The IMF supports the recapitalization of Nigeria’s banks and calls for tax strengthening

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

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Speaking during the presentation of the Global Financial Stability Report at the IMF and World Bank Spring Meetings in Washington, DC, Financial Advisor and Director of the IMF’s Money and Capital Markets Department, Tobias Adrian, emphasized that sound fiscal positions remain essential for emerging markets facing volatile global capital flows.

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

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

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

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

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Adrian also highlighted that maintaining debt sustainability and a stronger fiscal position remain central to the IMF’s engagement with countries, particularly in sub-Saharan Africa, where tailored programs address diverse economic challenges and vulnerabilities.

Speaking about capital flows to the region, Adrian noted that the ongoing conflict in the Middle East has triggered stronger market reactions, with movements approximately double those recorded during the initial phase of the Russia-Ukraine conflict.

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

He also called for continued efforts to maintain investor confidence despite rising geopolitical tensions around the world.

Meanwhile, Deputy Director of the International Monetary Fund’s Department of Monetary and Financial Markets, Jason Wu, said capital flows to emerging markets are increasingly driven by debt rather than foreign direct investment or capital inflows.

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

He also underlined the need for lasting fiscal reforms to protect against sudden capital outflows and strengthen economic resilience.

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