The Executive Board of International Monetary Fund IMF has released its Article IV consultation document on Nigeria.
The document is usually prepared under Article IV of the IMF’s Articles of Agreement, where 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.
The Washington-based bank welcomed Nigeria’s exit from recession and the strong recovery in foreign exchange reserves, helped by rising oil prices and new foreign exchange measures.
It also commended the progress in implementing the Economic Recovery and Growth Plan, including the start of a convergence in foreign exchange windows, tight monetary policy, improvements in tax administration, and significant strides in improving the business environment.
Directors of the bank noted, that important challenges remain, as growth in the non‑oil non‑agricultural sector has not picked up inflation remains high and sticky; unemployment is rising, and poverty is high. To address these vulnerabilities, they stressed that comprehensive and coherent policy actions remain urgent.
The bank emphasized the need for a growth‑friendly fiscal adjustment, which frontloads non‑oil revenue mobilization and rationalizes current expenditure to reduce the ratio of interest payments to revenue to a more sustainable level and create space for priority social and infrastructure spending.
In addition to ongoing efforts to improve tax administration, Directors of the bank underlined the need for more ambitious tax policy measures, including through reforming the value‑added tax, increasing excises, and rationalizing tax incentives.
Directors commended the central bank’s tightening bias in 2017, which should continue until inflation is within the single-digit target range.
They recommended the continued strengthening of the monetary policy framework and its transparency, a higher monetary policy rate, a symmetric application of reserve requirements, and no direct central bank financing of the economy.
A few Directors urged confirmation of the appointments of the central bank’s board of directors and members of the monetary policy committee.
They also commended the recent foreign exchange measures and recent efforts to strengthen external buffers to mitigate risks from capital flow reversals.
They welcomed the country’s commitment to unify the exchange rate and urged additional actions to remove remaining restrictions and multiple exchange rate practices.
Directors stressed that rising banking sector risks should be contained. They welcomed the central bank’s commitment to help increase capital buffers by stopping dividend payments by weak banks.
Directors emphasized that structural reform implementation should continue to lay the foundation for a diversified private‑sector‑led economy.
They noted that building on recent improvements in the business environment, implementing the power sector recovery plan, investing in infrastructure, accelerating efforts to strengthen anti‑corruption and transparency initiatives, and updating and implementing the financial inclusion and gender strategies remain essential.
