The International Monetary Fund (IMF) has raised the alarm over Nigeria’s insufficient social protection systems, warning that the country’s most vulnerable citizens remain dangerously exposed as wide-ranging economic reforms take shape.
In a detailed commentary published on the IMF’s website on Monday, the Fund noted that while recent policy changes have brought some early signs of economic progress, the absence of a comprehensive safety net continues to pose a threat to inclusive growth and long-term stability.
The article was authored by Axel Schimmelpfennig, IMF Mission Chief to Nigeria, and Christian Ebeke, the Fund’s Resident Representative in Abuja. They acknowledged the Federal Government’s efforts to implement fiscal and structural reforms but warned that millions are yet to see tangible improvements in their daily lives.
“Despite the reforms underway, Nigeria still lacks a functioning and scalable social safety net to protect the poorest from economic shocks,” the authors wrote. “Expanding and strengthening the country’s existing cash transfer programme is urgent if growth is to be truly inclusive.”
Persistent Poverty, Weak Growth Undermine Gains
According to the IMF, Nigeria’s economic landscape remains weighed down by high levels of poverty and food insecurity. Between 2014 and 2023, real per capita income declined at an average rate of 0.7% annually, while the national poverty rate was pegged at 42% last year.
The Fund credited the current administration with implementing a series of bold reforms most notably, the removal of petrol subsidies, liberalisation of the foreign exchange regime, and halting of monetary financing of the budget deficit. These steps, it said, have helped to stabilise macroeconomic conditions, improve access to foreign exchange, and revive investor confidence, as seen in Nigeria’s return to international capital markets in 2023.
Nonetheless, the IMF warned that the country’s economy is still grappling with multiple headwinds. Inflation remains stubbornly high hovering above 20% and weak infrastructure, particularly in the power sector, continues to hamper private sector-led growth. Oil revenues, which still contribute roughly 30% of government income, are exposed to global price volatility.
IMF Recommends Urgent Expansion of Social Protection
Looking ahead, the IMF identified three key policy directions that Nigeria must prioritise:
- Accelerating Economic Growth: The country must foster stronger and more sustained growth to lift millions out of poverty. In the short term, this requires rapidly scaling up targeted cash transfers to support vulnerable households.
- Overhauling Public Finance Management: The Fund called for a more transparent and efficient budgeting process to better support infrastructure development and social spending.
- Boosting Domestic Revenue: While recent improvements in tax collection were noted, Nigeria still ranks among the lowest in tax-to-GDP ratios globally. The IMF emphasised the importance of domestic revenue mobilisation—especially to fund critical sectors like agriculture, energy, and climate resilience.
The article also pointed to ongoing tax reforms as essential to broadening the country’s revenue base and ensuring compliance. Once economic conditions improve and the social safety net becomes more robust, the IMF suggested there could be room to adjust Nigeria’s tax rates to levels similar to its West African peers.
Subsidy Savings Must Benefit Nigerians, IMF Says
The IMF stressed that the financial gains made from eliminating fuel subsidies must be strategically reinvested into projects that directly benefit citizens.
“Fuel subsidy savings should not disappear into administrative costs or general expenditure,” the Fund cautioned. “They must be redirected into high-impact programmes that improve infrastructure, healthcare, education, and most importantly, the lives of ordinary Nigerians.”
Despite Nigeria’s current challenges, the IMF expressed optimism about the country’s long-term prospects if reforms are sustained and more equitable policies are adopted.
“Nigeria’s economic potential is immense,” the article concluded. “But unlocking it will require a deliberate and inclusive approach one that ensures no one is left behind.”
