The International Monetary Fund (IMF) has predicted that the Nigerian economy will experience a 3.2 per cent economic growth rate in 2025.
The IMF’s prediction, contained in its Updated World Economic Outlook report for 2025, published on Friday, came days after a similar prediction by its sister institution, the World Bank
The IMF report said policymakers face urgent priorities in undertaking structural reforms to boost productivity and allow its currencies to adjust to global shifts while also rebuilding depleted fiscal buffers and strengthening international cooperation.
The recent World Bank Global Economic Prospects Report for 2025 projected an economic growth rate of 3.6 per cent for the Nigerian economy due to its macroeconomic and fiscal reforms ranging from a tightened monetary policy, fuel subsidy removal and its largely controversial tax reform bills, the IMF forecast a marginal pick up growth rate of 3.2 per cent as against the world bank prognosis for the Sub-saharan nation.
The IMF advised Monetary policymakers to ensure that price stability is restored while supporting activity and employment.
“In economies where inflationary pressures are proving persistent and the risk of upside surprises is rising, a restrictive stance be maintained until evidence is clearer that the underlying inflation is sustainably returning to target. In economies where activity is cooling fast and inflation is on track, a less restrictive stance is justified.”
“In either case, fiscal policy should consolidate to put public debt on a sustainable path and restore the space needed for more agile responses. The consolidation path needs to be carefully calibrated to the conditions of a particular economy. It should be sizable yet gradual to avoid hurting economic activity, clearly communicated to avoid disruptions in debt markets, and credible to achieve long-lasting results.
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Adopting a growth-friendly approach and mitigating the adverse impacts on poor individuals could help preserve the economy’s potential and maintain public support, it stated.”
However, it noted that, as laid out in the IMF’s Integrated Policy Framework, adjusting policy rates and allowing exchange rate flexibility is advisable for countries with deep foreign exchange markets and low levels of foreign-currency debt. For those with shallow foreign exchange markets and substantial amounts of foreign-currency debt, temporary foreign exchange interventions (provided that foreign reserves are adequate and used prudently), capital flow management measures, macroprudential policies, or some combination of the three could, in some cases, accompany appropriately set monetary and fiscal policies to preserve macro-financial stability.
The IMF also warned that decisive policy action is needed to enhance economic dynamism, boost the supply side, and counter the rising risks to the already-dim medium-term growth prospects.
Targeted reforms in labour markets, competition, health care, education, and digitalisation can revive productivity growth and attract capital. Active communication to build consensus and continuous engagement with key stakeholders could help policymakers design and effectively implement measures of the distributional impact of reform.
The report also posited that multilateral cooperation is vital in containing fragmentation, sustaining growth and stability, and addressing global challenges. Trade policies should be consistent with the legal framework of the World Trade Organization (WTO), as well as being clear and transparent, to reduce uncertainty, lower volatility in markets, and mitigate distortions.
“Priorities should be given to restoring a fully and well-functioning WTO dispute settlement system, levelling the playing field, and achieving clarity and coherence of the desire among countries for greater resilience within the rules-based multilateral trading system, IMF stated.”
However, It also envisages slightly downward world trade volumes for 2025 and 2026 owing to the sharp increase in trade policy uncertainty, which will likely hurt investment disproportionately among trade-intensive firms. In the baseline, the impact of heightened uncertainty is expected to be transitory in anticipation of tighter trade restrictions, providing some offset in the near term.
It added that the risk of renewed inflationary pressures could prompt central banks to raise policy rates and intensify monetary policy divergence leading to renewed spikes in commodity prices. While higher for even longer interest rates could worsen fiscal, financial, and external risks.
