The International Monetary Fund (IMF) has warned that Nigeria’s 2025 fiscal plans face significant risks and urged the government to urgently revise its budget targets to avoid deepening economic instability.
In its latest Article IV consultation released on Wednesday, July 2, the IMF projected that Nigeria’s fiscal deficit could hit 4.7 percent of GDP, well above the government’s estimate.
It blamed declining oil prices, low production, and execution challenges as key threats to budget performance.
“The 2025 budget was based on optimistic hydrocarbon revenue projections, even before the price decline since April,” the report stated.
It also cautioned that if savings from fuel subsidy removal, estimated at two percent of GDP, are not realised by the second half of 2025, expenditure cuts may become inevitable.
The IMF noted that expected tax reforms may not deliver meaningful revenue this year. As a result, it advised cutting recurrent spending to protect critical investments, while urging Nigeria to adopt a neutral fiscal stance that preserves macroeconomic stability.
The report also highlighted delays in capital project execution, stating that “budgeted capital expenditure is likely to exceed implementation capacity, given execution in previous years.”
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On revenue diversification, the IMF called for stronger tax reforms, including improvements to value-added tax and corporate income tax, and recommended strengthening social safety nets amid rising poverty and food insecurity.
Despite these concerns, the Fund acknowledged Nigeria’s progress in key reforms. It commended the Central Bank for tightening monetary policy, stabilising the naira, and helping reduce inflation to 23.7 percent in April 2025 from 31 percent in 2024.
Reacting to the report, Finance Minister Wale Edun said the 2025 budget is being implemented with reforms in mind.
“The government is taking responsive measures to mitigate risks while maintaining momentum toward inclusive growth,” he said in a statement issued Wednesday.
Meanwhile, the World Bank has also flagged concerns, describing the ₦54.99 trillion budget as overly ambitious and warning of possible reliance on Central Bank loans.
But Budget Minister Abubakar Bagudu disagreed, saying the budget was modest and grounded in realistic assumptions. “Budgets should be aspirational,” he said.
Both institutions agree that urgent adjustments are needed if Nigeria is to navigate 2025 without slipping into a deeper fiscal crisis.