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| International Monetary Fund |
The International Monetary Fund has again pressed Nigeria to deliver temporary, tightly targeted cash transfers to its most vulnerable households, arguing that headline economic growth is doing little to shield millions from the daily grind of higher food, transport and energy prices. The recommendation, delivered during the Fund’s latest World Economic Outlook and Global Financial Stability Report briefings, sits at the intersection of three hard truths: Nigeria’s economy is expanding on the back of energy exports, poverty remains stubbornly high, and the country’s fiscal space is limited.
Deniz Igan, Division Chief in the IMF’s Research Department, put the case plainly: “What we’re advocating for is cash transfers, income support, targeted temporary income support for the most vulnerable households.” Such support, she said, could ease poverty and improve food security while remaining consistent with the government’s medium-term fiscal framework. Improving the quality of public spending and strengthening revenue collection would be essential if the approach is to be sustained.
The message is not new. Since the 2023 removal of the petrol subsidy and the unification of the foreign-exchange market, successive IMF statements have returned to the same theme: growth alone is not enough when inflation and currency depreciation erode real incomes. Nigeria’s economy has continued to expand, helped by oil and gas exports, yet household surveys and independent assessments continue to show large numbers of people struggling to meet basic needs. Food inflation has been especially punishing; energy and transport costs feed into the price of almost everything else.
Why cash transfers, and why now?
Cash transfers are attractive in principle because they put purchasing power directly into the hands of those who need it most, avoiding the leakages and distortions that often accompany generalised subsidies. In Nigeria’s case, the argument is strengthened by the sheer scale of vulnerability.
Large sections of the population already live close to or below poverty lines; any further rise in the cost of staples quickly pushes households into deeper hardship.
Yet the practical challenges are substantial. Identifying the “most vulnerable” accurately, delivering payments efficiently, and preventing capture by intermediaries have proven difficult in past programmes. Nigeria’s social-register systems have expanded, but coverage gaps and data quality issues remain. Any new or scaled-up transfers would also have to compete with other pressing claims on the budget – debt service, security, infrastructure and the still-large wage bill. The IMF’s insistence that support must be temporary and aligned with medium-term fiscal plans is a recognition of this constraint: permanent or poorly targeted spending would simply recreate the fiscal pressures that subsidy reforms were meant to ease.
Monetary policy: room to ease, but credibility is non-negotiable
Alongside the social-protection message, IMF officials signalled that progress on inflation could open space for a less restrictive monetary stance.
Jason Wu, Assistant Director in the Monetary and Capital Markets Department, noted improvements on the inflation front and suggested that “a not-as-tight monetary policy stance would be appropriate.”
He immediately qualified the remark: central-bank credibility remains essential. Decisions must be data-driven and clearly explained to the public and markets.
“I think what’s important is credibility. In other words, the central bank has to be data-driven and has to be able to explain the decisions clearly,” Wu said. Transparent communication and continued reliance on economic evidence would help manage any future inflation surprises. Developments so far, he added, appeared encouraging.
For the Central Bank of Nigeria, the tightrope is familiar. After a period of aggressive tightening, any pivot must be carefully timed so that it does not reignite inflation expectations or undermine the naira. Clear forward guidance and consistent messaging will matter as much as the rate decision itself.
Banking sector: recapitalisation is only the first step
Wu also turned to the financial system. After the recent recapitalisation exercises, he called for stronger regulations to prevent new risks from building. Banks need to maintain adequate capital and liquidity, recognise credit losses and bad loans promptly, and manage their exposure to sovereign risk – an especially relevant concern in many African economies where government securities form a large part of bank balance sheets.
“In emerging economies, after recapitalisation, [it is important to] start imposing appropriate regulations to prevent risks from building up in the future,” he said. Understanding the extent of banks’ exposure to government-related risks is necessary to strengthen resilience. The IMF did not prescribe specific new capital requirements for Nigerian banks, but flagged capital adequacy, liquidity, loan-loss recognition and sovereign exposure as priority areas for supervisors.
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Global backdrop: resilient growth, rising risks
The Nigeria-focused comments sit inside a broader global picture presented by Sylvana Tenreyro, the IMF’s Economic Counsellor and Director of Research. The world economy has remained resilient, she said, but faces increasing risks. Global growth is projected at 3.1 per cent in the current forecast year – about 0.4 percentage points below the previous year – before rising to 3.4 per cent in 2027.
Two forces are shaping the outlook. Rising energy and commodity prices (oil, gas, metals, fertilisers) are weighing on activity by raising production and transport costs. At the same time, investment in artificial intelligence and related technologies is supporting capital spending and growth. Countries with limited fiscal resources and heavy dependence on imported food and energy are particularly exposed. Some have responded by diversifying import sources, boosting domestic production or accelerating renewable-energy investment – steps that can reduce vulnerability over time but do not eliminate near-term pain.
Tenreyro urged governments to rebuild fiscal buffers so they can respond to future shocks. Rising borrowing costs and debt-service obligations already constrain spending on infrastructure, social services and the energy transition. Additional commodity-price shocks could worsen fiscal weaknesses. Consolidation, where needed, should protect the most vulnerable and avoid undermining recovery. Public spending should be directed toward productive priorities while restoring the capacity to absorb future disruptions.
On monetary policy, the IMF’s message was consistent across countries: keep the focus on price stability and bring inflation back to target. The right stance depends on domestic conditions – inflation levels, labour-market developments and exposure to commodity or technology shocks. Central-bank independence, credible frameworks and clear communication remain essential for anchoring expectations.
One newer risk flagged by Tenreyro is the concentration of AI-related investment in a relatively small number of companies and sectors. If expectations about future productivity or profitability prove too optimistic, a correction could spill over into broader investment, financial conditions and growth. Policymakers need to monitor these developments closely.
Financing conditions for emerging markets
International capital markets remain open to emerging economies, including through Eurobond issuance, Wu observed. “The market for Eurobonds remains very much open. Financing is happening.”
Yet the combination of high yields and narrow spreads is unusual and leaves borrowers exposed if global financial conditions tighten – whether because of developments in advanced economies or fresh energy shocks. Emerging markets should therefore strengthen resilience now. Transparency about outstanding obligations is one practical step that can help maintain investor confidence, particularly for African borrowers seeking to raise funds in domestic currencies as well as hard currency.
What this means for Nigeria
The IMF’s latest statements crystallise a familiar policy agenda: protect the poorest with temporary, targeted transfers; keep monetary policy data-driven and communicative; strengthen bank regulation after recapitalisation; rebuild fiscal buffers; and improve the quality of public spending and revenue collection. The analysis is coherent. The harder question is execution.
Cash transfers only work if the targeting is accurate, the delivery is reliable, and the fiscal arithmetic adds up. Monetary easing only sustains confidence if inflation continues to ease and communication remains clear. Banking reforms only reduce systemic risk if supervisors follow through on capital, liquidity and sovereign-exposure rules. And all of these steps occur against a global backdrop of higher commodity prices, elevated borrowing costs and the uncertain productivity payoff from AI investment.
For Nigerian households currently absorbing the cost of food and energy, the recommendation of cash support is welcome in principle. Whether it translates into tangible relief depends on the government’s ability to design, fund and administer programmes that reach the intended recipients without creating new fiscal vulnerabilities. That is the real test the IMF’s latest advice has once again placed in front of policymakers.
Samuel O. Sulaimon is the founder and Editor-in-Chief of Naijapiz. He covers News, Sports, Finance, Faiths, Education, Politics and Technology.
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