The International Monetary Fund (IMF) has endorsed the Central Bank of Nigeria’s (CBN) decision to cut interest rates. However, it says monetary policy is still tight.
Zeine Zeidane, Director of the IMF’s African Department, made the remarks on Thursday. He spoke at a press briefing on the sidelines of the IMF/World Bank Annual Meetings in Bangkok, Thailand.
Why the rate cut is not an easing
In September, the CBN’s Monetary Policy Committee (MPC) lowered the Monetary Policy Rate (MPR) by 350 basis points. The rate fell to 23 per cent from 26.5 per cent.
Zeidane said inflation has slowed enough to allow this move. As a result, the central bank could bring down the real interest rate and still keep its tough stance.
“It’s the right thing to do, and it’s not easing yet because the stance itself remains a tight stance,” he said.
The IMF’s view suggests the CBN has not yet signalled a push for cheaper credit.
Growth outlook improves
The Fund also upgraded its outlook for the economy. It expects Nigeria to grow by 4.2 per cent this year, compared with four per cent in 2025. Growth should reach 4.3 per cent in 2027.
Montfort Mlachila, the department’s Deputy Director, linked the gains to higher oil prices. These have lifted foreign exchange receipts and external reserves. They have also added liquidity to the economy.
He said services remain the main driver of growth. He also noted that inflation has dropped sharply since 2025. This has strengthened macroeconomic conditions and improved foreign exchange availability.
IMF calls for deeper reforms
Still, the IMF warned that the momentum may not last without further action. It urged the government to push structural reforms and improve the business environment. It also wants more domestic revenue, especially from outside the oil sector.
According to Zeidane, extra revenue would give the government room to spend on education, health and infrastructure. It would also reduce reliance on oil income.
He said Nigeria’s large market, young entrepreneurs and tech-savvy population offer strong opportunities for private investors. But he added that governance and business environment reforms must come first. These steps, he said, would speed up growth and create jobs.
Subsidy savings should reach the needy
On subsidies, the IMF said energy support mostly benefits wealthier people. Zeidane explained that much of the money goes to those who do not need it.
The Fund advised governments to remove subsidies gradually. It also urged them to channel the savings to vulnerable households.
Regional report praises reforms
The IMF’s latest Regional Economic Outlook backed these points. It said foreign exchange reforms and fuel subsidy cuts in Nigeria and Ethiopia have improved stability. It added that such steps have strengthened the case for private investment.
The report also credited better revenue and monetary frameworks across the region. It said structural reforms in South Africa have helped too.
