IMF Bemoans Inadequate Social Safety Net in Nigeria
The International Monetary Fund (IMF) has raised concerns over the lack of a robust social safety net to protect poor Nigerians from the adverse effects of ongoing economic reforms.
In an article published on its website on Monday, the Fund said that although Nigeria has made progress with recent reforms, poverty and food insecurity remain widespread, and the absence of a proper social buffer poses a risk to inclusive growth.
The article, jointly written by the IMF’s Mission Chief to Nigeria, Axel Schimmelpfennig, and its Resident Representative in Nigeria, Christian Ebeke, stressed that while policy shifts undertaken since 2023 have started to yield positive results, millions of Nigerians are yet to feel the impact.
“Nigeria lacks an effective social safety net to cushion the impact of shocks on the most vulnerable,” the IMF said, noting that scaling up the existing cash transfer system would be key to making growth more inclusive.
The Bretton Woods institution noted that the Bola Tinubu administration inherited a challenging economy marked by weak growth, falling per capita income, and rising poverty. It added that between 2014 and 2023, Nigeria’s real per capita GDP declined by an average of 0.7 per cent annually, with the poverty rate at 42 per cent in 2023.
The Fund said the government had since embarked on a series of bold economic reforms, including the liberalisation of the foreign exchange market, halting central bank financing of deficits, and the removal of fuel subsidies.
It also acknowledged improvements in revenue collection, although Nigeria’s tax-to-GDP ratio remains among the lowest in the world.
According to the IMF, these measures have helped stabilise the economy to an extent, with foreign exchange now more accessible through official channels, international reserves rising, and Nigeria’s return to the international capital market last December described as successful.
However, it warned that challenges persist. Inflation remains above 20 per cent, infrastructure—particularly power supply—continues to constrain growth, and oil revenues, which still account for about 30 per cent of government income, are vulnerable to global price shocks.
The IMF identified three policy priorities for Nigeria going forward. It said the country must pursue stronger and more sustained growth to lift millions out of poverty, with an urgent need to expand cash transfers in the short term.
It also called for a more effective and transparent budgeting framework to support infrastructure and social spending. The IMF also stressed the importance of raising domestic revenues to fund key sectors like agriculture, electricity, and climate adaptation.
It added that the ongoing tax reforms were necessary to broaden the revenue base and ensure compliance, adding that once the cost-of-living crisis eases and the cash transfer system is fully operational, there would be room to align tax rates with those of neighbouring countries.
The IMF urged the Nigerian government to ensure that the financial savings from the fuel subsidy removal are channelled into priority investments that would directly benefit citizens.
“Nigeria’s potential is beyond doubt,” the Fund said. “But achieving it will require continued reforms and an effective social safety net to carry the most vulnerable along.”