Nigeria’s fiscal outlook for 2025 is under serious threat, according to the International Monetary Fund (IMF), which has warned that the country must urgently revise its budget targets or face a deepening financial crisis.
The IMF’s latest Article IV consultation report, released on Wednesday, highlighted a significant risk of Nigeria exceeding its fiscal deficit projections for the year. The warning is driven by a combination of falling oil prices, reduced oil production, and continued challenges in executing capital expenditure.
The IMF urged Nigerian authorities to recalibrate fiscal policies and adjust budget expectations to reflect current economic realities. It stated: “Ensuring that the fuel subsidy savings accrue to the government would yield the proposed neutral stance—the full-year savings are estimated at two per cent of GDP. If the savings are not realised starting H2-2025 and given that tax policy reforms under consideration are not expected to deliver significant revenue gains in 2025, adjustment would have to come from the expenditure side (0.6 per cent of GDP), with staff recommending to prioritise adjustments to recurrent spending to protect growth-enhancing investments.”
According to the report, Nigeria’s fiscal deficit could hit 4.7% of GDP in 2025, far exceeding the government’s target. The IMF criticised the original budget assumptions, which were based on optimistic hydrocarbon revenue projections, even before the sharp decline in oil prices since April.
Beyond revenue shortfalls, the IMF also raised concerns about capital expenditure implementation. Despite ambitious plans, it warned that Nigeria’s history of underperformance in infrastructure delivery poses a risk to the 2025 fiscal plan. “Budgeted capital expenditure is likely to exceed implementation capacity, given execution in previous years,” the report said.
The IMF recommended that the Nigerian government formally revise its budget to address these growing vulnerabilities. It noted: “The authorities have announced that they will adjust the budget to lower oil prices, while pushing for higher hydrocarbon production and continuing with administrative efforts to boost revenue. However, without a revised budget or announced budget targets, projections of the fiscal stance and financing needs are uncertain.”
The report emphasised the need for Nigeria to adopt a neutral fiscal stance in 2025 to preserve macroeconomic stability and maintain essential growth investments. It also called for increased social support, urging the government to expand social safety nets to shield the most vulnerable amid rising poverty and food insecurity.
In terms of structural reforms, the IMF urged Nigeria to reduce its dependence on oil revenues and broaden its tax base. It encouraged continued efforts to modernise the value-added tax and corporate income tax systems, though it noted these changes will take time to deliver meaningful fiscal results.
Despite these warnings, Nigerian authorities expressed their commitment to recalibrating the budget and addressing the fiscal crisis. The report captured the Federal Government’s response, noting: “The authorities are confident that increased oil production and in-year adjustments will be sufficient to compensate for lower oil prices in 2025. They stressed their resolve to bring the savings from the fuel subsidy removal to the budget and staying the course with domestic revenue mobilisation, while looking to diversify financing sources and relying more on private sector involvement in delivering infrastructure projects.”
The IMF also drew attention to Nigeria’s rising sovereign debt, which surged to 53% of GDP in 2024, up from 49% the previous year—driven by large deficits and exchange rate pressures. It urged careful management of new financing options, including public-private partnerships and pre-export financing, to avoid worsening debt vulnerabilities.
To improve capital expenditure outcomes, the IMF advised that Nigeria should focus on high-return infrastructure projects, improve public investment management, and enhance the accuracy of fiscal forecasting. It stressed that a realistic 2026 budget would allow for better prioritisation of initiatives.
The IMF commended Nigeria for some positive reforms, including tighter monetary policy that has helped lower inflation from 31% in 2024 to 23.7% in April 2025. It also praised ongoing efforts to stabilise the naira, reform the foreign exchange market, and strengthen the financial sector.
Nonetheless, the IMF maintained that continued reforms are essential for long-term stability, economic growth, and poverty reduction. While acknowledging improved fiscal performance—attributed to naira depreciation, higher grants, and better revenue collection—it cautioned that challenges remain.
In a response issued by the Director of Information and Public Relations, Mohammed Manga, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, welcomed the IMF’s report. Edun emphasised the government’s commitment to managing risks and sustaining economic reform.
“In response to the downside risks highlighted in the IMF’s report—particularly uncertainties in the global economy—the Minister reaffirmed the government’s proactive stance,” the statement read. “The implementation of the 2025 Budget is being carried out with a focus on safeguarding reform gains and ensuring economic stability.”
The Federal Government said it is closely monitoring international oil prices and global trade developments to mitigate potential risks and maintain progress toward inclusive growth.
Earlier, the World Bank described Nigeria’s 2025 federal budget as overly ambitious, warning that the government may resort to borrowing from the Central Bank’s Ways and Means facility to cover revenue shortfalls. In its Nigeria Development Update report titled “Building Momentum for Inclusive Growth”, the World Bank expressed concern over the viability of Nigeria’s N54.99 trillion budget—the highest in the country’s history.
The record-breaking budget includes N13.64 trillion for recurrent spending, N23.96 trillion for capital projects, N14.32 trillion for debt servicing, and N3.65 trillion for statutory transfers. It projects a deficit of N13.08 trillion, to be financed through domestic and external borrowing. Key assumptions include oil at $75 per barrel, 2.06 million barrels per day in production, an exchange rate of N1,400/$, and 15% inflation.
Speaking at the World Bank event, Lead Economist for Nigeria, Mr. Alex Sienaert, said: “It’s a very ambitious budget. Even with the very positive revenue sort of tailwind that we have… even considering that, it looks like it’s going to be pretty hard to meet some of the ambitious revenue targets that are in there.”
Responding, Minister of Budget and Economic Planning, Senator Abubakar Bagudu, defended the projections, calling them modest and realistic. “Is the projection of the 2025 budget ambitious? No, they are not,” he said. “They are all modest. Because even in the presentation, two things were said—some oil prices are about $60, but the average for Nigeria is $73 because of our premium grades.”
As fiscal pressures mount, Nigeria’s economic managers face a tightrope walk—balancing reform, revenue mobilisation, and social protection in a turbulent global environment.