IMF Warns of Widening Fiscal Deficit as Nigeria’s Oil Revenues Fall Short

News in Brief:

The International Monetary Fund projects Nigeria’s 2025 fiscal deficit will balloon to 4.7% of GDP, fueled by plunging oil prices, underwhelming crude production, and rising expenditures. Urging urgent budget recalibration, the IMF calls for subsidy reforms, enhanced revenue mobilization, and targeted social protection.

Abuja, Nigeria – July 6, 2025
The International Monetary Fund (IMF) has issued a sobering forecast for Nigeria, warning that the country’s fiscal deficit is set to widen to 4.7% of Gross Domestic Product (GDP) in 2025 — surpassing both the 2024 figure of 4.1% and the government’s budget target.

According to the IMF, Nigeria’s fiscal position is being undermined by declining oil revenues, persistent subsidy burdens, and underperforming production levels. Brent crude prices have dropped significantly in recent months, now hovering around $68.50 per barrel, below Nigeria’s budget benchmark of $75. Coupled with daily oil production struggling to exceed 1.5 million barrels per day, the anticipated revenue shortfalls are placing enormous pressure on government finances.

IMF’s Key Recommendations

In its Article IV consultation report, the IMF called for immediate recalibration of Nigeria’s 2025 federal budget. Top priorities include:

• Protecting fuel subsidy savings, which could free up nearly 2% of GDP.

• Accelerating tax reforms, including broadening the VAT base and enhancing corporate income tax compliance.

• Scaling back non-essential spending while preserving capital investments critical to growth.

• Strengthening targeted social protection through cash transfers to buffer the poor from economic shocks.

The Risk of Inaction

“Without prompt adjustments, Nigeria risks deeper macroeconomic instability,” the IMF warned. It highlighted the dangers of continued fiscal slippage, growing debt levels, and erosion of public confidence if corrective measures are delayed.

Already, Nigeria’s public debt has risen to 53% of GDP, and analysts caution that further increases without structural reforms could compromise debt sustainability.

CBN Policy Backed—But Coordination Urged

The Fund endorsed the Central Bank of Nigeria’s (CBN) tight monetary policy aimed at taming inflation and stabilizing the naira but emphasized that fiscal and monetary policies must work in sync to ensure macroeconomic balance.

Impact on Nigerians

With food inflation rising and over 1 million people facing food insecurity, the IMF stressed the need for urgent social intervention programs. The report highlighted that economic reforms must be accompanied by human-centered policies to mitigate hardship and ensure inclusive growth.

Outlook

As Nigeria grapples with fiscal tightening, global oil volatility, and rising domestic needs, the IMF’s warning is a call to reset priorities and enact bold reforms. The path forward demands a delicate balance between economic realism and social responsibility.

Graphics & Data Support: iNewsAfrica Research Desk