The International Monetary Fund (IMF) has strongly advised the Central Bank of Nigeria (CBN) to keep its restrictive monetary policy settings active for a prolonged period.
In its annual Article IV economic health assessment published today, the Washington-based lender warned that escalating geopolitical conflicts in the Middle East and a broader global “risk-off” environment are fueling fresh inflationary pressures across the African continent.
While acknowledging the resilience of President Bola Tinubu’s macroeconomic overhauls, the IMF raised strong flags over a recently disclosed $5 billion total return swap agreement structured between the Nigerian government and First Abu Dhabi Bank PJSC.
The Fund cautioned that the opaque offshore balance sheet structure introduces severe fiscal vulnerabilities and poses potential risks to the central bank’s independence.
Interest rate decision
Nigeria’s central bank left its benchmark interest rate at 26.5% last month after a cut at its previous meeting, as policymakers expect a recent uptick in inflation driven by higher energy and food prices because of the Iran war to prove temporary. The fund now expects Nigeria’s annual inflation rate, which stands at 15.7%, to average 16% this year.
Debt swap concerns
The IMF warned that complex financing structures, including a $5 billion total return swap agreement Nigeria entered into with First Abu Dhabi Bank PJSC, could undermine the central bank’s independence in setting monetary policy.
The IMF described the deal as opaque and lacking transparency, cautioning that the “high collateral and possible margin calls introduce additional fiscal risks and could give rise to political constraints on monetary or exchange-rate policy.”
Growth outlook
Despite the fallout from the Iran war, the IMF still expects the economy of Africa’s largest crude producer to expand 4.1% this year and 4.3% in 2027—in line with its April forecast.
The outlook is underpinned by President Bola Tinubu’s reforms. He has overseen changes to Nigeria’s currency, tax and energy policies, winning praise from the IMF and other international observers, while fueling public discontent as Nigerians grapple with a sharp rise in living costs.
Social impact
“Conditions for many Nigerians remain difficult,” the IMF said, noting that 63% lived below the national poverty line, and an estimated 27 million citizens faced food insecurity in the fall of 2025. Nigeria’s Finance Minister Taiwo Oyedele acknowledged that more needs to be done.
While progress is being made, with per capita income growing by nearly 10% last year indicating a marked reduction in poverty levels, “we are mindful that macroeconomic stability, while necessary, is not sufficient on its own,” he said. “Economic growth must be inclusive and must translate into tangible improvements in the welfare of Nigerians.”
Structural reform recommendations
The IMF suggested the country implement structural reforms to address challenges in:
-
Electricity sector
-
Infrastructure
-
Agriculture
-
Human capital formation
-
Security improvements to facilitate high and inclusive growth
The fund also urged authorities to further strengthen supervision and bring stablecoin and other crypto-asset activities into the regulatory perimeter.
 Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!
 to keep its restrictive monetary policy settings active for a prolonged period){kind=link}