Inflation Decline in Nigeria: A Sign of Policy Success
The International Monetary Fund (IMF) has highlighted that the slowdown in inflation in Nigeria is largely due to policy tightening, especially in monetary policy, and the impact of exchange rate reforms. This observation was made by Abebe Selassie, the Director of the African Department at the IMF, during a press conference on the IMF’s October Regional Economic Outlook for Sub-Saharan Africa.
The National Bureau of Statistics recently reported that Nigeria’s headline inflation rate dropped to 18.02% in September from 20.12% in August 2025. This marks the sixth consecutive month of declining inflation and the first time in three years that the rate has fallen below the 20% threshold.
Selassie noted that the decline in inflation aligns with the tightening of policies implemented over recent years. He emphasized that this trend is also influenced by the exchange rate adjustments that have taken place over the past year. However, he acknowledged that more needs to be done to reach the government’s target.
He pointed out that while the rate of price increase is slowing down, there has been a significant shift in the level of inflation. This situation is not unique to Nigeria but is particularly severe due to the cost-of-living crisis affecting the population more than other regions.
Addressing Debt Concerns in Sub-Saharan Africa
Selassie also addressed concerns about rising debt levels in the region. He mentioned that public debt is high in many countries, with about 20 countries facing a high risk of debt distress. These include 14 countries at high risk and six in actual debt distress. He stressed the need for reforms to address these challenges.
Reforms aimed at encouraging higher economic growth are essential to make debt servicing more affordable. Additionally, fiscal reforms are needed to improve revenue mobilisation and public expenditure management. Countries like Nigeria have been investing heavily in infrastructure, health, and education, which are crucial areas for development.
Revenue Mobilisation and Taxation
Revenue mobilisation is a key challenge for Nigeria, as the country has long relied on oil resources. Selassie emphasized the importance of shifting focus to domestic revenue mobilisation. He highlighted that the tax system must capture the return on investments and ensure that collected funds are used effectively.
People often view tax levels as high because they do not see sufficient public services. Therefore, demonstrating that collected money is used for the right purposes is vital. Minimising leakages and corruption is also part of this effort. The extent of these challenges varies across countries, but they remain an important agenda for reform.
Combating Illicit Financial Flows
Illicit financial flows pose another significant challenge. Selassie noted that these can be blocked if the government understands the nature of the illegal fund flows. Different types of illicit flows exist, ranging from simple trade leakages to those related to tax evasion or corruption. Addressing these requires identifying their sources and implementing targeted reforms.
Economic Growth Projections for Sub-Saharan Africa
The sub-Saharan region’s economic growth is projected to remain steady at 4.1% in 2025, with a slight increase expected in 2026. This reflects ongoing progress in macroeconomic stabilisation and reform efforts. Countries such as Benin, Ivory Coast, Ethiopia, Rwanda, and Uganda are among the world’s fastest-growing economies. However, resource-intensive and conflict-affected countries continue to face significant challenges.
Key Priorities for Sub-Saharan Africa
Selassie outlined two major priorities for countries in the region: domestic revenue mobilisation and debt management. He stressed the potential for raising revenues through comprehensive tax policy reforms and improved tax administration. Modernising tax systems, streamlining inefficient tax expenditures, and strengthening enforcement are crucial steps.
However, these efforts must go beyond technical adjustments. Building public trust in tax institutions, strengthening institutional capacity, and conducting careful impact assessments are essential to ensure effective and equitable reforms.
Debt management is equally important. Enhancing debt transparency and strengthening public financial management can reduce borrowing costs and unlock innovative financing. Publishing comprehensive debt data and reinforcing budget oversight are key steps forward.
IMF Support for Sub-Saharan Africa
The IMF has disbursed about $4 billion to sub-Saharan Africa in 2025 so far, with the region being the largest recipient of its capacity development efforts. This support underscores the importance of continued collaboration and reform to achieve sustainable growth and resilience in the region.
