IMF Staff Concludes Visit to Nigeria

IMF News, July 13, 2018

Source details

Press Release No. 18/292; mission dates: June 27 to July 9, 2018.
IMF staff team led by Amine Mati, Senior Resident Representative and Mission Chief for Nigeria.
Purpose: discuss recent economic and financial developments, update macroeconomic projections, and review reform implementation.
Statement clarifies: views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board; this mission will not result in a Board discussion.

International reserves remained stable at about $47 billion, supported by some convergence in existing foreign exchange windows, despite some reversal of foreign inflows since April.
Inflation declined to its lowest level in more than two years.
Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year.
Private sector lending remains low and foreign exchange inflows are mostly short-term.
Non-oil non-agricultural sector activity remains weak due to lower purchasing power and credit risk limiting bank lending.
Current spending remains in line with expectations.
Federal Government’s interest-to-revenue ratio is expected to absorb more than half of revenues this year.

Corporate tax collection efforts improved.
Revenue shortfalls and late adoption of the 2018 budget impede implementation.
Revenue from higher oil prices is limited by net losses from retail fuel sales.
Non-oil revenue remains below expectations; yields from tax administration measures—including the Voluntary Asset Income Declaration Scheme (VAID) and increased tax audits—have yet to fully materialize.
Carryover from 2017 to 2018 helped increase capital spending in the first four months of 2018, despite delayed approval of the 2018 budget.
Lower yields have kept interest payments within the budgeted envelope.

Reforms to improve the business environment are progressing:
- Identification of priority investment projects.
- Adoption of the Company and Allied Matters Act (CAMA).
Power sector reform progress:
- Implementation of the Power Sector Recovery Plan is advancing through a mini-grid policy, and regulations on eligible customers and meter asset providers.
Continued structural reform is needed to invigorate inclusive growth, particularly faster progress in the power sector to ensure financing shortfalls are met in a sustainable manner.

Growth would pick up to about 2 percent in 2018, weighed down by lower than expected oil production and relatively weak agriculture growth.
The fiscal deficit would narrow slightly, with higher oil revenues offsetting increased spending, including those planned in a supplementary budget.
Inflation would pick up in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices.
Increased oil exports would keep the current account in surplus, helping stabilize gross international reserves even if the current pace of foreign portfolio outflows continues.

Recovery remains challenging given low private sector lending and mostly short-term foreign exchange inflows.
Revenue shortfalls and delayed budget processes increase fiscal implementation risks.
Credit risk limiting bank lending constrains non-oil growth.
Potential for inflationary pressures in H2 2018 from fiscal and supply-side developments.

The team held productive discussions with senior government and central bank officials, and met with representatives of the banking system, the private sector, civil society, and international development partners.
The team thanked the authorities and participants for productive discussions, excellent cooperation, and hospitality.

International Monetary Fund — IMF Staff Concludes Visit to Nigeria (Press Release No. 18/292, July 13, 2018).