- IMF urges Nigeria to take action to exit FATF grey list.
- The Fund commended Nigeria’s reforms that reduced inflation.
- Nigeria was placed on the grey list in February 2023.
- The IMF emphasizes the importance of improving financial systems and economic stability.
- Central Bank independence has been restored, promoting economic credibility.
The International Monetary Fund’s Recent Statements on Nigeria
IMF Urges Nigeria to Swiftly Exit Grey List The International Monetary Fund (IMF) has recently called on Nigeria to take decisive actions aimed at exiting the Financial Action Task Force (FATF) grey list. In its latest Article IV Consultation, the Fund acknowledged Nigeria’s economic reforms that have helped slow inflation rates and improve stability in the country’s foreign exchange market. It’s a significant moment, as these reforms have reportedly strengthened financial discipline and restored some level of credibility in the nation’s economic management.
Current Economic Landscape and Policy Recommendations
Challenges and New Reforms Needed to Address Inflation Notably, Nigeria found itself on the FATF grey list in February 2023 due to increased capital inflows and notable deficiencies in its efforts to combat money laundering. This designation places Nigeria under increased scrutiny, as the FATF focuses on jurisdictions with inadequate measures to combat financial crimes. According to the IMF’s Executive Board Assessment, while they applauded the progress made regarding the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework, they stressed that challenges remain in areas such as inflation, fiscal management, and security issues. If unaddressed, these factors could potentially derail Nigeria’s progress toward economic stability and growth.
Inflation Control and Financial System Stability
Restoration of Central Bank Independence is Key to Growth Central to this economic reset, the IMF pointed out, is the revival of independence for the Central Bank of Nigeria (CBN). After years of excessive reliance on the central bank for financing fiscal deficits, the CBN has scaled back its use of the “Ways and Means” facility, which had previously inflated beyond permissible limits. The Fund noted a significant reduction of nearly 90% in these advances as of April 2025, marking a notable step toward curbing deficit monetization, which, the IMF believes, will help lay the groundwork for effective inflation targeting and overall economic stability.
Central Bank Reforms and Economic Impacts
Positive Outlook Amidst Global Economic Challenges The IMF’s report reflects a cautiously optimistic outlook for Nigeria as headline inflation peaked at a staggering 40% but has since declined to 22.9% by May 2025. A strict monetary policy from the CBN is being credited for this positive trend. Ensuring stability in the foreign exchange market, reforms in exchange rates have transitioned to a much more flexible “willing-buyer, willing-seller” framework, which is designed to enhance price discovery and liquidity. As a result, the gap between official and parallel market rates has shrunk from over 60% to below 3%, enabling the naira to stabilize and providing a positive environment for businesses.
Focused Growth in Critical Areas
Investment in Banking and Agricultural Sectors Additionally, the IMF recognized Nigeria’s efforts to strengthen its banking system, particularly through plans to raise minimum capital requirements for banks by March 2026. This move is intended to ensure banks are better equipped to withstand future economic shocks while deepening access to credit. On another note, the agricultural sector has seen promising improvements, with increased food production helping to mitigate inflationary pressures. By May 2025, the headline inflation dropped to 22.9%, bolstered by reduced food inflation at 21.4%.
Government’s Response to IMF Recommendations
Government’s Commitment to Economic Stability Following the release of the IMF report, CBN Governor Olayemi Cardoso emphasized the importance of responsible and forward-looking policies for Nigeria, highlighting that the positive reassessment reflects the country’s commitment to regaining credibility and paving the way for long-term growth. The Minister of Finance, Wale Edun, expressed gratitude towards the IMF for recognizing the government’s ongoing reform initiatives that have improved fiscal stability and external factors vital to investor confidence, particularly in the agricultural domain.
In summary, the IMF’s assessment calls for Nigeria to act swiftly to exit the grey list while continuing its current economic reforms. The report outlines existing challenges that could undermine progress, including inflation and infrastructural issues, yet acknowledges positive developments such as improvements in the banking sector and headway in agricultural production. As the government continues to implement reform strategies, maintaining vigilance in the global market will be crucial for Nigeria’s sustainable economic growth moving forward.
