The International Monetary Fund (IMF) has endorsed Nigeria’s ongoing bank recapitalisation drive.
It said that stronger capital buffers are cushions for the financial system against external shocks and strengthens resilience amid intensifying global uncertainties.
Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department said this during the Global Financial Stability Report presentation at the IMF/World Bank Spring Meetings in Washington DC on Tuesday.
Adrian said that robust fiscal positions remained critical for emerging markets to withstand volatile global capital flows.
He said this would reduce exposure to sudden market reversals and maintain macroeconomic stability under uncertain financial conditions.
He stressed the growing importance of bank recapitalisation during the periods of heightened financial stress globally.
Adrian said that building a well-capitalised banking sector remained essential to sustaining global financial stability, particularly as economies confront persistent uncertainty.
He also said that tightening financial conditions, and evolving risks across international capital markets was crucial for economic sustenance.
According to him, the benefits of bank recapitalisation become most evident during stress periods, as stronger capital positions enable financial institutions absorb shocks, sustain lending activities, and support broader economic stability across markets.
Adrian said that ensuring debt sustainability and maintaining stronger fiscal positions are foundational to IMF engagement with countries, particularly across Sub-Saharan Africa, where tailored programmes address diverse economic challenges and vulnerabilities.
On capital flows to Sub-Saharan Africa, he said: “I have observed the ongoing Middle East conflict have triggered an outsized reaction, with movements roughly twice as large as those recorded during early stages of Ukraine crisis.”
Adrian said that in spite of the significant shifts in capital flow volumes, price reactions have remained relatively contained, reflecting broadly healthy global risk appetite.
He also called for continued investor confidence across financial markets in spite of prevailing geopolitical tensions worldwide.
Jason Wu, Assistant Director in the Monetary and Capital Markets Department at the IMF, said that the capital flows to emerging markets are increasingly driven by debt rather than foreign direct investment and equity.
He said that the raising concern was about long-term financial stability outlook globally.
Wu said that countries with stronger fiscal positions generally enjoy improved access to international markets and lower borrowing costs.
He also underscored the need for sustained fiscal reforms to guard against sudden capital outflows. (NAN)
