The International Monetary Fund provided strong and candid feedback on the reforms in the Nigerian financial sector that have taken place over the past two years.

The feedback followed a recent visit to Nigeria by officials from the Fund, who were reviewing the monetary reforms initiated by the Central Bank of Nigeria.

At the end of its visit, the Fund released the Article IV Consultations on the country and commended the reforms by the apex bank to enhance market confidence by increasing foreign inflows through the strengthening of the banking system by recapitalising the local banks.

According to the IMF, reforms in the foreign exchange market and ongoing stability of the naira have supported price discovery and enhanced dollar liquidity in the economy.

The Fund said Nigerian authorities had implemented major reforms over the past two years, which had improved macroeconomic stability and enhanced resilience.

In its report, the Fund highlighted a significant risk that Nigeria may exceed its fiscal deficit projections for the year. This risk is driven by a combination of falling oil prices, lower production levels, and challenges in executing capital expenditures.

It called on the country’s fiscal authorities to take immediate action to recalibrate the country’s fiscal policies and budget expectations to reflect the current economic realities.

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.”

According to the report, IMF directors noted that the CBN was rightly maintaining a tight monetary policy stance, which should be sustained until disinflation is firmly established. They also welcomed the cessation of deficit monetisation and commended ongoing efforts to strengthen central bank governance—crucial steps toward laying a solid institutional foundation for effective inflation targeting.

The Fund stressed the need for the implementation of a robust foreign exchange intervention framework focused on containing excess volatility, noting that the exchange rate was an important shock absorber.

It also agreed with the call to phase out existing capital flow management measures in a properly timed and sequenced manner.

The IMF directors recommended maintaining a neutral fiscal stance to ensure macroeconomic stability, while prioritising investments that promote growth. They urged a faster implementation of cash transfers to support the poor.

The report also lauded the fiscal authorities for the successful signing of the tax reform bills into law, noting that it is a crucial step toward improving revenue generation and creating fiscal space for development spending, all while maintaining debt sustainability.

Last week, President Bola Tinubu signed four tax reform bills into law, marking what he called a bold new era of economic governance in the country.

The four bills that have now become Acts are the Nigeria Tax Bill (Fair Taxation), the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill.

The CBN, led by Cardoso, eliminated the long-standing multiple exchange-rate system by introducing a “willing-buyer, willing-seller” framework supported by a digital trading platform called B-Match.

Consequently, the IMF noted, “Gross and net international reserves increased in 2024, with a strong current account surplus and improved portfolio inflows.”

The forex premium, which is the gap between official and parallel markets, has decreased from over 60 per cent to below three per cent.

The reform also boosted investors’ confidence, propelling forex inflows to surge to $6.9bn in Q1 2025, and external reserves climbed to a peak of $40.9bn at the end of 2024, providing over eight months of imports, well above benchmark thresholds.

“Reforms to the FX market and foreign exchange interventions have brought stability to the naira,” the IMF asserted.

The Fund noted a “strengthening of investor confidence” and “renewed portfolio inflows” following the country’s successful return to the Eurobond market after a four-year hiatus.

It also “recognised actions to strengthen the banking system, including the ongoing process of increasing banks’ minimum capital”, according to the IMF Executive Board Assessment.

It also welcomed the authorities’ efforts to boost financial inclusion and promote capital market development.

The CBN’s recapitalisation plan will significantly increase banks’ minimum capital by March 2026. This initiative aims to ensure that banks can absorb future shocks, enhance credit access, and support the planning for a $1 1tn Nigerian economy.

The CBN is also expanding access to banking services for previously excluded demographics through digital platforms and financial literacy programmes, such as the Women’s Financial Inclusion Initiative.

The Fund also acknowledged progress made in strengthening the Anti-Money Laundering and Combating the Financing of Terrorism, and “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.

According to the Fund, significant challenges persist, noting that although inflation is declining, it remains burdensome.

It 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.

Meanwhile, the IMF projected that Real GDP will grow by 3.4 per cent in 2025, supported by the new domestic refinery, higher oil production, and a strong services sector. Amid a complex and uncertain external environment, medium-term growth is expected to remain around 3.5 per cent, supported by domestic reform gains.

It observed that gross and net international reserves rose in 2024, supported by a strong current account surplus and better portfolio inflows, adding that Reforms to the FX market and foreign exchange interventions had stabilised the naira.

The CBN recently announced a quantum leap in the net forex reserve position at $23.11bn at the end of last year.

Upon assuming office in October 2023, Cardoso prioritised reforms to rebuild Nigeria’s economic buffers and enhance resilience.

He faced a $7bn forex backlog from unfulfilled commitments, worsened by a fragmented multi-rate FX system that fueled arbitrage.

The regime discouraged foreign investment and drained external reserves to $33.22bn by December 2023.

“Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets,” Cardoso said.

According to data from the apex bank, NFER reached $23.11bn, the highest level in over three years. This marks a significant increase from $3.99bn at the end of 2023, $8.19bn in 2022, and $14.59bn in 2021.

The NFER, which adjusts gross reserves for short-term liabilities like FX swaps and forwards, is seen as a more accurate measure of available foreign exchange buffers.

The CBN expects reserves to rise steadily, driven by improved oil output and stronger non-oil exports.

The organisation is dedicated to effective reserve management, clear reporting, and macroeconomic strategies that promote exchange rate stability, attract investment, and enhance long-term resilience.

Foreign capital inflows are vital for stabilising monetary and fiscal policies in the domestic economy. The central bank is seeking to diversify sources of foreign exchange to increase dollar inflows, enhancing access for manufacturers and retail consumers.

The CBN has streamlined dollar inflows for FX dealers—driving business and economic growth—through new diaspora-focused products, licensing additional IMTOs, adopting a willing buyer-willing seller FX model, and ensuring timely naira liquidity access for IMTOs.

The President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, stated that the recent policy changes demonstrate the creativity, effort, and dedication of Cardoso in ensuring that more foreign exchange flows into the economy and remains accessible to businesses.

He noted that diaspora remittances to Nigeria, estimated at $23bn annually, continue to be a dependable source of foreign exchange for the domestic economy.

Additionally, the central bank is exploring various other sources and policies to ensure a consistent inflow of dollars.

According to Gwadabe, the CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

The CBN’s initiatives to enhance confidence in the FX market, promote financial inclusion, and uphold price stability are expected to support increased remittance inflows and long-term economic growth.

According to the Director of Trading at Verto, Charlie Bird, the dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.

During the Cordros Asset Management seminar titled “The Naira Playbook”, he stated that Nigeria has become the darling of foreign investors due to improved dollar liquidity in the economy resulting from positive reforms by the CBN.

Recently, the CBN announced the introduction of two new financial products aimed at serving Nigerians living abroad and attracting more remittances from the diaspora.

These initiatives, along with other measures, include granting licenses to new International Money Transfer Operators, implementing a willing buyer-willing seller model, and ensuring timely access to naira liquidity for International Money Transfer Operators.

The apex has recently issued revised guidelines for International Money Transfer Services in Nigeria. These guidelines represent a significant change in the way IMTOS operate, highlighting the CBN’s commitment to improving transparency and efficiency in foreign exchange transactions, as well as strengthening diaspora remittances into the country.

A further circular titled “New Measures to Enhance Local Currency Liquidity for Settlement of Diaspora Remittances” reaffirmed the CBN’s commitment to strengthening the foreign exchange market by boosting remittance flows through formal channels.

The circular outlined new measures to provide licensed IMTOs with access to naira liquidity, enabling smoother disbursement of remittances to beneficiaries.

The IMF’s endorsement of Nigeria’s monetary reforms marks a significant milestone in the country’s journey toward economic recovery and resilience. With the Central Bank of Nigeria sustaining a disciplined and transparent approach—backed by bold interventions in the FX market, financial sector recapitalisation, and growing remittance inflows—confidence is steadily being restored.

Complementary fiscal reforms, including the recent tax legislation and the expected recalibration of the 2025 budget, point to a maturing policy environment capable of responding to global headwinds.

As monetary and fiscal authorities continue to work in tandem, Nigeria is poised to unlock stronger growth, attract long-term investment, and lay the groundwork for achieving a more inclusive, stable, and diversified $1tn economy in the coming years.