In its 2025 Article IV Consultation released on Tuesday, the IMF said the apex bank’s recent policy actions, including an 875 basis points hike in 2024, were appropriate to address inflationary concerns and stabilise the exchange rate.

“The CBN has appropriately tightened monetary policy and should maintain a tight stance going forward considering still high inflation and external pressures,” the report said.

According to the organisation, the ex-post and ex-ante policy rates “are now positive in real terms which is appropriate to guide inflation down, while supporting external stability in the face of heightened uncertainty and external pressures”.

Ex-ante and ex-post policy rates are interest rates before and after inflation is considered, respectively.

“The Committee had previously widened the asymmetric corridor, increased the cash reserve requirement to 50 percent, and the CBN issued OMOS to manage liquidity,” the IMF said.

According to the report, the tightening has “incentivized fx inflows and supported stability in the fx market”.

IMF added that transmission through the credit channel remains limited, given the low credit-to-gross domestic product (GDP) ratio.

“As such, and also given information gaps including from parameter uncertainty, IMF said monetary policy is subject to large uncertainty, in particular from the external side, and the CBN’s data dependent approach remains appropriate, including integrating inflation expectations and further developing the modeling and forecasting toolkit,” the lender said.

“Announcing a disinflation path could help anchor inflation expectations and facilitate the transition to an inflation targeting regime.

“A neutral fiscal policy stance in 2025 that complements monetary policy and entrenched disinflation gains would allow reducing the nominal policy rate, while keeping the real policy rate positive.”

IMF said Nigeria recorded a $2 billion outflow in portfolio investments by April, but also flagged external vulnerabilities.

The Bretton Woods institution said heightened global uncertainty “exposes Nigeria to external shocks, improvements in resilience notwithstanding”.

“The outflow of some $2 billion in portfolio investments through April with limited CBN interventions demonstrated that the foreign exchange market functions even under stress and that the authorities have built resilience in an impressive manner,” the IMF said.

“At the same time, positioning of nonresident portfolio investors in OMOS (and to a lesser extent in treasury bills), exposes Nigeria to rollover risks at a time of heightened uncertainty.

“A sharp fall in oil prices or escalation in global uncertainty as in the adverse scenario could trigger portfolio outflows, putting pressure on reserves and, in the extreme, inducing steep exchange rate depreciation.

“In such circumstances, temporary capital flow measures (CFMS)-as part of a broader policy package and consistently with the Fund’s Institutional View on The Liberalization and Management of Capital Flows (IMF’s Institutional View)-may be warranted.”

In the medium term, the fund encouraged reforms to improve Nigeria’s business environment and attract more stable foreign direct investment (FDI), reducing dependence on volatile short-term portfolio flows.