidy removal, warning that poverty and food insecurity remain widespread despite improvements in Nigeria’s economic stability.
In its 2026 Article IV consultation report released on Tuesday, the Washington-based institution said reforms introduced over the past three years have strengthened Nigeria’s economic resilience and improved key macroeconomic indicators. However, it cautioned that rising global food and fuel prices could intensify inflationary pressures and further strain household incomes.
“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 stated.
The fund projected Nigeria’s economy to expand by 4.1 percent in 2026, slightly above the estimated 4 percent growth recorded in 2025.
Despite the positive outlook, the IMF noted that inflation remains a major concern, pointing out that consumer prices rose to 15.4 percent in March after months of decline.
“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 report added.
The IMF recommended that fiscal policy in 2026 should focus on maintaining economic stability while safeguarding investment in infrastructure and social programmes. It also urged the government to resist election-related spending pressures and uphold its commitment not to restore fuel subsidies.
The institution further raised concerns over a proposed $5 billion total return swap arrangement with an international bank contained in the draft 2026 budget framework.
According to the IMF, the deal would require the government to provide 133 percent collateral in domestic securities, creating exposure to margin calls if the naira weakens.
“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 IMF said.
The organisation warned against relying on complex financing mechanisms, saying such arrangements could increase fiscal vulnerabilities and limit 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,” it noted.
The IMF also urged the government to adopt realistic capital expenditure targets and maintain prudent fiscal management.
On monetary policy, the fund endorsed the Central Bank of Nigeria’s tight policy stance, saying positive real interest rates remain necessary in the face of persistent inflation risks.
It further encouraged authorities to sustain exchange rate flexibility, reduce dependence on short-term portfolio inflows, remove remaining foreign exchange restrictions and deepen reforms aimed at attracting foreign direct investment.
The IMF added that improvements in governance, security, power supply, agriculture, infrastructure and human capital development remain crucial for achieving stronger and more inclusive economic growth.