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Nigeria economic reforms have improved investor sentiment but the nation’s finances are being hurt by lower oil prices that will widen its budget deficit this year, said the International Monetary Fund (IMF).
Africa’s biggest crude producer could see its fiscal deficit reach 4.7% of gross domestic product (GDP) in 2025 from 4.1% in 2024, according to IMF staff projections released on Wednesday.
“The 2025 budget was based on optimistic hydrocarbon revenue projections, even before the price decline since April,” the IMF said. “Absent policy actions, the fiscal deficit in 2025 would exceed budget expectations.”
Nigerian lawmakers approved a 55 trillion naira ($35.9 billion) spending plan in February based on an oil price of $75 per barrel and output of 2.06 million barrels per day. Prices have since fallen below $70 and crude production has averaged about 1.5 million barrels a day.
The IMF in its report recommended Nigeria adopt a ‘neutral fiscal stance” to safeguard economic stability that cuts spending and focuses investment on projects that make the biggest contributions to growth and employment.
But it also urged the government to speed up cash transfers to the poor, who’ve been hurt by high inflation stemming from currency and fuel-subsidy reforms which the Washington-based lender has supported.
Axel Schimmelpfennig, the IMF’s mission chief for Nigeria, later said the finance minister was working to trim spending and boost revenue and if those measures succeed the country “will get back to a place where the deficit is roughly the same percentage as last year.”
The IMF forecast Nigerian GDP to grow 3.4% in 2025, the same as last year, and sees it expanding around 3.5% a year over the medium term.
That would be beneath the pace needed to quickly reduce poverty in the West African nation, which afflicts almost half the population, the IMF said.
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