MARKET NEWS

The International Monetary Fund (IMF) has endorsed Nigeria’s recent financial sector reforms, particularly those led by the Central Bank of Nigeria (CBN) under Governor Olayemi Cardoso. In its 2025 Article IV Consultation report, the Fund praised sweeping changes to the foreign exchange regime, monetary tightening, and banking sector recapitalisation, all of which have contributed to macroeconomic stability, naira strengthening, and rising market confidence. The review signaled growing global approval for Nigeria’s efforts to restore investor trust, deepen financial inclusion, and build a more resilient economy, writes JOSEPH INOKOTONG.

The International Monetary Fund (IMF) has delivered an encouraging assessment of Nigeria’s financial reforms, stating that the measures, especially those spearheaded by the Central Bank of Nigeria (CBN), are yielding positive outcomes. The endorsement came through the Fund’s Article IV Consultation, which highlighted how reforms in the foreign exchange market, banking recapitalisation, and fiscal discipline have helped stabilize the economy and reinforce investor confidence.

According to the IMF, Nigeria’s macroeconomic framework has strengthened, particularly due to the CBN’s actions to unify exchange rates, improve forex liquidity, and eliminate the backlog of unfulfilled FX obligations that previously stifled market operations.

In January 2025, Nigeria successfully returned to the Eurobond market, its first issue in four years, reflecting, as the IMF noted, “strengthened investor confidence” and “a resumption of portfolio inflows.”

The Fund “recognised actions to strengthen the banking system, including the ongoing process of increasing banks’ minimum capital,” as stated in the IMF Executive Board Assessment. It also “welcomed the authorities’ efforts to boost financial inclusion and promote capital market development.”

As stated in the IMF Executive Board Assessment, the Fund “welcomed progress made in strengthening the AML/ CFT framework”, Anti-Money Laundering and Combatting the Financing of Terrorism. It “stressed the importance of resolving remaining weaknesses to exit the FATF grey list,” a designation for jurisdictions under increased monitoring by the Financial Action Task Force due to gaps in their anti-financial crime regimes. “Further significant challenges remain. Inflation, though declining, remains a burden. Infrastructure deficits, insecurity, and fiscal slippages could derail progress. The Fund highlighted “the importance of tackling security, red tape, agricultural productivity, infrastructure gaps, including boosting electricity supply, as well as improved health and education spending, and making the economy more resilient to climate events.”

Naira stability, fx inflows show strong reform momentum

The report commended the introduction of the “willing-buyer, willing-seller” FX framework and the use of the B-Match digital platform, both of which have improved transparency and efficiency in forex trading. The naira has since stabilised, and the exchange rate gap between official and parallel markets has narrowed significantly—from over 60 per cent to less than 3 per  cent.

As of Q1 2025, foreign exchange inflows surged to $6.9 billion, and gross external reserves climbed to $40.9 billion by the end of 2024, providing over eight months of import cover. This achievement surpasses international benchmarks and reflects a more resilient external sector.

Tight monetary policy, fiscal prudence welcomed

The IMF acknowledged the CBN’s sustained tight monetary stance, noting it was necessary to entrench disinflation. The Fund praised the cessation of deficit financing by the CBN and ongoing efforts to improve central bank independence, a critical move toward formal inflation targeting.

It also called for the phased removal of capital flow restrictions, urging that exchange rate flexibility be preserved to cushion external shocks. Additionally, the IMF Directors recommended a neutral fiscal stance, targeted growth investments, and expedited cash transfer programmes to support vulnerable populations.

Bank recapitalisation to power a $1 trillion economy

A major pillar of the CBN’s reform agenda is the recapitalisation of commercial banks. The minimum capital requirement is set to increase significantly by March 2026, a move that will equip banks to weather economic shocks and support Nigeria’s ambition to build a $1 trillion economy.

The IMF welcomed this initiative, noting it will expand credit access, strengthen balance sheets, and prepare the financial sector for deeper economic engagement. Alongside this, the CBN is ramping up financial inclusion initiatives, including digital onboarding platforms and gender-focused programmes such as the Women’s Financial Inclusion Initiative (Wi-Fi).