The International Monetary Fund (IMF) has called on Nigeria to demonstrate greater fiscal discipline and prudent expenditure following recent economic reforms that have enabled the country to improve its revenue generation and create fiscal space.
This advice was delivered during a Fiscal Monitor press briefing held at the ongoing 2025 IMF/World Bank Spring Meetings in Washington, D.C., on Wednesday.
Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department, emphasized the urgency for countries like Nigeria to focus on building financial buffers while navigating challenging economic trade-offs in a volatile global environment.
A Call for Fiscal Prudence and Responsibility
Gaspar noted that many governments, including Nigeria’s, are now facing difficult policy decisions as they work to stabilize their economies amid persistent global uncertainties. He advised that maintaining credibility and fiscal sustainability should be top priorities.
“There is an urgent need for fiscal authorities and governments to build buffers,” he said. “Governments must act decisively as they are confronted with painful policy trade-offs.”
He further underscored the need for leaders to invest their political capital in policies that foster confidence and trust, which he said begins with ensuring their own domestic financial structures are sound.
“This is especially important in a situation that tests the resilience of individual economies—not to mention the entire international system,” Gaspar warned.
Three Key Fiscal Priorities Outlined
Outlining what he described as essential pillars for sound fiscal policy, Gaspar listed three major priorities:
- Policy Alignment: Fiscal policy must be coordinated with broader macroeconomic strategies.
- Debt Management and Shock Preparedness: Countries should aim to reduce public debt and rebuild fiscal buffers. This involves adopting credible medium-term frameworks that enable governments to respond effectively to unexpected economic shocks.
- Sustainable Growth: Fiscal strategies should be tied to structural reforms that promote economic potential and reduce vulnerabilities.
He emphasized that fiscal policy must act as an “anchor” of economic stability and confidence.
“Fiscal policy must be an anchor for confidence and stability that contributes to a competitive economy—delivering growth and prosperity for all,” Gaspar stated. “Finance ministers must build trust, tax fairly, spend wisely, and take the long term into account.”
Nigeria Commended for Difficult Reforms, But More Work Needed
Speaking specifically about Nigeria, Davide Furceri, Division Chief in the Fiscal Affairs Department of the IMF, acknowledged the efforts of the Nigerian government in implementing painful but necessary reforms that have improved fiscal performance.
“Nigeria managed to do a very difficult reform that was important in delivering fiscal savings,” Furceri said at the briefing.
Although Furceri did not specify which reform he referred to, analysts believe he was pointing to the removal of fuel subsidies and foreign exchange unification policy initiated by President Bola Ahmed Tinubu’s administration.
Furceri, however, cautioned that beyond creating savings, Nigeria must now focus on optimizing how it spends those funds.
“The country needs to ensure that its spending is efficient and targeted. There’s a need to scale up investment in social protection, education, and infrastructure while improving domestic revenue mobilization,” he added.
Revenue Mobilization and Targeted Investment Essential
The IMF officials urged Nigeria to invest its growing revenues into sectors that can deliver long-term benefits for citizens and reduce poverty. These include healthcare, education, social safety nets, and critical infrastructure projects.
Improved revenue mobilization remains a recurring recommendation by the IMF. The organization has often emphasized Nigeria’s low tax-to-GDP ratio—currently below 10 percent—as a key area for policy reform.
To this end, Furceri reiterated the importance of strengthening tax systems, enhancing compliance, and broadening the tax base without placing undue burden on low-income households.
Local and Global Contexts Shape Economic Outlook
The IMF’s advice comes at a time when Nigeria, like many emerging economies, is grappling with inflation, currency devaluation, and public debt challenges. The country is also trying to recover from the fiscal strain caused by years of low oil prices and heavy subsidy payments.
Gaspar warned that the global economic landscape remains fragile, with geopolitical tensions, supply chain disruptions, and climate-related shocks posing continuous threats.
“In such a world, countries must be prepared to act quickly and responsibly. Building buffers now is the insurance policy that economies will need when the next shock comes,” he said.
Government Response Still Awaited
As of the time of filing this report, Nigeria’s Ministry of Finance had not issued an official response to the IMF’s statements. However, insiders say the administration has taken note of the Fund’s recommendations and is working on a revised fiscal framework for 2025–2027, which is expected to reflect some of these suggestions.
President Tinubu’s government has, in recent months, insisted that it is committed to redirecting funds from fuel subsidies to development initiatives, though critics have raised concerns about transparency and impact.
Stakeholders React
Economists and policy experts have welcomed the IMF’s recommendations but stressed the need for accountability and effective execution.
Dr. Tolu Ogunlesi, a public policy analyst, said, “The reforms were painful but necessary. Now the real challenge is ensuring that the savings from these reforms are channeled into areas that will make a tangible difference for ordinary Nigerians.”
He added: “Boosting tax revenue shouldn’t mean squeezing the poor—it means bringing more people into the formal economy, closing loopholes, and enforcing compliance among high-income earners and corporations.”
Conclusion
With renewed attention from global financial institutions, Nigeria finds itself at a crucial fiscal crossroads. Having made hard economic decisions to stabilize its finances, the country must now ensure that its newly created fiscal space is used wisely.
The IMF’s call for prudent spending, revenue expansion, and structural investment offers a roadmap—but success will depend on execution, transparency, and political will.
