## How Nigeria Can Unleash its Economic Potential

_IMF News, July 7, 2025_

## Source details

**Canonical URL:** [How Nigeria Can Unleash its Economic Potential](https://www.imf.org/en/news/articles/2025/07/07/cf-how-nigeria-can-unleash-its-economic-potential)

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## Bibliographic details
- Published: July 7, 2025

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### Overview
- Publication date: July 7, 2025.
- Core message: Increasing revenues, establishing an effective budget framework, and scaling up the cash transfer system can support Nigeria’s progress.
- Context: Article based on the Staff Report for the 2025 Article IV Consultation with Nigeria.

### A difficult starting point
- Between 2014 and 2023, real per capita GDP declined on average by 0.7 percent annually.
- In 2023, the poverty rate stood at 42 percent.
- Limited access to dollars forced reliance on the parallel currency market, where people paid a much higher price than the official rate.
- Public finances were strained by an opaque fuel subsidy system that caused recurrent petrol scarcity.
- Central bank financing of the fiscal deficit pushed up inflation.

### Reforms implemented and early results
- In 2023 the new government and the Central Bank of Nigeria:
  - liberalized the foreign exchange market,
  - stopped central bank financing of the fiscal deficit,
  - reformed fuel subsidies.
- The government strengthened revenue collection, described as "still one of the world’s weakest."
- Since these reforms:
  - international reserves have increased,
  - anyone can now access foreign exchange in the official market,
  - Nigeria successfully returned to international capital markets last December,
  - Nigeria was recently upgraded by rating agencies,
  - a new domestic, private refinery is positioning Nigeria up the value chain in a fully deregulated market.

### Remaining challenges
- Inflation still exceeds 20 percent.
- Poor infrastructure, especially for electricity, inhibits economic activity.
- Poverty and food insecurity remain high.
- Nigeria lacks an effective social safety net to cushion the impact of shocks on the most vulnerable.
- Global environment challenges: elevated uncertainty and high borrowing costs.
- Nigeria is especially affected by volatile international oil prices since oil revenues account for a large proportion of government revenues—a figure that stood at 30 percent in 2024.

### Policy priorities and recommendations
- Priority 1: Stronger and more sustained growth
  - Objective: lift millions out of poverty and food insecurity.
  - Short-term action: scale up the existing cash transfer system to make growth more inclusive.
- Priority 2: Establish an effective budget framework
  - Components: realistic budget assumptions, strong expenditure management, transparent implementation and reporting.
  - Expected outcomes: deliver effective investments in people and infrastructure; strengthen accountability.
  - Monetary policy role: continue to decisively tackle inflation and reduce economic uncertainty.
- Priority 3: Increase domestic revenues
  - Rationale: finance substantial funding needs in growth-enabling areas such as agriculture, infrastructure (including access to electricity), and climate adaptation.
  - Tax reform aims: make it easier to pay taxes and ensure that everyone who owes taxes pays them.
  - Sequencing: once the ongoing cost-of-living crisis abates and the cash transfer system is fully operational, there will be room to align tax rates with those in neighboring countries.
  - Immediate concern: the share of revenue that goes to interest spending leaves too little for investment in people and infrastructure.
  - Critical action: ensure the substantial financial savings from the removal of fuel subsidies flow to the government to fund priority spending.

### Key statistics and facts (exact figures preserved)
- Real per capita GDP change (2014–2023): declined on average by 0.7 percent annually.
- Poverty rate (2023): 42 percent.
- Inflation: still exceeds 20 percent.
- Oil revenues share of government revenues (2024): 30 percent.

### Conclusion
- Nigeria’s potential is beyond doubt, but achieving it will require continued reforms and an effective social safety net to carry the most vulnerable along.
- Authors: Axel Schimmelpfennig (IMF mission chief to Nigeria and assistant director in the IMF’s African Department) and Christian Ebeke (IMF resident representative in Nigeria).

*This article is based on the Staff Report for the 2025 Article IV Consultation with Nigeria.*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [STAFF REPORT](https://www.imf.org/en/Publications/CR/Issues/2025/07/01/Nigeria-2025-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-568220)
- [NIGERIA AND THE IMF](https://www.imf.org/en/Countries/NGA)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2025/07/07/cf-how-nigeria-can-unleash-its-economic-potential_