The Naira could depreciate by an additional 35% in 2024, according to the IMF


The Naira may depreciate by an additional 35 percent this year, according to a warning from the International Monetary Fund (IMF). This could result in an inflation rate apex of 44 percent, before monetary policy tightening can bring the situation under control.

The IMF revealed this information in its Post-Financing Assessment and Staff Report for February 2024, where it was observed that the country’s monetary policy is presently inadequately restrictive to contain inflation at 20 percent, despite ongoing challenges to the Naira.
In light of the recent liberalization of commodity imports and the lack of domestic production, the report predicted that the exchange rate would likely depreciate further.
Following severe flooding in late 2022, Nigeria was struck by another adverse climate shock in early 2024, according to the IMF. This further weakened the country’s agricultural sector, resulting in a decrease in output and an increase in food prices.
The nation would benefit, according to the Bretton Woods institution, from devising a comprehensive macroeconomic and growth strategy in collaboration with development partners and with their assistance.
According to the document, this would entail implementing aggressive monetary tightening, fiscal adjustment to restore macroeconomic stability, and climate adaptation measures.
It emphasized that the sharp decline in real incomes had weakened domestic demand, as investments in the energy sector were likely to cease due to rising costs and production declines.
Additionally, the fund forecast that the nation’s growth might decline to zero percent in 2024, recovering only gradually to two percent by 2028.
The International Monetary Fund (IMF) has identified Nigeria’s net international reserves level of uncertainty and exogenous disruptions that affect external stability, poverty, and food insecurity as further sources of risk.

Additionally, the publication predicted that in 2024 and 2025, the fiscal deficit might surpass six percent of GDP, due in part to a rise in implicit fuel subsidies and increased transfers to pacify social unrest (one percent of GDP).In light of constrained external financing alternatives and escalating expenditures, the utilization of CBN and domestic financing is on the rise. Despite the implementation of expenditure measures by the government in 2026, such as the gradual elimination of implicit fuel subsidies, the debt to GDP ratio continues to increase by six percentage points above its initial value by 2028.
“Portfolio outflows are prompted by the surge in inflation and uncertainty, and Nigeria is unable to obtain Eurobond financing,” the report states. In 2025, reserves decrease to $17 billion. The maximal obligation level under the RFI is greater than 8% of officially reported reserves.Nigeria has the capacity to reimburse the fund, notwithstanding the worst-case scenario. This is predicated on the authorities’ continued emphasis on servicing external debt. Nonetheless, debt service would directly conflict with pressing humanitarian concerns such as food insecurity and the escalation of poverty, which would require higher priority.Consequently, trade-offs may be severe, even if the authorities reserve the residual SDR allocation for RFI repayments.

“Also posing additional risks are uncertainties regarding the level of Nigeria’s net international reserves and exogenous shocks that affect external stability, poverty, and food insecurity.”