The International Monetary Fund (IMF) has advised Nigeria to adapt its 2025 budget to lower oil prices and scale up cash transfers to shield the most vulnerable parts of its population.
In its just-released ‘Article IV’ assessment of Nigeria’s economic policies, the IMF said economic growth had been steady but too low in per capita terms, with inflation remaining high. The Fund predicted that the country’s economy would expand at 3.4% this year and 3.2% in 2026.
The report read, “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.
“Absent policy actions, the fiscal deficit in 2025 would exceed budget expectations,” further underlining the urgency of revising the fiscal plan.
“The international economic environment that Nigeria lives in and operates in is marked by the very, very large uncertainty, and in particular, international oil price volatility impacts Nigeria directly through the fiscal and the external balances as well as inflation,” said Axel Schimmelpfennig, the Fund’s mission chief for Nigeria.”
The complex outlook made it more important than ever for policymakers to build and maintain buffers while being nimble and ready to respond to shocks or seize opportunities, he said.
“Turning to our policy messages, the key challenge now is to tackle high poverty and food insecurity.”
The Fund’s advice followed President Bola Tinubu’s directive to oil and gas operators in the country to revive dormant oil fields to boost crude oil production and revenue.
The directive was conveyed to oil and gas operators by the Minister of State Petroleum Resources (Oil), Heineken Lokpobiri, on Tuesday, at the ongoing 2025 Nigeria Oil and Gas Energy Week in Abuja.
According to the minister, reactivation of the oil assets towards productivity will not only lead to growth in the oil sector but also sustain investments in capacity building.
He said the government was determined to maximise oil production by ensuring that only serious investors retain access to Nigeria’s hydrocarbon resources.
The Federal Government had set a crude oil production target of 2.1 million barrels per day, and roughly N84.67 trillion crude oil revenue in its 2025 budget. This is based on an oil price of $75 per barrel.
However, the country has been struggling with its oil production, with output hovering around 1.4 million barrels per day.
Crude oil and condensate production climbed to 1.63 million barrels per day in May from 1.61mbpd in April.
Nigeria’s crude oil reserves are estimated at 37.28 billion barrels as of January 1, 2025, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). This includes 31.44 billion barrels of proven and probable (2P) crude oil and 5.84 billion barrels of condensate.
However, the country’s oil production levels have been affected by factors like pipeline vandalism, theft, and terminal shutdowns.
The challenges have not only led to shortfalls in locally targeted output, but Nigeria has also been unable to meet its OPEC’s 1.5 million barrels per day quota.
Low crude oil production also affected the country’s revenue, coupled with the ongoing war between Iran and Israel, which had seen a significant drop in crude oil prices.
The Federal Government had assumed a price of $75 per barrel in its 2025 budget. Brent crude futures last traded at just over $68 a barrel.
