The International Monetary Fund has endorsed Nigeria’s ongoing bank recapitalisation drive, stating that stronger capital buffers are cushioning the financial system against external shocks and strengthening resilience amid intensifying global uncertainties. Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department of the IMF, made this known 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 remain critical for emerging markets to withstand volatile global capital flows, reduce exposure to sudden market reversals, and maintain macroeconomic stability under uncertain financial conditions. He stressed the growing importance of bank recapitalisation during periods of heightened financial stress globally, noting that building a well-capitalised banking sector remains essential to sustaining global financial stability, particularly as economies confront persistent uncertainty.
According to Adrian, the benefits of bank recapitalisation become most evident during stress periods, as stronger capital positions enable financial institutions to absorb shocks, sustain lending activities, and support broader economic stability across markets. He 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, Adrian observed that the ongoing Middle East conflict has triggered an outsized reaction, with movements roughly twice as large as those recorded during the early stages of the Ukraine crisis. He noted that despite significant shifts in capital flow volumes, price reactions have remained relatively contained, reflecting broadly healthy global risk appetite. He called for continued investor confidence across financial markets despite prevailing geopolitical tensions.
Jason Wu, Assistant Director in the Monetary and Capital Markets Department, added that capital flows to emerging markets are increasingly driven by debt rather than foreign direct investment and equity, raising concerns about long-term financial stability globally. He noted that countries with stronger fiscal positions generally enjoy improved access to international markets and lower borrowing costs, underscoring the need for sustained fiscal reforms to guard against sudden capital outflows.
