Tough times ahead as IMF warns on oil volatility
The International Monetary Fund (IMF) has cautioned that oil-exporting nations, including Nigeria, may face difficult economic conditions despite rising crude prices triggered by tensions involving the United States, Israel, and Iran.
IMF Managing Director, Kristalina Georgieva, advised these countries to channel gains from the current oil price surge into building fiscal buffers that can shield their economies from future shocks.
Speaking at the World Bank/IMF Spring Meetings in Washington, DC, Georgieva noted that global economic pressures are intensifying, with increases not only in energy prices but also in fertiliser costs and shipping expenses. These developments, she said, are expected to slow production, output, and consumption worldwide.
Nigeria, which earns more than 70 per cent of its foreign exchange from crude oil exports, stands to benefit from oil prices remaining above $92 per barrel. However, Georgieva warned that delays in oil shipments and ongoing geopolitical tensions could worsen price volatility and create supply gaps.
She urged governments to provide targeted support to businesses and citizens affected by these external shocks while maintaining fiscal discipline.
Georgieva also highlighted the burden of fuel subsidies, noting that countries still implementing such policies could face significant fiscal strain. She stressed the importance of strengthening revenue generation, especially as debt servicing continues to consume a large share of government income in many low-income nations.
Davide Furceri, Division Chief in the IMF’s Fiscal Affairs Department, added that the ongoing conflict is forcing governments to balance protecting citizens from rising prices with preserving fiscal stability.
He explained that the economic impact of the crisis varies widely. While energy-importing countries, particularly low-income ones, bear the highest costs, even major oil exporters are not immune to the disruptions.
Furceri warned that prolonged conflict could further strain public finances through rising food and fuel prices, tighter financial conditions, reduced economic activity, and increased defence spending. In such a scenario, global debt risks could climb significantly.
He also pointed out that declining external aid makes domestic revenue mobilisation more critical for low-income countries, adding that effective tax reforms could help improve government earnings.
The IMF emphasised that as countries respond to the current economic shock, they must strike a careful balance between supporting vulnerable populations and maintaining stable market conditions.
