The International Monetary Fund has raised alarm over Nigeria’s 2025 fiscal outlook, warning that the country must urgently adjust its budget targets to prevent a deepening financial crisis.

In its Article IV consultation report released on Wednesday, the IMF highlighted a strong likelihood that Nigeria will exceed its fiscal deficit target for the year, citing declining oil prices, lower production, and challenges in capital project implementation.

It urged the Nigerian government to swiftly realign its fiscal policies and budget assumptions with current economic realities.

The report read, “Ensuring that the fuel subsidy savings accrue to the government would yield the proposed neutral stance—the full-year savings are estimated at two per cent of GDP. If the savings are not realised starting H2-2025 and given that tax policy reforms under consideration are not expected to deliver significant revenue gains in 2025, adjustment would have to come from the expenditure side (0.6 per cent of GDP), with staff recommending to prioritise adjustments to recurrent spending to protect growth-enhancing investments.”

The IMF’s report delivers a stark warning, projecting that Nigeria’s fiscal deficit could rise to 4.7 percent of GDP in 2025—well above the government’s budgeted target.

It noted, “Absent policy actions, the fiscal deficit in 2025 would exceed budget expectations,” further underlining the urgency of revising the fiscal plan.

The report noted that the 2025 budget, initially built on optimistic hydrocarbon revenue forecasts, now faces significant pressure due to the global decline in oil prices and continued uncertainty in the oil sector.

According to the IMF, “The 2025 budget was based on optimistic hydrocarbon revenue projections, even before the price decline since April,” highlighting the disconnect between initial revenue assumptions and the current economic environment.

Beyond the revenue shortfall, the IMF raised concerns about the execution of capital expenditure—an essential pillar of the 2025 budget.

While the government has outlined ambitious spending plans, the Fund warned that Nigeria’s track record of underperformance in delivering large-scale infrastructure projects makes it unlikely that capital expenditure targets will be fully achieved.

“Budgeted capital expenditure is likely to exceed implementation capacity, given execution in previous years,” the IMF cautioned, suggesting that delays in infrastructure development could intensify Nigeria’s fiscal pressures.

The IMF strongly urged the Nigerian government to take immediate steps to adjust its fiscal policies and revise the 2025 budget to align with current economic conditions.

“The authorities have announced that they will adjust the budget to lower oil prices, while pushing for higher hydrocarbon production and continuing with administrative efforts to boost revenue,” the report stated.

The IMF recommended that Nigeria adopt a neutral fiscal stance in 2025—aimed at preserving macroeconomic stability while sustaining critical investments in growth-driving sectors.