Experts at the International Monetary Fund clash with financial analysts on the best remedies for Nigeria's economy

Nigeria's top economists and financial experts have voiced disagreement with certain policy recommendations made by the International Monetary Fund, while endorsing the Fund's warning against the Federal Government's proposed $5 billion loan from a bank in Abu Dhabi.

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The IMF's 2026 Article IV Mission Concluding Statement cautioned against the loan from First Abu Dhabi Bank of the United Arab Emirates, citing a collateral amount of 133.3% of the loan as a significant risk.

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Other key points from the IMF statement include the need for Nigeria to increase its VAT rate, which is currently low compared to other countries in the region, and for the Central Bank of Nigeria to continue monetary tightening due to renewed inflationary pressures.

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The IMF also advised the Federal Government to increase funding for its cash transfer program, as poverty rates are on the rise, and to ensure more transparency in its budgetary spending, with a projected deficit of 4.4% of 2025 GDP.

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Inflation is expected to moderate in the second half of the year, according to the IMF, which also noted that reforms have strengthened macroeconomic stability, and the Federal Government should guard against excessive reliance on portfolio investments.

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The Federal Government has welcomed the IMF statement, with Minister of Finance and Coordinating Minister of the Economy, Mr. Taiwo Oyedele, stating that it validates the country's economic reform program under the leadership of President Bola Ahmed Tinubu.

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Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, has backed the IMF's concerns over Nigeria's proposed $5 billion borrowing, emphasizing the need for a more cautious approach to debt accumulation.

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Yusuf agreed with the IMF's emphasis on debt sustainability and prudent fiscal management, noting that the country's growing debt-service burden is a major source of concern and that a substantial share of public revenue is being committed to debt servicing.

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He urged the government to carefully assess the cost, tenor, repayment terms, currency risks, and developmental impact of the loan before proceeding, and to prioritize affordable and concessional financing for productive investments.

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Yusuf also called for a more balanced policy mix, arguing that while tight monetary policy has contributed to exchange-rate stability and inflation moderation, elevated interest rates are constraining investment, business expansion, and job creation.

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Head of Equity Research at Quest Merchant Bank, Mr. Tunde Abidoye, supported the IMF's reservations on the proposed UAE loan, describing the transaction as risky due to its structure as a total return swap, a derivative instrument that exposes the country to significant volatility.

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Chief Economist at United Capital Plc, Mr. Ayodele Akinwunmi, took a different position on external borrowing, saying that foreign loans could be beneficial if deployed to productive infrastructure projects, given Nigeria's current macroeconomic environment.

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David Adonri, Analyst and Executive Vice Chairman at High Cap Securities Limited, commented that the IMF's counsel to the Federal Government against borrowing is reasonable, but expressed doubt that the government would heed the advice due to its debt trap situation.

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On the IMF's recommendation for a VAT increase, Abidoye disagreed, arguing that Nigerians have already borne the burden of recent reforms and that the timing is not right for a VAT increase.

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Akinwunmi also rejected the IMF's call for a VAT increase, stating that what Nigeria needs is not higher tax rates but broader tax compliance to strengthen government revenue without stifling growth.

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Adonri said the IMF's advice to raise VAT is unacceptable, as taxation is a serious fiscal tool aimed at specific strategic imperatives of the economy, and that VAT is a consumption levy that can worsen poverty levels.

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Abidoye argued that an immediate rate hike may not be necessary, as the current inflationary pressure is largely driven by supply-side energy shocks, and that monetary policy can do little to address first-round effects.

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Akinwunmi said the current stance of the Central Bank of Nigeria remains appropriate, warning that additional rate hikes could undermine economic growth, and that inflation is likely to remain in double digits in the second half of the year.

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Adonri stated that the IMF recommendation on monetary policy tightening is justifiable, as the Central Bank loosened monetary policy prematurely, and that official figures indicate that inflation is moderating, but the reality on the ground shows otherwise.

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Both Abidoye and Akinwunmi agreed with the IMF's position that Nigeria should reduce its dependence on Foreign Portfolio Investment and attract more productive Foreign Direct Investment to support long-term economic growth.

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Adonri commented that portfolio investment is hot money that is very volatile, and that what the economy needs now is patient capital, such as Foreign Direct Investment, to boost the supply side of the economy.