*Backs tight monetary policy, private sector-led growth 

*CBN: FG recorded $2.06bn capital inflow, $2.20bn trade surplus in January

*Fiscal deficit widens amid lower revenue receipts

James Emejo in Abuja, Nume Ekeghe and Dike Onwuamaeze in Lagos

The International Monetary Fund (IMF) has commended Nigeria’s ongoing economic reforms, describing them as bold measures that have helped stabilise the economy and laid the groundwork for future growth.
However, the Fund also cautioned that declining oil prices and global economic uncertainty could pose risks to the country’s macroeconomic outlook.

This was as the Central Bank of Nigeria (CBN) in its January 2025 Economic Report revealed that the federal government attracted $2.06 billion in foreign capital in January, compared to $1.57 billion in December 2024, amid favourable returns in the domestic financial market. The country also improved its trade surplus to $2.20 billion, from $1.06 billion in December.

The report posted on the apex bank’s website also revealed that portfolio investment inflow increased to $1.85 billion, from $1.23 billion mainly to higher purchases of money market instruments.
The IMF’s assessment was contained in a statement issued at the end of its 2025 Article IV Consultation Mission to Nigeria, which took place from April 2 to 15.

The fund noted that the team, led by Axel Schimmelpfennig, engaged with key stakeholders including the Minister of Finance and Coordinating Minister of the Economy, Wale Edun; Central Bank Governor Yemi Cardoso; other senior government officials; as well as representatives from the private sector, academia, and civil society.
IMF in its Article IV consultation report stated: “The Nigerian authorities have taken important steps to stabilise the economy, enhance resilience, and support growth. These reforms have put Nigeria in a better position to navigate the external environment.

 “The macroeconomic outlook is marked by significant uncertainty. Elevated global risk sentiment and lower oil prices impact the Nigerian economy.
“Macroeconomic policies need to further strengthen buffers and resilience, reduce inflation, and support private sector-led growth.”
Schimmelpfennig in the statement noted that the cessation of deficit financing by the CBN, the removal of costly fuel subsidies, and improvements in the foreign exchange market were major policy shifts that signaled a commitment to reform.

He stated: “The Nigerian authorities have taken important steps to stabilise the economy, enhance resilience, and support growth. The financing of the fiscal deficit by the central bank has ceased, costly fuel subsidies were removed, and the functioning of the foreign exchange market has improved.

“Gains have yet to benefit all Nigerians as poverty and food insecurity remain high.
“The outlook is marked by significant uncertainty. Elevated global risk sentiment and lower oil prices impact the Nigerian economy. The reforms since 2023, have put the Nigerian economy in a better position to navigate this external environment. “Looking ahead, macroeconomic policies need to further strengthen buffers and resilience, while creating enabling conditions for private sector-led growth.”

The report added: “The authorities communicated to the mission that they will implement the 2025 budget in a manner that is responsive to the decline in international oil prices. A neutral fiscal stance would support monetary policy to bring down inflation.

“To safeguard key spending priorities, it is imperative that fiscal savings from the fuel subsidy removal are channeled to the budget. In particular, adjustments should protect critical, growth-enhancing investment, while accelerating and broadening the delivery of cash transfers under the World Bank-supported program to provide relief to those experiencing food insecurity.”
In response to these risks, the IMF urged policymakers to sustain the current policy trajectory and adopt a tighter monetary stance to curb inflation.

“A tight monetary policy stance is required to firmly guide inflation down. The Monetary Policy Committee’s data-dependent approach has served Nigeria well and will help navigate elevated macroeconomic uncertainty. Announcing a disinflation path to serve as an intermediate target can help anchor inflation expectations,” it added.
Meanwhile, the CBN Economic Report also showed that the country’s Foreign Direct Investment (FDIs) declined to 0.07 billion from $0.12 billion in December.

Other investments, mainly loans, also decreased to $0.14 billion, from $0.22 billion in the preceding month, the report stated.
The Federal Capital Territory (FCT) accounted for the highest share of capital importation with 62.88 per cent, displacing Lagos State to the second position with 36.59 per cent, for the first time.
Others include Ogun (0.04 per cent) and Kano (0.01 per cent). Other destinations accounted for the balance.
However, the federal government’s fiscal deficit expanded in the review period compared to December due to lower revenue receipts.

Export receipts grew by 29.09 per cent to $5.37 billion, from $4.16 billion in the preceding month, reflecting increase in the export of both oil and non-oil products.

Import bills also increased by 2.26 per cent to $3.17 billion compared to $3.10 billion in December amid higher importation of non-oil products.

According to the CBN, provisional data revealed that fiscal operations of the federal government resulted in an expansion of fiscal deficit in January, compared with the level in the preceding month.

Federally collected revenue declined by 31.35 per cent, relative to the level in December, as retained revenue decreased by 69.19 per cent while its aggregate expenditure declined by 15.51 per cent.

Data further showed that primary deficit and overall deficit expanded relative to the preceding month, reflecting a lower collection of federal government independent revenue and FGN’s share of exchange gain.

Also, Gross Federation Account earnings declined, reflecting lower receipts from oil and non-oil sources.

According to the CBN, at N1.94 trillion, provisional gross federation account receipt was 31.35 per cent and 35.22 per cent below the level in the preceding month and the benchmark, respectively.

The report attributed the decline in revenues mainly to reduction in receipts from Petroleum Profit Tax (PPT), royalties, company income tax, and customs & excise duties.

Nevertheless, the composition of gross federation revenue showed that non-oil revenue remained dominant, accounting for 68.67 per cent, while oil revenue constituted the balance.

Non-oil revenue, at N1.33 trillion, was 22.18 per cent below the level in the preceding month, driven by low collections from federal government independent revenue, customs and excise duties and corporate tax.

Non-oil revenue was however, 8.25 per cent above the monthly target of ₦1.23 trillion.

In the review period, oil revenue declined by 45.45 per cent to ₦0.61 trillion on account of lower receipts from PPT and royalties.

It was 65.55 per cent short of the monthly target, due to shut-ins, arising from ageing oil pipelines and installations, the CBN noted.

Nonetheless, earnings from crude oil and gas export, increased in January, driven by increases in both crude oil price and domestic production.

Provisional data showed that aggregate receipts from crude oil and gas export increased to $4.80 billion, from $3.62 billion in December.

The increase was on account of the rise both in crude oil prices to $80.76pb from $74.72pb in the preceding month and domestic crude oil production to 1.54mbpd, from 1.48mbpd in December.

A disaggregation indicated that crude oil export receipts rose to $3.86 billion, from $2.68 billion as export earnings also increased to $0.95 billion, from $0.94 billion in the preceding month.

Furthermore, capital outflow increased in January driven by higher loan repayments and capital reversals.

Capital outflow rose to $1.20 billion, from $1.06 billion in the preceding month.

A disaggregation showed that loan repayments and capital reversals increased by 27.45 and 3.85 per cent, respectively, to $0.65 billion and $0.54 billion.

Repatriation of dividends, however, declined by 66.67 per cent to $0.01 billion.

In terms of share in total outflow, repayment of loans constituted 54.33 per cent, followed by capital reversals and repatriation of dividends at 44.81 and 0.85 per cent, respectively while other forms of outflow accounted for the balance.

According to the CBN report, external reserves stood at $38.88 billion at end-January 2025, from $40.19 billion at end-December.

The reserves however, remained above the international benchmark of three months of import cover, and could cover 8.82 months of import for goods and services or 13.20 months for goods only.

In addition, the economy recorded a lower net foreign exchange inflow, on account of decreased inflow through the Bank.

Foreign exchange flows through the economy amounted to a net inflow of $4.79 billion, compared with $5.01 billion in December.

Aggregate FX inflow declined to $9.63 billion, from $10.17 billion in the preceding month.

Similarly, the foreign exchange outflow decreased to $4.84 billion, from $5.17 billion in the preceding month.

FX inflow through the Bank declined to $2.33 billion, from $4.09 billion in the preceding month, while autonomous inflow increased to $7.31 billion, from $6.08 billion in the preceding month.

Outflow through the Bank fell to $3.80 billion, from $4.16 billion in the preceding month, while autonomous outflow rose to $1.04 billion, from $1.01 billion in December.

Consequently, the CBN recorded a net outflow of $1.47 billion, compared with $0.07 billion in December while a net inflow of $6.26 billion was recorded through autonomous sources, compared with $5.07 billion in the preceding month.

Nonetheless, the central bank stated that the Nigerian economy is projected to maintain a positive growth trajectory in 2025, predicated on the continued implementation of policy reforms, especially in the oil sector and foreign exchange market.

It stated that potential risks to the outlook, however, include heightened insecurity, unexpected depreciation of the naira, increasing cost of living and rising input costs.

“Inflation pressures are expected to moderate in the near term, hinged on improved security in food-producing areas, lagged impact of the policy rate hikes, stable PMS prices, and stability in the foreign exchange market.

“Nonetheless, exchange rate depreciation, growth in money supply, and escalating insecurity could undermine the outlook.”

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