IMF: Nigeria Must Expand Cash Transfers To Reduce Poverty

The International Monetary Fund (IMF) is urging Nigeria to scale up its cash transfer system to protect vulnerable citizens from the effects of economic reforms, high inflation and food insecurity.
In an article published Monday, Axel Schimmelpfennig, IMF mission chief to Nigeria, and Christian Ebeke, the Fund’s resident representative, said that although the government’s recent economic policies have shown early signs of progress, millions of Nigerians still face worsening poverty and rising costs.
“Making growth more inclusive also requires scaling up the existing cash transfer system,” the authors wrote. “This is essential in the immediate term while broader reforms take hold.”
According to the IMF, real per capita gross domestic product declined by an average of 0.7 percent per year between 2014 and 2023. The poverty rate stood at 42 per cent in 2023, and limited access to foreign exchange led many to rely on costlier parallel markets.
The Fund noted that Nigeria’s finances were previously strained by a fuel subsidy system that created regular petrol shortages. At the same time, direct central bank financing of the fiscal deficit drove up inflation.
Since 2023, the Nigerian government and the Central Bank of Nigeria have ended fuel subsidies, stopped central bank deficit financing and liberalised the foreign exchange market. The IMF said these reforms have improved dollar liquidity, strengthened international reserves and helped Nigeria return to global capital markets, earning recent credit upgrades.
But the IMF warned that challenges persist, with inflation still above 20 percent and infrastructure shortfalls—particularly in electricity—limiting economic growth. Nigeria also remains vulnerable to external shocks, including volatile oil prices and rising global borrowing costs.
The Fund said increased public investment is urgently needed, particularly in agriculture, infrastructure and climate adaptation. It called for more domestic revenue generation and effective budget management, noting that current debt service obligations leave little room for capital spending.
“To meet its development needs, Nigeria must increase revenues and ensure that public savings from subsidy reforms are used for priority investments,” the IMF said.
The fund also emphasised the need for strong and transparent budget processes, realistic revenue projections and better reporting systems to improve public trust and accountability.
“While the recent reforms have laid a foundation, continued progress will depend on protecting the most vulnerable and building a stronger, more resilient economy,” the IMF said.