Oil
IMF supports central bank rate cut as forex reforms yield results
The International Monetary Fund has endorsed Nigeria's recent monetary policy adjustment, noting that falling inflation has created room for interest rate normalisation.
Key points
- The IMF backed the Central Bank of Nigeria's decision to lower the Monetary Policy Rate by 350 basis points.
- CBN Governor Olayemi Cardoso stated that previous foreign exchange pressures forced the country to diversify its inflow sources beyond oil.
- Fitch Ratings upgraded the outlooks of nine Nigerian banks and two bank holding companies to Positive.
- The IMF raised Nigeria's economic growth forecast for 2026 to 4.2 per cent.
What happened
The International Monetary Fund (IMF) has expressed support for the Central Bank of Nigeria's (CBN) recent monetary policy shift. Speaking during the IMF and World Bank Annual Meetings held in Bangkok, Thailand, senior IMF officials described the adjustment as a suitable response to sustained progress in lowering inflation.
The endorsement follows the CBN's September decision to reduce the Monetary Policy Rate from 26.5 per cent to 23 per cent. According to CBN Governor Olayemi Cardoso, severe foreign exchange constraints—which previously saw net reserves decline to approximately $3 billion and backlogs surpass $7 billion—compelled the institution to look beyond petroleum exports for foreign currency inflows.
Why it matters
For an economy where fuel exports accounted for 85.9 per cent of merchandise exports in 2025, according to World Bank figures, diversifying foreign exchange sources is critical for macroeconomic stability. Cardoso noted that targeted efforts to ease capital flow restrictions for the diaspora helped monthly remittances climb significantly, reaching $950 million by July towards a $1 billion target.
Fitch Ratings has responded to the improving economic backdrop by revising the outlooks for eleven Nigerian financial institutions from Stable to Positive, affirming their Long-Term Issuer Default Ratings at 'B'. Meanwhile, the IMF raised Nigeria's growth projection for 2026 to 4.2 per cent, up from 4.0 per cent in 2025, driven largely by services and more favourable external conditions.
What comes next
Despite the positive outlook, the IMF advised Abuja to accelerate structural reforms, enhance domestic revenue mobilisation outside the energy sector, and phase out broad energy subsidies to protect vulnerable populations. Cardoso emphasised that sustaining market confidence will depend on consistent policy implementation and tangible outcomes.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Crude benchmarks move budgets, currencies and inflation in producer and importer countries alike. For economies such as Nigeria, where fuels dominate exports, production and refining decisions move the whole economy.
85.9% of Nigeria’s merchandise exports were fuels in 2025Countries in this story
Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
