IMF to FG: End oil revenue dependence, widen tax base, upgrade infrastructure

From Uche Usim, Bangkok, Thailand

The International Monetary Fund (IMF) has urged Nigeria to drastically reduce its dependence on oil revenue and mobilise more funds from non-oil activities to finance critical infrastructure, healthcare and education.

The Fund also called for reforms to improve the business environment, attract long-term private investment and create jobs, warning that stronger economic growth must translate into better living conditions for Nigerians.

Director of the IMF’s African Department, Zeine Zeidane, gave the advice on Thursday while outlining policy priorities for Nigeria.

He noted that the country’s large market, youthful population and growing pool of technology-savvy entrepreneurs offered significant investment opportunities.

He said the government needed to strengthen revenue mobilisation while pursuing structural reforms in governance, the business environment and economic integration.

According to him, increasing domestic revenue outside the oil sector would create the fiscal space needed to fund development priorities without relying excessively on oil earnings.

Zeidane said Nigeria had considerable potential to attract private investment but needed policies that would make it easier for businesses to operate, expand and create employment.

He stressed that sustained reforms were essential to unlock the country’s economic potential and ensure that investment translated into productive jobs.

On subsidies, the IMF director advised the government to prioritise direct, targeted support for vulnerable households rather than broad-based subsidies that could place pressure on public finances.

He argued that energy subsidies often benefit wealthier segments of society disproportionately, limiting the resources available for social services and support for poorer citizens.

The Fund, he said, generally recommends gradually phasing out such subsidies while ensuring that the savings are directed towards people who genuinely need assistance.

“It’s important to have a targeted system of support to the most vulnerable component of society,” he said.

Zeidane explained that targeted assistance would protect vulnerable households while reducing the financial burden of subsidies on government revenue.

He also noted that subsidies could increase import bills in countries that depend on imported oil, further worsening pressure on public finances.

On monetary policy, Zeidane backed the Central Bank of Nigeria’s (CBN) adjustment of its policy stance following progress in reducing inflation.

He explained that the move towards lower interest rates represented a normalisation of monetary policy rather than a shift to an expansionary stance, as monetary conditions remained tight.

The IMF official said Nigeria’s progress in lowering inflation had helped improve its macroeconomic environment, but stressed the importance of maintaining sound policies to sustain stability.

Earlier, Deputy Director of the IMF’s African Department, Montfort Mlachila, said improved oil prices had boosted Nigeria’s foreign exchange earnings and external reserves, while declining inflation had supported economic activity.

The IMF projected Nigeria’s economy to grow by 4.2 per cent in 2026 and 4.3 per cent in 2027, following growth of 4.0 per cent in 2025.

Mlachila said the services sector remained a major driver of growth, alongside improved external conditions.

However, the Fund’s recommendations highlight the need for Nigeria to broaden its revenue base, strengthen social protection and improve the investment climate to ensure that economic gains support wider development.

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