IMF Executive Board Concludes 2011 Article IV Consultation with Nigeria
ABUJA, Nigeria, February 28, 2012/African Press Organization (APO)/ -- On February 22, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the 2011 Article IV consultation with Nigeria.1
Economic growth remains strong in Nigeria, with non-oil real gross domestic product (GDP) estimated to have grown at 8.3 percent in 2011 and overall real GDP at about 6.7 percent. Inflation slightly declined to 10.3 percent in December 2011 (year-on-year) from 11.7 percent a year earlier, in response to monetary tightening by the Central Bank of Nigeria (CBN) and moderation of food prices.
A modest fiscal consolidation took place in 2011. The non-oil primary deficit (NOPD) of the consolidated government is estimated to have narrowed slightly from about 34.6 percent of non-oil GDP in 2010 to 32.9 percent in 2011, mainly due to expenditure restraint at the federal government level. Higher oil prices helped shrink the overall fiscal deficit from 7.7 percent of GDP in 2010 to about 0.2 percent of GDP in 2011. Monetary policy was tightened substantially in 2011 in response to high inflation and strong foreign exchange demand. The central bank has gradually increased its overnight deposit rate by 900 basis points since September 2010 and tightened regulatory requirements. In November, it adjusted downward its soft band around the naira-US dollar exchange rate, and depreciation pressures on the naira have since abated. Financial soundness indicators point to continued improvements in the health of the banking system.
Growth is projected to remain robust in 2012 and inflation is projected to increase temporarily as a result of the increase in gasoline prices. The main downside risks to the short-term outlook are a further deterioration in the global environment and an exacerbation of current violence in northern Nigeria.
Executive Board Assessment
Executive Directors commended the authorities for countercyclical policies that have supported economic activity in challenging circumstances. Directors considered that the medium-term growth outlook remains favorable, although subject to external downside risks. Accordingly, they emphasized the continued need for policies to safeguard macroeconomic stability, diversify the economy, and make growth more inclusive.
Directors supported the authorities' strategy to rebuild fiscal buffers through a better prioritization of public expenditure, continued subsidy reform, and improved tax administration. Efforts in these areas will also provide the necessary resources for targeted social programs and needed infrastructure. Directors endorsed the use of conservative oil price assumptions in the preparation of the budget but noted that only a comprehensive tax reform will reduce the budget's dependence on oil revenues over the medium term.
Directors highlighted the importance of improving public financial management, including a stronger framework for managing Nigeria's oil wealth. They welcomed the establishment of a Sovereign Wealth Fund (SWF) and underscored that a rules-based approach to setting the budget reference oil price would strengthen the budgetary process and the operations of the SWF. In this regard, Directors recommended that outlays from the SWF's infrastructure fund be integrated into the budget and medium-term expenditure plans.
Directors noted the monetary authorities' commitment to further reduce inflation but considered that a pause in the tightening cycle is at present warranted. More broadly, they agreed that a monetary framework better focused on a clear inflation objective should help anchor inflation expectations and support disinflation. Greater exchange rate flexibility will also facilitate the pursuit of price stability.
Directors commended the authorities for their actions to resolve the recent banking crisis. The modalities of operation of the asset management corporation should continue to make sure that fiscal risks and moral hazard are minimized. Directors supported the central bank's focus on strengthening supervision and the regulatory framework, including by addressing remaining deficiencies in the Anti-Money Laundering/Combating the Financing of Terrorism regime. They also agreed that a Financial Sector Assessment Program update will help take stock of the progress so far and provide a road map for remaining reforms in the financial sector.
Directors concurred that wide-ranging reforms are needed to make growth more inclusive. They welcomed the authorities' initiatives to improve the business climate and reform sectors with high employment potential, particularly agriculture. Directors encouraged the authorities to persevere with planned reforms in the energy sector under appropriate social safeguards.
Nigeria: Selected Economic and Financial Indicators, 2007–12
2007 2008 2009 2010 2011 2012
Act. Act. Act. Act. Est. Proj.
National income and prices
(Percentage change, unless otherwise specified)
Real GDP (at 1990 factor cost)
6.4 6.0 7.0 7.8 6.7 6.9
Oil and Gas GDP
-4.5 -6.2 0.5 5.0 -2.2 1.9
9.5 9.0 8.3 8.4 8.3 7.8
Production of crude oil (million barrels per day)
2.22 2.09 2.16 2.46 2.44 2.48
Nominal GDP at market prices (trillions of naira)
20.9 24.6 25.1 29.6 36.3 40.7
Nominal non-oil GDP at factor cost (trillions of naira)
13.1 15.2 17.4 19.5 22.5 26.6
Nominal GDP per capita (US$)
1,153 1,401 1,110 1,261 1,479 1,545
Consumer price index (end of period)
6.6 15.1 13.9 11.7 10.3 11.0
Current account balance (percent of GDP) 1
16.8 13.6 7.9 1.3 6.9 6.4
Consolidated government operations
(percent of GDP)
Total revenues and grants
26.9 32.0 17.8 23.3 28.2 27.3
Of which: oil and gas revenue
20.4 25.8 10.6 16.3 21.6 20.0
Total expenditure and net lending
25.3 25.7 27.2 31.0 28.4 27.0
1.6 6.3 -9.4 -7.7 -0.2 0.3
Non-oil primary balance (percent of non-oil GDP)
-28.2 -29.9 -27.2 -34.6 -32.9 -27.9
Excess Crude Account / SWF (US$ billions) 2
14.2 19.7 7.1 2.7 4.7 14.8
Money and credit
(Change in percent of broad money at the beginning of the period, unless otherwise specified)
44.2 57.8 17.5 7.0 9.8 18.6
Net foreign assets
23.5 23.3 -10.9 -10.3 7.0 12.0
Net domestic assets
20.8 34.5 28.4 17.4 2.8 6.6
Treasury bill rate (percent; end of period)
7.8 5.6 4.0 7.5 15.1 ...
(Percentage change, unless otherwise specified)
Exports of goods and services
13.9 30.1 -33.4 31.2 26.9 3.4
Imports of goods and services
29.8 37.4 -22.6 52.7 5.9 8.0
Terms of trade
1.4 11.8 -17.2 10.6 9.5 -2.2
Price of Nigerian oil (US$ per barrel)
71.1 97.0 61.8 79.0 109.2 103.7
Nominal effective exchange rate (end of period)
100.3 101.6 82.2 83.6 81.7 ...
Real effective exchange rate (end of period)
108.5 122.9 109.9 120.7 128.8 …
Gross international reserves (US$ billions) 3
51.3 53.0 42.4 32.3 32.9 39.2
(equivalent months of imports of goods and services)
9.5 12.7 6.7 4.8 4.5 5.1
Sources: Nigerian authorities and IMF staffs' estimates and projections.
1Large errors and omissions in the balance of payments suggest that the current account surplus is overestimated by a significant (but unknown) amount.
2Includes all components of the sovereign wealth fund (SWF).
3Includes $2.6 billion in 2009 on account of the SDR allocation. From 2012 onward, it reflects accumulation in the stabilization component of the SWF.
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.