The International Monetary Fund (IMF) has urged the Federal Government to provide targeted, temporary cash transfers to vulnerable Nigerians to cushion the impact of rising food and energy prices, saying economic growth has not eased the hardship many households face.

The Fund said Nigeria’s economy continued to grow partly because the country exports energy, but poverty remained high, and many people still struggled to meet basic needs.

Speaking at the IMF’s World Economic Outlook press briefing, Deniz Igan, Division Chief in the Fund’s Research Department, said the government needed to address the population’s immediate needs while maintaining medium-term economic stability.

“What we’re advocating for is cash transfers, income support, targeted temporary income support for the most vulnerable households,” Igan said.

She argued that such assistance could help reduce poverty and improve food security in Nigeria.

She said the support should align with the government’s medium-term fiscal framework, adding that improving the quality of public spending and revenue collection would be necessary to sustain the approach.

The IMF’s recommendation comes amid growing pressure on households and businesses from higher food and energy prices, among other commodities, which have increased the cost of production, transportation and basic consumption.

The IMF said Nigeria’s progress in reducing inflation could allow a less restrictive monetary policy but urged the Central Bank of Nigeria (CBN) to base its decisions on economic data and communicate them clearly to sustain confidence.

Also speaking while presenting the Global Financial Stability Report, Assistant Director, Monetary and Capital Markets Department of the IMF, Jason Wu,

Said improvements in inflation suggested that a less tight monetary policy stance might be appropriate.

“We have seen improvements on the inflation front, which suggests that perhaps a not-as-tight monetary policy stance would be appropriate.”

He, however, said the Central Bank’s credibility remained essential, adding that its decisions should be guided by economic evidence and clearly explained to the public and financial markets.

“I think what’s important is credibility. In other words, the central bank has to be data-driven and has to be able to explain the decisions clearly,” he said.

Wu said transparent communication and continued reliance on economic data would be important in managing further increases in inflation, adding that developments observed so far appeared encouraging. He stressed the need for clear and transparent monetary policy communication.

Wu also called for stronger banking regulations after the recapitalisation exercises, noting that banks needed to maintain adequate capital and liquidity to prevent financial risks from building up.

He said recapitalisation should be followed by appropriate regulatory measures to strengthen banks’ ability to withstand financial pressures.

“In emerging economies, after recapitalisation, [it is important to] start imposing appropriate regulations to prevent risks from building up in the future,” he said.

According to him, banks should maintain sufficient capital and liquidity, while identifying credit losses and bad loans promptly,

Saying these measures were necessary to strengthen the banking sector and prevent emerging risks from threatening financial stability.

Wu also highlighted the relationship between governments and banks in African economies, describing banks’ exposure to sovereign risks as an important area that needs attention.

He said understanding the extent of banks’ exposure to government-related risks was necessary to strengthen their resilience.

The IMF official did not specify additional capital requirements for Nigerian banks, but identified capital adequacy, liquidity, loan-loss recognition and exposure to sovereign risks as important areas for regulatory attention.

Wu noted that international capital markets remain open to emerging economies seeking to raise funds through Eurobond issuances, with financing activities continuing despite uncertainties in the global economy.

“I’ll just observe in the report that the market for Eurobonds remains very much open. Financing is happening,” he said.

However, he warned that emerging markets could face higher borrowing costs if global financial conditions deteriorated.

He said emerging economies had shown resilience, often supported by sound domestic policies and strong economic fundamentals.

But he noted that the combination of high yields and narrow spreads in international bond markets was unusual and could expose borrowers to changes in global financial conditions.

Yields represent the returns investors demand on bonds, while spreads measure the additional return they require for holding a borrower’s debt compared with a benchmark investment.

He warned that borrowing costs could rise further if developments in advanced economies, or fresh energy shocks, push up global yields.

Such developments, he said, could widen borrowing spreads and make financing more expensive for emerging economies, including countries with sound policies and strong economic fundamentals.

He therefore urged emerging markets to strengthen their resilience ahead of less favourable conditions in international financial markets.

Wu also stressed the importance of transparency in helping emerging economies maintain access to international financing.

He said governments needed to ensure that investors had clear information about their outstanding financial obligations.

According to him, transparency could reassure investors and help keep international capital markets open to emerging economies, including African countries that need to borrow in their domestic currencies.

He said disclosing outstanding obligations was important for maintaining investor confidence, especially when global financial conditions were uncertain.

Presenting the global economic outlook, Sylvana Tenreyro, the IMF’s Economic Counsellor and Director of its Research Department, said the world economy had remained resilient but was facing increasing risks.

She said global growth was projected at 3.1 per cent in the forecast year, about 0.4 percentage points below the previous year’s rate, before rising to 3.4 per cent in 2027.

Tenreyro said two major developments were shaping the outlook: rising energy and commodity prices, which were weighing on economic activity, and investment in artificial intelligence (AI) and related technologies, which was supporting investment and growth.

She warned that higher prices for crude oil, gas, metals and fertilisers were raising production and transportation costs, putting additional pressure on businesses and households.

Countries with limited fiscal resources and those heavily dependent on imported food and energy were particularly vulnerable to supply disruptions and rising prices, she said.

Tenreyro noted that some countries had responded to changing supply conditions by redirecting imports, increasing production or finding alternative sources of energy and other commodities.

She added that investment in renewable energy and alternative sources could help reduce the effects of energy price shocks over time.

The Fund also urged governments to strengthen public finances and rebuild fiscal buffers so they can respond more effectively to future economic shocks.

Tenreyro said rising borrowing costs and debt-servicing obligations could leave governments with fewer resources for infrastructure, social services and investment in renewable energy.

She said additional commodity-price shocks could worsen fiscal weaknesses and place further pressure on economic growth.

According to her, governments should address excessive budget deficits and strengthen their public finances where necessary, while ensuring that adjustments did not impose unnecessary hardship on vulnerable groups.

She said fiscal consolidation should be carefully designed to protect those most affected by economic difficulties and avoid measures that could undermine the recovery.

Where government assistance was required, she said, it should be temporary, targeted at those who needed it most and consistent with medium-term fiscal sustainability.

The IMF also called for governments to direct public spending toward productive and essential priorities while rebuilding the financial capacity needed to withstand future disruptions.

On monetary policy, Tenreyro said central banks should keep focusing on price stability and bringing inflation back to their targets.

She said the appropriate policy response would depend on conditions in individual countries, including inflation levels, labour-market developments and exposure to commodity-price and technology-related shocks.

She said central bank independence was essential to achieving inflation targets and supporting sustainable economic growth over the medium term.

She added that credible monetary policy frameworks and clear communication could help keep inflation expectations under control and strengthen confidence in economic management.

The IMF said monetary and fiscal policies should support overall economic stability while allowing private businesses to invest, create jobs and drive innovation.

Tenreyro also warned that investment in artificial intelligence could pose financial risks because much of the spending was concentrated in a relatively small number of companies and sectors.

She said a correction could occur if expectations about future productivity gains or profitability proved too optimistic, potentially affecting investment, financial conditions and economic growth beyond the technology sector.

She urged policymakers to monitor these developments and remain alert to emerging financial stability risks.

The Fund called on countries to strengthen supply chains, reduce vulnerabilities in essential supplies, and encourage productivity-enhancing investment to better withstand future economic shocks.

Concluding her presentation, Tenreyro said the global economy needed to move beyond managing immediate shocks towards building stronger defences against future disruptions.

She said restoring fiscal space, strengthening supply-side resilience and improving countries’ capacity to withstand economic shocks would help create the conditions for more sustainable growth. (The Nation)