IMF backs Nigeria’s bank recapitalisation, urges stronger fiscal buffers

The International Monetary Fund (IMF) has thrown its weight behind Nigeria’s ongoing bank recapitalisation programme, saying stronger capital buffers are helping protect the financial system from external shocks and rising global uncertainty.

Speaking during the presentation of the Global Financial Stability Report at the IMF/World Bank Spring Meetings in Washington, D.C., the Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department, Tobias Adrian, stressed that solid fiscal positions remain essential for emerging markets navigating volatile global capital flows.

Adrian explained that stronger fiscal buffers help countries reduce exposure to sudden market reversals and maintain macroeconomic stability during uncertain financial conditions.

He added that bank recapitalisation has become increasingly important as global financial stress intensifies.

According to him, well-capitalised banks are better positioned to absorb shocks, sustain lending activities, and support broader economic stability, particularly at a time of persistent global uncertainty.

He also highlighted tightening financial conditions and evolving risks in international capital markets as factors requiring careful policy responses.

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Adrian further emphasised that maintaining debt sustainability and stronger fiscal positions remain central to the IMF’s engagement with countries, especially in Sub-Saharan Africa, where tailored programmes address varying economic challenges and vulnerabilities.

Speaking on capital flows to the region, Adrian noted that the ongoing Middle East conflict has triggered stronger market reactions, with movements roughly twice the scale recorded during the early phase of the Russia-Ukraine conflict.

Despite this, he said price movements have remained relatively contained, reflecting sustained global risk appetite.

He also called for continued efforts to maintain investor confidence despite rising geopolitical tensions worldwide.

Meanwhile, the Assistant Director in the IMF’s Monetary and Capital Markets Department, Jason Wu, said capital flows to emerging markets are increasingly being driven by debt rather than foreign direct investment or equity inflows.

Wu warned that the trend raises concerns about long-term global financial stability, noting that countries with stronger fiscal positions typically enjoy better access to international markets and lower borrowing costs.

He also stressed the need for sustained fiscal reforms to guard against sudden capital outflows and strengthen economic resilience.