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Nigeria: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
August 2004
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VIII. Natural Gas Prospects91

A. Introduction

227. Natural gas has seen a rapid rise worldwide as a relatively clean source of energy.92 Developments in major energy consuming countries have changed the perception of gas as a low-value commodity, and efforts to find and produce gas have greatly expanded. This paper gives an overview of the natural gas sector in Nigeria with a focus on the impact on government revenue and the balance of payments from existing and planned gas production. It presents the two existing natural gas export projects in detail, following an overview of reserves and production in section B. Section C describes the economics of the Nigeria Liquefied Natural Gas (NLNG) company, and Section D describes the Escravos project. Section E examines the impact of the gas sector on government revenue and the balance of payments. Section F discusses possibilities for expanding the domestic market for natural gas, and the last section gives concluding remarks.

B. Overview

228. Nigeria has been producing oil for more than thirty years, and has therefore been producing natural gas for an equally long period. It is difficult, however, to gauge the availability of natural gas in the Niger Delta Basin because upstream producers have exerted little effort looking for gas. Gas fields have therefore been largely ignored when they were found, and oil companies have left aside prospects without exploratory drilling when the seismic data suggested ‘gassy’ deposits.

229. Oil and gas reserves worldwide are classified on the basis of marketability. Starting with the category used for resources that can and will be developed profitably with existing technology and prices, proven gas reserves in Nigeria are booked as only 3.2 billion barrels oil equivalent (bn bl/oe), compared with 24 billion barrels of proven oil reserves in 2002.93 Proven and probable reserves of gas are estimated at 32bn bl/oe, and yet-to-be-found gas is calculated as 25bn bl/oe based on a probabilistic method, bringing the total natural gas reserve base to 57bn bl/oe. Proven and probable crude oil reserves are put at 55bn barrels.94 The potential for future gas production could therefore be higher than for oil production, although higher transportation costs for gas mean that the value of oil will be higher than that of natural gas (assuming gas prices continue to follow oil prices).

230. Almost 50 percent of gas produced in 2003 was flared, i.e. burnt at the oil collection point. The flaring of gas carries potential opportunity costs, and high environmental costs. However, the domestic market for natural gas is still very small, and the conditions for investment in the infrastructure for gas export have only recently been established.

231. Total gas production is projected to increase from 4.3bn cubic feet per day (cft/d) in 1999 to 6bn cft/d in 2009. Sales of gas however, are expected to increase from 200 million cft/d to 3.5bn cft/d over the same period (40-760 kb/d oe). Natural gas is now used in three ways, apart from being flared: (i) exported by Nigeria Liquefied Natural Gas (NLNG) from Bonny Island, (ii) gathered and transported to Lagos and beyond in the Escravos project, and (iii) reinjected into oil reservoirs to maintain the pressure needed to lift the oil.

C. Nigeria Liquefied Natural Gas Company (NLNG)

Plant size and investment costs

232. After a long period of planning and numerous failed attempts to get the project started, NLNG was created as a joint venture between Shell Nigeria (25.6 percent equity), Elf (15 percent), Agip (10.4 percent), and NNPC (49 percent). Liquefaction of natural gas started in September 1999, in two production streams (so-called trains) with a capacity of 2.7 million tons (mt) each annually. The construction of the plant cost US$3 billion spread over more than three years. In 2002, the plant was expanded by another train which increased capacity by 50 percent at a cost of US$1.3 billion, and currently 9 million tons of LNG are exported mainly to Europe. The plant liquefies 1.2bn cft/d of natural gas, and exports the equivalent of 210 kbd of oil.95

233. Financing arrangements for another expansion by trains four and five have been put in place in December 2002. Project financing from international banks of US$1 billion was secured for a total investment of US$2.1 billion. This was the first time in sub-Saharan Africa that a project of this magnitude was found strong enough by international banks to justify such a financing arrangement.96 A sixth train is at the planning stage at a projected cost of $1.8 billion.97 It is estimated that production will reach a new maximum of 450 kb/d oil equivalent in 2006, equivalent to 17 percent of the oil production projected for that year. Expansion of LNG capacity beyond 2006 is possible at a different location (Bass river). The Bonny island shipping channel is projected to be used to capacity by the six trains’ exports.

Revenue and cost statement

234. To illustrate the importance of the liquefaction plant for government revenue and the balance of payments, we present here the financial details of the project. As most of the operational financial data were not available, assumptions had to be made for sales prices and operating costs. To illuminate the calculations and assumptions, we take simulated revenues and costs for the year 2003 as an example.

235. The liquefaction plant produced 9 million tons of LNG in 2003 from three trains of production, which have been built with an investment of US$4.3 billion provided entirely by the shareholders. In 2003, the company also invested into trains four and five (and into maintaining production in the existing trains), mostly provided by the project financing from international banks. Capital costs are depreciated over a period of five years. Recurrent costs consist of operating costs and costs for the purchase of natural gas from upstream producers, which are the joint ventures between the NNPC and the private shareholders of NLNG.98 The LNG is sold in Europe, on the basis of long-term take-or-pay contracts, based on a pricing formula that links the sales price for liquefied gas to international oil prices. Export revenue for the company is estimated as US$1.9 billion (see Table VIII-1).99 Despite ongoing investments in expansions, income should have exceeded costs by more than $400 million in 2003.100 The projected profit for 2004 reaches $940 million.

Table VIII-1.Nigeria - Physical and Financial Data for Nigeria Liquefied Natural Gas (NLNG)
20022003200420052006
(in millions of U.S. dollars, unless otherwise specified
Production (mt)5.79.010.916.018.9
Investment
Capital costs (investment)4524207309501,000
of which: debt finance050050000
of which: retained earnings30020200650650
Costs1,1371,4641,7441,7212,100
Capital costs (maintenance)50100100150150
Capital costs (depreciation over 5 years)762852936482697
Debt service (10%, 8 years maturity)0094187187
Operating costs112175212311367
Upstream gas purchases213337403590698
Production and export revenue1,0561,9252,6883,5903,895
Profits-814619441,8691,795
NNPC profits (49% equity share)-40226463916880
JV partner profits-41235482953916
Source: Nigerian authorities; and staff estimates and projections.

236. Over the medium term, the company is expected to produce a steady stream of income for both the government and the private partners. Export revenue is projected to reach US$5 billion in 2009, and profits are estimated at US$2.2 billion for the same year, with more than $1 billion for NNPC.101 Note that the company is exempt from corporate income tax for ten years.

D. The Escravos Gas Project

237. Since mid-1997, gas from oil production in the Western delta is collected and processed near the town of Escravos. Natural gas liquids and condensates are extracted for export and domestic consumption, and gas is transported to domestic customers, mainly in Lagos. The first phase of the project processed 165 million cft/d at an investment of $550million. The second phase expanded processing capacity to 285 million cft/d (50 kbd oe) at an additional $82 million and came on stream in late 2000 (Table III-2).

Table VIII-2.Nigeria - Physical and Financial Data for the Escravos Gas Project, Phases I-III, and the West Africa Gas Pipeline
20022003200420052006
(in millions of U.S. dollars, unless otherwise specified
Production (million cft/d)285285286585785
Investment151293469700400
of which: retained earnings0200163300300
Costs8858117238407
Capital costs (depreciation over 5 years)461675152292
Operating costs42424285115
Revenue4504795369661,086
Profits362221256429379
NNPC profits (49% equity share)177108126210186
JV company profits185113131219193
Source: Nigerian authorities; and staff estimates and projections.

238. In the third phase, one of the world’s first commercial gas-to-liquids facilities will be constructed. Still at the planning stage, the third phase would increase processing capacity to nearly 600 million cft/d, to produce 50 kbd of highquality motor fuel for domestic use and exports. Production is projected to commence in 2005 after an investment of $2 billion. The next step could be the extension of the Escravos pipeline system to allow exports of 200 million cft/d to countries to the West of Nigeria in the West Africa Gas Pipeline project (WAGP). This project is at the design stage, although purchase and financing arrangements still need to be finalized. Start of production is projected for 2006.

239. With production in the Escravos complex estimated to bring revenue of $300 million, profits of $59 million are estimated for 2003. According to the NNPC, the Escravos project pays upstream gas producers on a net-back basis, which means the gas is not sold at any specified price to the processing plant, but rather, profits are paid as dividends to the producers.

E. Macroeconomic Impact of the Gas Sector

240. The gas sector generates government revenue, requires public expenditure in the form of NNPC cash calls, and has an impact on the balance of payments through imports of goods and services for operating and investment costs, foreign direct investment by joint venture companies, and profit remittances by the same companies.

Government Revenue and Cash Calls

241. Government revenue related to the gas sector—along with other information—is shown in Table VIII-3. It increases from $350 million to $1.4 billion between 2002 and 2006. In the early years, this depends almost entirely on revenue from the penalty imposed on oil operators for the flaring of gas. This has been set at naira 10 per thousand cft in 1999, and government revenue from the flaring penalty decreases from $33 million in 2002 to $21 million in 2006 as flares are replaced by exports, domestic gas use, and reinjection.

Table VIII-3.Nigeria - Physical and Financial Data for the Gas Sector, and Macroeconomic Impact, 2002-2006
20022003200420052006
(in million cubic feet per day; unless otherwise specifie
Total production4,8554,9835,5715,7705,920
NLNG7651,2001,4472,1282,515
Escravos285285285585785
Other uses248255286314346
Reinjection749705718744763
Flaring1,8272,3682,3401,452909
Flaring (in percent of production)3848422515
Gas monetization (in million barrels per day oil e0.190.260.310.480.59
(in millions of U.S. dollars)
Production1,5062,4043,2244,5564,981
Exports1,0561,9252,6883,5904,132
Government revenue3515318581,4691,449
NNPC cash calls295349588809686
Imports of goods and services6057441,1621,6371,505
FDI3704401,0111,2751,148
Profit remittances by JV companies4889441,1931,3871,310
Source: Nigerian authorities; and staff estimates and projections.

242. Government revenue comes increasingly from the 40–49 percent equity share the NNPC holds in the gas joint ventures. This of course raises the question of the pass-through of profits from the NNPC to government accounts. The NNPC has so far only produced government revenue from the proceeds of the sales of crude oil, and upstream gas sales to NLNG and the Escravos project. The NNPC has to carry investment costs for gas projects in accordance with its equity share (cash calls). 2003 was a year with heavy investment requirements in the gas sector, for the two-train expansion of NLNG and the onset of investment into Phase III of the Escravos project. Some investment expenditure is financed from retained earnings, as shown in the tables.102

Balance of payments

243. The gas sector depends to a large extent (we assume 80 percent) on imported goods and services for both operating and investment costs. Imports follow closely the investment profile, and are projected to peak in 2005 at about $1.6 billion. The portion of investment that is paid for by the foreign joint venture companies is financed by foreign direct investment, which also peaks in 2005. Foreign operators remit profits from their participation in the Nigerian gas sector, and $940 million is estimated to have been transferred in 2003.

F. Outlook for the Domestic Gas Market

244. As described in the background section to this paper, the reserve base of natural gas in Nigeria is likely to be sufficient to expand gas production significantly beyond the LNG and Escravos projects described here. Apart from the additional LNG and pipeline export projects under discussion, the domestic market could in the future provide an outlet for gas that would benefit both producers and the Nigerian economy. This section looks at the potential market, and at institutional and legal changes needed to make the market attractive to investors.

Domestic Market Potential

245. Nigeria suffers from a chronic shortage of electricity, mainly because of shortages in generation capacity. Gas-fired electricity generation alongside major investments in electricity distribution infrastructure could alleviate this shortage, and create the minimum demand necessary to build an extensive gas distribution pipeline system across Nigeria. Currently, the National Electric Power Agency (NEPA) uses gas for 41 percent of its 6,000 Megawatt (MW) power plant capacity. Assuming that electric power consumption grows at 6 percent per year, Exxon Mobil estimates that 77,000 MW installed capacity will be needed by 2020. Over the medium-term, the company estimates that new power stations will be based in Kaduna, Enugu, Ibadan, and Lagos with a total capacity of 4,400 MW by 2010.

246. Gas demand from existing and new power generation would be about 1,000 million cft/d by 2010 from 400 million cft/d today. Cement, fertilizer, steel, and aluminum industries could add another 100–200 million cft/d. Residential and small industry demand is more uncertain, and depends critically on the extent of any future gas distribution network. Shell estimates demand to be in the range of 50-500 million cft/d annually (Table VIII-4). The domestic market for gas over the medium term is therefore likely to be equivalent to the current NLNG gas use. Investment requirements for the domestic gas market are large. Because they are likely to be too large for the public purse, private investment will have to be attracted.

Table VIII-4.Nigeria: Domestic Gas Demand, 2003-10
20032010
Proj.
low casehigh case
(in million cubic feet per day)
Power generation40010001000
Industry (cement, fertilizer, steel, aluminium)0100200
Households050500
Total40011501700
Total (in thousand barrels oil equivalent per day)71205303
Source: Nigerian authorities; and staff estimates and projections.

Regulatory framework for a domestic gas market

247. The framework for attracting private investment in domestic gas infrastructure is currently not in place. The government is working on two fronts to change this: first, the revival of the power sector should follow from efforts under way to restructure NEPA, unbundle its activities, and privatize most of its operations. The authorities are hoping to attract private investment, including foreign direct investment, through possibilities for build-operate-transfer schemes. Second, the government is working on a gas sector strategy, with the help of the World Bank.

248. A technical team and two stakeholder workshops produced a proposal to draft a Gas Act that would create a new and separate legal and regulatory regime for downstream gas.103 The proposal also contains suggestions for a combined gas and electricity regulatory agency staffed with relevant personnel from the Department of Petroleum Resources. The Act would define a licensing regime, and distinguish between the roles of a transportation network operator, transporters, and distributors and gas suppliers. A National Gas Transportation Company (NGTC) would be created separate from the NNPC. The Gas Act would allow certain gas users and distributors third party access to the pipeline network to enable them to contract directly with upstream producers.

G. Concluding Remarks

249. The objective of this chapter was to provide basic information about the natural gas sector in Nigeria. The chapter has shown a very promising development potential for a sector that is very much in its infancy. Export projects are moving well ahead, although it remains to be seen how the government will share in their expected high profitability. A domestic market does not yet exist, but has a good potential to develop together with an alleviation of the chronic electricity shortages that still plague Nigeria.

250. Natural gas deserves attention by the government, as it could provide several benefits to Nigeria. First, the development of profitable outlets for natural gas could reduce the flaring of this resource, with immediate environmental as well as financial benefits. Second, expansion of profitable gas use is not constrained by Nigeria’s OPEC quota. This includes the production of natural gas liquids and condensates, which command higher prices than crude oil. Third, natural gas could be used to eliminate electricity shortages, and provide a clean, stable source of energy to industry and households.

251. A number of concerns follow from our description. There is a shortage of information on the gas sector in its current form; in particular, (i) the current upstream fiscal regime is not clear, and the pass through of profits from the government’s participation in NLNG has yet to occur; (ii) although some private gas-fired power stations are already under construction, the legal and regulatory framework may change considerably; it is not clear what the current agreements are with the sponsors of the projects under construction, and how they would be affected by an eventual Gas Act; the preparation of the Gas Act should therefore proceed without delay.

STATISTICAL APPENDIX
Table 1.Nigeria: Revised Gross Domestic Product by Sector of Origin at Current Prices, 1999-2003
19992000200120022003

Prel.
(In millions of naira)
Primary sector2,156,2983,384,1863,813,9873,795,6955,237,792
Agricultural activities1,127,6931,192,9101,584,3121,700,4511,940,587
Agriculture948,1831,000,0691,328,7331,411,0481,628,349
Livestock111,110116,393153,453175,838189,247
Forestry17,68422,43727,46329,11131,146
Fishing50,71654,01074,66484,45491,845
Mining and quarrying1,028,6052,191,2762,229,6752,095,2453,297,206
Of which: crude petroleum and gas1,024,4642,186,6822,223,6712,089,4703,291,115
Secondary sector180,584200,841244,586293,612342,988
Manufacturing150,947168,037201,393250,187293,083
Utilities2,1102,2002,4384,2345,153
Building and construction27,52830,60440,75539,19144,753
Tertiary sector976,656952,6101,119,5981,364,8581,779,358
Transport116,502129,092145,661179,365239,378
Communication1,3331,6382,1143,0273,637
Wholesale and retail trade485,667527,485642,860772,7211,041,209
Hotel and restaurants5,7916,4557,2528,2919,719
Finance and insurance39,39043,77554,38379,44970,113
Real estate133,185165,070171,768206,626276,583
Other private services35,27644,07755,38566,40587,907
Government services159,51335,01740,17648,97450,812
Gross domestic product at factor cost3,313,5384,537,6375,178,1715,454,1657,360,139
Oil1,024,4642,186,6822,223,6712,089,4703,291,115
Non-oil2,289,0732,350,9552,954,5003,364,6964,069,023
Total indirect taxes (net)128,019140,663163,392180,643187,625
Subsidies-1,378-1,906-2,500-2,500-2,500
Gross domestic product at market prices3,440,1794,676,3945,339,0635,632,3087,545,263
Memorandum items:(In percent of GDP)
Oil GDP30.948.242.938.344.7
Non-oil GDP69.151.857.161.755.3
Agricultural activities34.226.430.731.326.4
Secondary5.44.44.75.44.7
Tertiary sectors29.521.021.625.024.2
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 2.Nigeria: Revised Gross Domestic Product by Sector of Origin at Constant 1990 Prices, 1999-2003(In millions of naira)
19992000200120022003

Prel.
Primary sector217,288232,466239,052230,615263,299
Agricultural activities113,797117,110121,605126,763131,977
Agriculture95,68298,179101,988105,189110,742
Livestock11,21211,42711,77813,10812,870
Forestry1,7852,2032,1082,1702,118
Fishing5,1185,3025,7316,2966,246
Mining and quarrying103,491115,356117,447103,852131,322
Of which: crude petroleum and gas102,663114,507116,130102,627129,870
Secondary sector21,20121,96323,48425,79127,305
Manufacturing17,72118,37519,33721,97723,332
Utilities248241234372410
Building and construction3,2323,3473,9133,4433,563
Tertiary sector79,61681,59484,54695,56796,681
Transport10,85912,69812,65314,87015,737
Communication124161184251239
Wholesale and retail trade33,85239,77743,13346,47848,154
Hotel and restaurants540635630687639
Finance and insurance3,6714,3064,7246,5864,609
Real estate12,41416,23714,92117,13018,183
Housing3,2884,3364,8115,5055,779
Community and other services00000
Government services14,8683,4443,4904,0603,341
Gross domestic product at factor cost318,879336,858347,998352,941391,300
Oil102,663114,507116,130102,627129,870
Non-oil216,216222,351231,868250,314261,430
Total indirect taxes (net)10,0899,8009,3809,99410,438
Subsidies109133163186194
Gross domestic product at market prices328,859346,525357,216362,749401,544
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 3.Nigeria: Revised Gross Domestic Product by Expenditure Category at Current Prices, 1999-2003(In millions of naira)
19992000200120022003

Prel.
External balance-85,433964,618474,223-12,859684,196
Exports of goods and nonfactor services1,274,6802,537,7582,310,7242,296,2863,771,043
Goods1,189,3962,429,3882,194,3592,159,5683,587,658
Nonfactor services85,283108,370116,365136,718183,385
Imports of goods and nonfactor services1,360,1131,573,1401,836,5012,309,1453,086,847
Goods931,1951,078,9461,285,6451,630,3672,209,615
Nonfactor services428,918494,194550,856678,778877,232
Domestic demand3,525,6123,711,7764,864,8405,645,1676,861,068
Consumption2,573,6972,746,7143,648,6304,177,4235,145,801
Government620,795964,4331,415,5371,392,6491,755,272
Private1,952,9011,782,2812,233,0932,784,7753,390,529
Gross investment951,915965,0621,216,2101,467,7431,715,267
Stock changes00000
Gross fixed investment951,915965,0621,216,2101,467,7431,715,267
Government fixed investment260,014401,413646,990572,675703,900
Private fixed investment691,902563,649569,220895,0691,011,367
Gross domestic product at market prices3,440,1794,676,3945,339,0635,632,3087,545,263
Net factor income from abroad-317,041-644,978-476,732-782,179-1,104,976
Gross national product at market prices3,123,1384,031,4164,862,3314,850,1296,440,287
Net transfers from abroad113,423160,339143,074170,897216,767
National disposable income3,236,5614,191,7565,005,4055,021,0266,657,054
National savings 1/662,8641,445,0411,356,775843,6031,511,254
Gross domestic savings 2/866,4821,929,6801,690,4331,454,8852,399,463
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 4.Nigeria: Revised Gross Domestic Product by Expenditure at Constant 1990 Prices, 1999-2003(In millions of naira)
19992000200120022003

Prel.
External balance106,673143,908115,46962,031124,787
Exports of goods and nonfactor services261,106303,880291,955259,450343,527
Goods243,636290,903277,253244,003326,822
Nonfactor services17,46912,97714,70315,44716,706
Imports of goods and nonfactor services154,433159,972176,486197,419218,741
Goods105,732109,717123,549139,388156,578
Nonfactor services48,70150,25452,93758,03262,163
Domestic demand222,186202,617241,747300,718276,757
Consumption173,305158,041188,563222,531207,568
Government54,20378,74597,92084,74393,389
Private119,10279,29790,643137,789114,179
Gross investment48,88144,57653,18478,18769,189
Stock changes02000
Gross fixed investment48,88144,57653,18478,18769,189
Government22,21920,26224,17530,07227,676
Private26,66224,31429,01036,08633,211
Gross domestic product at market prices328,859346,525357,216362,749401,544
Net factor income from abroad-35,998-65,587-45,814-66,872-78,301
Gross national product at market prices292,861280,938311,402295,877323,243
Net transfers from abroad12,87816,30513,74914,61115,361
National disposable income305,739297,243325,152310,487338,604
National savings 1/132,434139,201136,58987,956131,036
Gross domestic savings 2/155,554188,484168,653140,217193,976
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 5.Nigeria: Selected Petroleum Statistics, 1998–2003
199819992000200120022003
Production and exports(In millions of barrels per day)
Production 1/2.2312.1102.2612.2381.9602.453
Domestic allocation0.2680.3000.3020.3890.4470.431
Exports 2/1.9551.8441.9521.8491.5132.022
(in U.S. dollars per barrel)
Average price of Nigerian crude12.9017.6228.0024.4825.0529.02
U.K. Brent, average price 3/12.7217.7028.3124.4125.0028.85
(in millions of U.S. dollars)
Export values 2/9,21811,94320,15116,57413,83421,415
(In naira per liter, unless otherwise indicated)
Domestic petroleum product prices 4/
Crude oil (naira per barrel)374.00807.50950.00950.001980.002,487.00
Premium motor spirits11.0020.0022.0022.0026.0031.50
Kerosene6.0017.0017.0017.0024.0029.08
Gas oil/diesel9.0019.0021.0021.0026.0031.50
Domestic consumption of petroleum products(In thousands of metric tons)
Premium motor spirits3,530.23,153.64,799.65,397.66,928.96,294.1
Kerosene1,266.41,217.41,217.01,744.41,281.9906.3
Gas oil/diesel1,809.92,059.92,195.32,179.21,910.01,886.1
Fuel oil (high and low “pour”)1,580.52,863.9174.4220.91,287.6
Liquefied petroleum gas66.137.613.8
Aviation spirits26.232.4
Sources: Central Bank of Nigeria; Nigerian National Petroleum Corporation; and Fund staff estimates.
Table 6.Nigeria: Selected Indicators of Agricultural Production and Prices, 1999-2003
19992000200120022003
(In thousands of metric tons)
Food crops
Millet6,3916,7657,0887,2317,377
Sorghum8,4648,8549,4089,6879,974
Maize6,5156,4916,5926,6986,806
Rice (paddy)3,5223,8653,9894,0854,183
Yams25,95026,45127,58928,97930,439
Cassava35,98036,79537,94939,41040,927
Export crops
Cocoa165170171172173
Groundnuts2,3072,3902,3612,3752,389
Palm kernels600629632645658
Cotton351353359379400
Sheanuts421448455463471
Rubber265275279284289
(In naira per metric ton)
Average prices for food crops
Millet20,34721,26433,528
Sorghum18,86719,28434,945
Maize19,30420,71937,351
Rice49,22646,99751,003
Yams15,54420,97556,333
Cassava9,68110,96920,613
Average prices for export crops
Cocoa85,76690,000100,744
Groundnuts28,58944,11044,843
Palm kernels19,12921,26023,379
Cotton40,20835,00033,204
Rubber57,89259,40069,800
Sources: Federal Office of Statistics; Federal Ministry of Agriculture; and Central Bank of Nigeria.
Table 7.Nigeria: Index of Industrial Production, 1999-2003
19992000200120022003
(1985 = 100)
Total industrial production129.7134.6145.3145.2
Manufacturing126.9136.9146.3146.3
Sugar confectionary55.856.847.552.8
Soft drinks147.6164.8194.0208.3
Beer and stout101.9120.6125.7128.3
Cotton textiles87.398.593.795.0
Synthetic fabrics736.8717.3665.6718.1
Footwear44.646.144.946.2
Paints104.7114.0114.4121.0
Refined petroleum117.0114.0133.0133.9
Cement84.588.793.594.5
Roofing sheets27.530.927.630.4
Vehicle assembly12.513.715.017.6
Soap and detergent161.1189.1210.1214.0
Radio and televisions4.93.93.33.8
Mineral production130.9137.5144.9133.7
Petroleum129.7138.8146.3134.9
Gas186.8191.5225.0240.3
Cassiterite20.626.124.525.0
Columbite48.498.297.798.3
Coal11.410.811.311.4
Limestone3.35.96.46.5
Electricity production139.4136.1144.6146.7
(In thousands of megawatts)
Electricity consumption8,5768,6899,0358,894
Industrial2,2002,2002,2002,200
Commercial and street lighting2,0832,0832,0832,083
Residential4,2934,4064,7524,611
Source: Central Bank of Nigeria.
Table 8.Nigeria: National Consumer Price Indices, 1999-2003(May 2003 = 100)
All itemsFoodBeverages, tobacco, and kolaClothing and footwearAccommodation, fuel, and lightHousehold goodsMedical care and healthTransportRecreation and education servicesOther services
Weights1,000.0637.620.632.118138.213.642.48.93.0
199964.865.148.688.761.285.194.366.759.645.5
March65.565.647.588.364.683.092.767.456.943.7
June66.968.147.890.362.484.596.168.959.044.6
September63.364.348.087.356.785.092.264.361.147.2
December63.663.550.889.758.886.798.566.061.249.1
200069.366.753.891.675.189.6100.270.866.253.1
March64.664.252.289.659.988.697.967.665.751.0
June70.968.153.490.678.892.0100.370.865.952.9
September73.167.754.792.891.389.9100.873.266.954.9
December72.968.561.094.384.291.1102.375.169.156.1
200182.385.374.491.474.792.695.475.975.260.8
March76.374.764.893.079.693.698.778.571.455.2
June82.288.879.386.861.595.494.868.475.768.3
September87.194.577.787.571.590.991.571.982.264.4
December84.988.38.39100.772.095.484.685.079.365.2
200292.996.592.491.587.395.298.579.182.871.9
March89.693.492.192.982.389.298.273.476.567.2
June92.398.095.684.189.190.789.375.570.567.8
September95.899.996.597.685.996.2107.180.296.777.4
December95.296.491.9100.892.1106.9119.288.892.591.3
2003
March94.893.5101.6100.394.1100.3113.382.992.8133.6
June105.2104.1100.6103.1110.2103.9107.6100.6105.2106.0
September113.4106.2105.3120.1138.2108.4125.3108.7111.0114.4
December117.9111.3106.1133.5137.1113.1134.9115.4148.6142.4
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 9.Nigeria: Urban Consumer Price Indices, 1999 - 2003(May 20030 = 100)
All itemsFoodBeverages,

tobacco,

and kola
Clothing

and

footwear
Housing

fuel, and

light
Household

goods
Medical

care and

health
TransportRecreation and

education

services
Other

services
Weights1000626.513.136.2172.844.68.750.313.32.9
1999 average63.662.646.079.767.873.778.761.161.773.5
2000 average72.087.280.283.587.672.368.0
2001 average81.686.172.692.873.888.285.772.772.893.9
2002 average92.097.491.896.680.696.788.583.480.695.6
March95.198.479.084.683.278.4100.583.486.993.3
June99.489.382.690.779.681.095.565.861.091.8
September101.2101.581.399.797.685.792.183.9101.175.0
December96.8112.087.6110.0122.189.795.585.7107.879.3
2003
March98.296.988.095.0122.775.984.987.9111.497.1
June106.2107.699.999.1113.1101.897.8100.2102.5103.1
September117.2106.8107.5119.5143.2106.3108.9106.5106.1101.9
December117.6110.1107.1148.4139.0122.1117.0117.799.9122.5
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 10.Nigeria: Rural Consumer Price Indices, 1999 -2003(May 2003 = 100)
All itemsFoodBeverages, tobacco, and kolaClothing and footwearHousing fuel, and lightHousehold goodsMedical care and healthTransportRecreation and education servicesOther services
Weights1000640.123.930.4184.535.515.7397.13.0
199965.065.549.190.659.987.299.370.458.338.8
200069.566.953.792.675.391.6103.874.466.545.9
200182.485.274.891.174.893.498.576.476.652.9
March76.073.766.893.380.295.0100.983.573.145.7
June82.388.680.685.861.995.399.562.775.362.9
September86.893.877.187.870.792.595.569.284.057.4
December84.888.183.1101.373.194.786.880.480.056.4
200293.196.392.590.588.795.0104.170.683.966.2
March89.693.092.891.883.090.1102.954.372.760.9
June92.297.795.383.090.490.792.366.073.160.1
September95.999.696.496.886.895.6110.170.5103.771.8
December95.396.491.398.493.0106.3118.284.195.191.3
2003
March95.092.6101.6101.095.3101.3110.487.795.5137.5
June104.8103.5101.2107.4107.2105.1115.4101.3107.0108.2
September111.8105.9102.8120.8133.1109.7138.3112.7114.3123.7
December118.1111.7105.0117.9135.1107.7149.1111.2180.9157.1
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 11.Nigeria: Consolidated Government Revenue, 1998-2003 1/(In millions of naira)
19981999200020012002Perl.

2003
Total revenue496,8921,010,5831,986,9492,247,8842,037,7632,752,107
Tax revenue250,939320,269636,082876,376711,5421,029,791
Taxes on net income, profits, and capital gains113,436155,588436,442560,110401,532658,596
Petroleum profits tax44,05068,933332,542405,941225,193437,964
Company income tax 2/33,50044,24151,14768,72689,104114,770
Education tax2,2233,6227,44416,2149,5709,704
Personal income tax 3/33,66338,79345,30869,23077,66596,157
Domestic taxes on goods and services73,19370,71183,937121,522108,601136,402
Value-added tax38,41548,23258,47091,789108,601136,402
Taxes on petroleum products34,77822,47925,46729,73300
Taxes on international trade and transactions64,31093,970115,703194,744201,408234,793
Import duties, excises, and fees 4/58,47585,175101,521170,549181,408195,462
Customs levies 5/5,8358,79414,18224,19520,00039,331
Nontax revenue245,953690,3141,350,8671,371,5081,326,2221,722,316
Oil crude export proceeds102,399518,6051,001,068954,816724,144966,716
Royalty0108,312192,531206,593170,143245,517
Autonomous foreign exchange market profits82,15800000
Domestic crude 6/56,58542,32196,430134,037304,238386,351
Federal government independent revenue 7/3,11214,60237,82844,33568,13454,164
Upstream gas proceeds/Other oil1,7006,47423,01031,72759,56269,568
Memorandum item:
Privatization proceeds0018,10485,80019,6980
Sources: Federal Ministry of Finance; and staff estimates.
Table 12.Nigeria: Consolidated Government Expenditure, 1998-2003 1/(In millions of naira)
19981999200020012002Perl.

2003
Total expenditure723,6351,118,5051,706,5622,509,9652,334,5662,853,918
Recurrent expenditure230,897492,316651,615770,120868,122912,239
Goods and services132,152206,652350,078403,073477,596514,371
Federal government personnel costs56,319135,066278,701285,169368,484367,950
Federal government overhead75,83371,58671,377117,904109,112146,422
Customs levies5,8358,79414,18224,19520,00039,331
Education Fund2,2233,6227,44416,2149,5709,704
Interest payments due90,687273,248279,911326,638360,956348,832
Domestic interest42,77091,488104,165154,796170,635169,725
Foreign interest45,667181,761175,747171,842190,321179,108
Other (local contractors)2,25000000
Capital expenditure220,420187,158250,506440,955264,002251,691
Domestically-financed budgetary212,281174,588233,762433,070251,078241,681
Foreign financed8,13912,57116,7447,88512,92410,010
NNPC operations71,861207,210289,856429,754352,932451,683
JVC cash calls54,991183,362267,736391,680347,084451,683
NNPC priority projects16,87023,84822,11938,0745,8480
Extrabudgetary outlays/Other/NDDC00010,00022,17154,958
Judiciary009,64115,00015,41526,186
Net lending03562.70074000
State and local governments200,457228,257504,945844,137804,5241,157,161
Sources: Federal Ministry of Finance and staff estimates.
Table 13.Nigeria: Federation Account Operations, 1998-2003(In millions of naira)
19981999200020012002Perl.

2003
Total revenue137,768454,2391,007,5851,096,4181,176,4641,449,939
Petroleum revenue45,793326,027855,051857,201905,9521,139,707
Foreign-generated oil and gas revenue (net)23,988257,212740,384735,656601,714753,356
Gross government export proceeds102,399498,217947,163934,284783,7071,036,284
Royalty and petroleum profit tax44,050171,411525,073639,234395,336683,481
First charges / Deductions-122,461-412,416-731,852-837,862-577,329-966,409
Domestically-generated oil revenue (net)21,80668,816114,667121,545304,238386,351
Petroleum naira revenue56,58468,816114,667121,545304,238386,351
Transfer to Petroleum Special Trust Fund34,77800000
Nonpetroleum revenue91,975128,212152,534239,217270,512310,233
Company income tax33,50044,98551,02868,66089,104114,770
Customs and excise58,47583,226101,506170,557181,408195,462
Total expenditure132,525436,5991,020,9541,212,1011,168,9511,471,816
Federation account distribution 1/132,525436,5991,020,9541,212,1011,168,9511,471,816
Federal government67,157211,751514,969530,658545,438616,948
State government33,232104,784256,501391,327321,422419,845
Local government27,69387,320213,751245,487269,446346,866
Special funds4,44332,74535,73344,62932,64488,157
Federal Capital Territory1,3854,36610,21012,7805,53920,170
Ecology / Derivation and Ecology2,7698,73220,41925,4918,94519,433
Statutory stabilization6922,1835,1056,3584,4719,711
Derivation / Development of Natural Resources-1018,7320013,69038,843
Mineral-producing areas-3038,7320000
Overall balance5,24317,640-13,369-115,6837,514-21,877
Financing-5,243-17,64013,369115,683-7,51421,877
Memorandum items:
First charges / Deductions122,461412,416731,852837,862577,329966,409
JVC cash calls54,991183,339260,000391,990347,084451,683
NNPC priority projects16,87023,46824,75038,0745,8480
External debt service37,400177,610175,034232,192143,867235,807
National priority projects13,20000000
Special reserve/excess proceeds028,000227,00397,2250141,724
13% natural resource derivation45,06678,38180,530137,195
Sources: Federal Ministry of Finance; and staff estimates.
Table 14.Nigeria: Summary Federal Government Fiscal Operations, 1998-2003 1/(In millions of naira, unless otherwise indicated)
19981999200020012002Perl.

2003
Total revenue285,884711,4491,368,2331,362,7011,155,6881,470,637
Distribution from Federation account67,157211,751514,969530,658545,438616,948
Drawdown of Federation stabilization account013,58006400
Federal government share of value-added tax9,4627,2778,77013,35915,74719,778
Independent revenue 2/3,11217,00038,05744,40568,13454,164
Autonomous foreign exchange market profit39,84600000
Education Trust Fund2,2333,0008,30216,2149,5709,704
Customs levies5,8358,82314,18224,19520,00039,331
First charges/deductions122,461426,416783,953680,070496,798730,712
External debt service37,400177,610175,034232,192143,867210,292
National priority projects13,20014,00042,45918,12400
JVC cash calls and NNPC priority projects71,861206,806284,750429,754352,932451,683
Excess proceeds28,000227,00368,736
Judiciary9,641
13 percent derivation grant45,06600
Transfer for Petroleum Special Trust Fund (PSTF)34,77821,0000000
PSTF independent revenue 3/1,00000000
Other02,603053,73700
Total expenditure513,950957,9601,220,7441,625,2551,420,4061,559,726
Recurrent expenditure221,669484,494684,850762,016749,712840,725
Goods and services132,946205,931350,078403,107477,596514,371
Personnel costs56,319136,909278,701285,118368,484367,950
Overhead75,83369,02371,377117,989109,112146,422
PSTF79400000
Interest payments due88,724266,740312,288358,909213,247242,088
Domestic interest40,52084,034104,168154,796170,635169,725
Foreign interest45,954182,706208,121204,11342,61272,364
Local contractors2,25000000
Other11,82322,484058,86984,265
Capital expenditure220,419166,540246,098433,486317,762267,317
Domestically financed212,281153,940233,843425,601304,838257,308
Budgetary132,254118,940176,825403,567304,838257,308
National priority projects13,20014,00042,45918,12400
PSTF66,82721,00014,5593,91000
Foreign financed8,13912,60012,2547,88512,92410,010
Net lending 4/000000
JVC cash calls and NNPC priority projects71,861206,806284,750429,754352,932451,683
Other/Extra budgetary expenditure0100,1195,046000
Overall balance (commitment basis)-228,066-246,511147,490-262,554-264,718-89,089
Balancing item-42,100013,300000
Overall balance (cash basis)-185,966-246,511134,190-262,554-264,718-89,089
Financing185,966246,511-134,190262,554264,71889,089
Privatization0018,104000
External loans (net)24,503-188,26545,341-26,290-106,142-127,919
Borrowings8,13912,60012,2547,88512,92410,010
Amortization due-46,720-200,865-135,513-34,174-101,255-137,928
Change in arrears (acc. +, red. -)63,084n.a.0000
Rescheduling00168,6000-17,8120
Domestic161,463434,776-179,531288,843370,860217,008
Banking system (net) 5/151,464238,000-99,615118,724398,848178,930
Nonbank10,000196,776-79,916-30,216-27,98738,077
Memorandum items:
Primary balance 6/-139,34220,229459,77896,355-51,471152,999
Primary balance (in percent of GDP)-4.90.69.81.8-0.92.0
GDP at market prices2,836,0853,440,1794,676,3945,339,0635,632,3087,545,263
Source: Federal Ministry of Finance; and staff estimates.
Table 15.Nigeria: Total Expenditure of the Federal Government by Functional Classification, 1998-2003 1/
199819992000200120022003
(In millions of naira)
Administration89,944139,871174,578230,065405,313
General administration47,02582,44795,882103,112183,379
National Assembly6,65519,81321,635
Defense25,16224,47737,49063,472108,148
Internal security17,75732,94834,55143,66992,152
Economic services180,925330,347130,222307,960273,628
Agriculture and natural services9,04312,15113,60964,94444,804
Road and construction2,2443,89518,48728,64245,126
Manufacturing, mining, and quarrying14,6919,92410,5147,28439,663
Transport and communications9,9655,9489,60553,17653,663
Housing4,7220056,35644,479
National priority projects14,66518,92040,37718,1240
JVC cash calls/NNPC priority projects68,210174,976000
Petroleum Trust Fund34,77920,80014,5593,9100
Counterpart funding17,08169,6287,02800
Niger Delta Development Commission0094410,0000
Others5,52514,10315,09865,52445,894
Social and community services50,86555,00286,768189,326266,378
Education24,61431,56449,56359,745109,455
Health13,64116,18020,44544,65263,171
Housing4,7220056,35644,479
Other7,8887,25816,75928,57449,273
Transfers206,591316,742469,815364,318437,311
Outstanding domestic liabilities4,1470000
Interest due86,474266,740279,911326,638360,956
Domestic40,52084,034104,165154,796170,635
External45,954182,706175,747171,842190,321
Other recurrent tranfers 2/52,27225,190143,20630,04676,355
Other capital transfers63,69824,81246697.676340
Total528,325841,962861,3831,091,6701,382,631
(In percent of total)
Administration17.016.620.321.129.3
General administration8.99.811.19.413.3
National Assembly0.00.00.81.81.6
Defense4.82.94.45.87.8
Internal security3.43.94.04.06.7
Economic services34.239.215.128.219.8
Agriculture and water services1.71.41.65.93.2
Construction0.40.52.12.63.3
Manufacturing, mining, and quarrying2.81.21.20.72.9
Transport and communications1.90.71.14.93.9
Housing0.90.00.05.23.2
National priority projects2.82.24.71.70.0
JVC cash calls/NNPC priority projects12.920.80.00.00.0
Petroleum Trust Fund6.62.51.70.40.0
Counterpart funding3.28.30.80.00.0
Niger Delta Development Commission0.00.00.10.90.0
Others1.01.71.86.03.3
Social and community services9.66.510.117.319.3
Education4.73.75.85.57.9
Health2.61.92.44.14.6
Housing0.90.00.05.23.2
Other1.50.91.92.63.6
Transfers39.137.654.533.431.6
Outstanding domestic liabilities0.80.00.00.00.0
Interest due16.431.732.529.926.1
Domestic7.710.012.114.212.3
External8.721.720.415.713.8
Other recurrent transfers 2/9.93.016.62.85.5
Other capital transfers15.215.215.215.215.2
Total100.0100.0100.0100.0100.0
Source: Annual reports of the Central Bank of Nigeria and staff estimates of the interest due.
Table 16.Nigeria: Recurrent Expenditure of the Federal Government by Functional Classification, 1998-2003 1/
199819992000200120022003
(In millions of naira)
Administration54,67497,224121,299180,810331,736
General administration26,93248,36459,33275,080146,807
National Assembly004,76619,80420,163
Defense15,46020,76931,04647,07286,054
Internal security12,28128,09126,15438,85578,713
Economic services11,86220,45129,81653,01165,911
Agriculture2,9795,2394,8067,06512,439
Road and construction2,2443,89511,4807,2029,276
Transport and communications1,4392,6322,42833,93536,579
Others5,2008,68611,1024,8097,616
Social and community services22,77837,74858,80279,634189,432
Education14,03523,04739,03439,885100,240
Health5,3348,79311,58024,52450,563
Others3,4095,9088,18915,22638,628
Transfers140,709439,518423,117356,684437,311
Interest due88,437273,248279,911326,638360,956
Domestic42,77091,488104,165154,796170,635
External45,667181,761175,747171,842190,321
Others 2/52,272166,270143,20630,04676,355
Total230,023594,942633,035670,1401,024,389
(In percent of total)
Administration23.816.319.227.032.4
General administration11.78.19.411.214.3
National Assembly0.00.00.83.02.0
Defense6.73.54.97.08.4
Internal security5.34.74.15.87.7
Economic services5.23.44.77.96.4
Agriculture and water1.30.90.81.11.2
Construction1.00.71.81.10.9
Transport and communications0.60.40.45.13.6
Others2.31.51.80.70.7
Social and community services9.96.39.311.918.5
Education6.13.96.26.09.8
Health2.31.51.83.74.9
Others1.51.01.32.33.8
Transfers61.273.966.853.242.7
Interest due38.445.944.248.735.2
Domestic18.615.416.523.116.7
External19.930.627.825.618.6
Others 2/22.727.922.64.57.5
Total100.0100.0100.0100.0100.0
Sources: Annual reports of the Central Bank of Nigeria, except for interest due estimated by the staff.
Table 17.Nigeria: Capital Expenditure of the Federal Government by Functional Classification, 1998-2003 1/
199819992000200120022003
(In millions of naira)
Administration35,27042,73753,28049,25573,577
General administration20,09334,08336,55028,03236,572
National Assembly001,88991,472
Defense9,7023,7986,44416,40022,094
Internal security5,4764,8568,3974,81413,440
Economic services200,862323,581111,508259,758215,333
Agriculture and natural resources6,0656,9138,80357,87932,364
Road and construction26,5995,0007,00621,44035,850
Manufacuring, mining, and quarrying14,6919,92410,5147,28439,663
Transport and communications8,5263,3177,17719,24117,083
Housing4,7220056,35644,479
National priority projects14,66518,92040,37718,1240
JVC cash calls/NNPC priority projects68,210174,976000
PTF34,77920,80014,5593,9100
Counterpart funding17,08169,6287,02800
Niger Delta Development Commission0094410,0000
Others5,52514,10315,09865,52445,894
Social and community services23,36617,25427,96553,33632,467
Education10,5798,51710,52919,8609,215
Health8,3077,3878,86620,12812,608
Others4,4791,3508,57013,34810,644
Transfers49,518114,45646,69876,3480
Outstanding domestic liabilities00000
Other49,518114,45646,6987,6340
Total309,016498,028239,451438,697321,378
(In percent of total)
Administration11.48.622.311.222.9
General administration6.56.815.36.411.4
National Assembly0.00.00.80.00.5
Defense3.10.82.73.76.9
Internal security1.81.03.51.14.2
Economic services65.065.046.659.267.0
Agriculture and water resources2.01.43.713.210.1
Road and construction8.61.02.94.911.2
Manufacuring, mining, and quarrying4.82.04.41.712.3
Transport and communications2.80.73.04.45.3
Housing1.50.00.012.813.8
National priority projects4.73.816.94.10.0
JVC cash calls/NNPC priority projects22.135.10.00.00.0
PTF11.34.26.10.90.0
Counterpart funding5.514.02.90.00.0
Niger Delta Development Commission0.00.00.42.30.0
Others1.82.86.314.914.3
Social and community services7.63.511.712.210.1
Education3.41.74.44.52.9
Health2.71.53.74.63.9
Others1.40.33.63.03.3
Transfers16.023.019.51.70.0
Outstanding domestic liabilities0.00.00.00.00.0
Other16.023.019.51.70.0
Total100.0100.0100.084.3100.0
Source: Annual reports of the Central Bank of Nigeria.
Table 18.Nigeria: Federal Government Outstanding Domestic Debt, 1998-2003
199819992000200120022003
(End of period, in millions of naira)
By Instruments404,102794,806898,2531,016,9741,166,0001,336,370
Treasury bills221,802361,758465,535584,536733,762831,748
Treasury bonds179,620430,608430,608430,608430,608503,152
Development stock2,6802,4402,1101,8301,6301,470
By Holders404,101794,807898,2531,016,9741,166,0001,336,370
Banking sector355,856765,123855,925937,847992,683
Central bank301,742522,820713,933738,585532,453
Commercial banks49,540226,092132,682199,262460,230
Merchant banks4,57416,2119,31100
Nonbank sector48,24529,68442,32979,128173,318
(In percent of total; unless otherwise indicated)
Holders100.0100.0100.0100.0100.0
Banking sector88.196.395.392.285.1
Central bank74.765.879.572.645.7
Commercial banks12.328.414.819.639.5
Merchant banks1.12.01.00.00.0
Nonbank sector11.93.74.77.814.9
Memorandum items:
Total domestic debt in percent of GDP14.223.119.219.020.717.7
Average rate of interest in percent9.0
Sources: Annual reports of the Central Bank of Nigeria; and staff estimates.
Table 19.Nigeria: Summary of Budgetary Operations of State and Local Governments and special funds, 1998-2003 1/
199819992000200120022003
(In millions of naira)
Revenue224,242316,820501,953727,557832,072
Statutory share of Federation account revenue 2/132,758232,221368,544523,470518,864
Statutory share of Federation stabilization account revenue2379225,7817,0619,570
Share of value-added tax26,37837,65544,19764,23371,359
State allocation750719000
Independent revenue 3/32,54638,15745,30869,230100,028
Other31,5737,14638,12363,563132,252
Expenditure 4/210,122252,745355,680529,930894,357
Recurrent104,260139,956196,784294,710565,765
Capital78,51478,962158,896235,220328,592
Net lending
Expenditure of special funds27,34833,827
Balance (deficit -)14,12064,075146,273197,627-62,286
Financing-14,120-64,075-146,273-197,62762,286
Foreign loans246295156015,879
Domestic loans4,1894,5543,835032,452
Other (Residual)-18,555-68,924-150,264-197,62713,955
Source: Central Bank of Nigeria (Annual reports).
Table 20.Nigeria: Monetary Survey, 1999–2003 1/
19992000200120022003
(In millions of naira; end of period)
Net foreign assets649,9671,164,8761,322,3851,282,2161,388,234
Central Bank of Nigeria (net)493,688956,9881,034,542902,957971,656
Foreign assets510,5591,091,0531,156,4831,013,5141,065,093
Foreign liabilities-16,871-134,065-121,940-110,557-93,437
Commercial and merchant banks (net)156,280207,889287,843379,259416,578
Foreign assets161,754222,988305,029398,210437,659
Foreign liabilities-5,474-15,099-17,185-18,951-21,081
Net domestic assets66,227-111,32319,721342,690628,754
Domestic credit632,010472,012829,7911,329,4011,764,563
Consolidated government (net)178,907-116,4251,588390,966572,804
Claims736,646813,542925,6821,017,302951,298
Deposits-557,740-929,968-924,094-626,336-378,494
Of which: Federal government (net)176,805-123,990-25,209373,639552,569
Non-financial public enterprises6929511,080164212
Other financial institutions4,5684,8816,3305,4886,878
Claims on private sector447,843582,606820,793932,7831,184,669
Other items (net)-565,783-583,335-810,070-986,712-1,135,809
Broad money698,0201,034,7701,315,8691,599,4951,985,192
Narrow money400,826649,684816,708946,2531,225,559
Quasi-money297,194385,086499,162653,241759,633
Bonds and money market instruments18,17418,78426,23725,41031,796
Capital accounts481,682594,207689,289598,310882,906
(Annual percentage change)
Net domestic assets 2/-199.3-268.1-117.71637.7-26.6
Domestic credit 2/103.0-25.375.860.24.4
Claims on private sector 2/34.830.140.913.614.4
Broad money 2/30.748.227.221.60.2
Quasi-money 2/53.129.629.630.95.9
Narrow money 2/17.962.125.715.9-3.0
(Contribution to the growth of M2; in percentage points)
Net foreign assets 3/24.873.815.2-3.110.8
Net domestic assets 3/24.9-25.412.724.5-11.5
Domestic credit 3/60.0-22.934.638.03.7
Net credit to the consolidated gover41.8-42.311.429.6-3.4
Of which: Net credit to the Federal41.6-43.19.530.3-3.7
Other items (net)-35.2-2.5-21.9-13.4-15.3
Velocity (non-oil GDP/broad money)0.80.62.22.12.0
Sources: Central Bank of Nigeria; and Fund staff estimates.
Table 21.Nigeria: Consolidated Accounts of the Central Bank, 1999–2003(In millions of naira; end of period)
19992000200120022003
Net foreign assets493,688956,9881,034,542902,957972,630
Foreign assets510,5591,091,0531,156,4831,013,5141,065,093
Foreign liabilities-16,871-134,065-121,940-110,557-92,463
Domestic credit43,523-298,843-147,881-28,396278,494
Consolidated government (net)15,308-343,014-178,998-41,248254,128
Claims532,299513,010716,769532,453552,859
Deposits-516,990-856,024-895,767-573,701-298,730
Non-financial public enterprises (gross)6929511,080164212
Private sector (gross)8842,1633,1031,6461,705
Claims on banks (gross)22,07036,17620,6045,55415,572
Other financial institutions (gross)4,5684,8816,3305,4886,878
Liabilities to commercial banks95,478130,035194,830192,551260,696
Currency in vault21,89234,97664,83576,21190,099
Demand deposits 2/9,58221,35015,29418,31530,690
Special deposits44444
Required reserves64,00173,704114,69898,021139,904
Liabilities to merchant banks1,4883,8468,41211,94215,801
Currency in vault2131,510000
Demand deposits 1/7469671,5542,3163,544
Special deposits999927
Required reserves01,3506,8479,49312,153
Other deposits of DMBs52011112477
Currency and deposit liabilities190,904292,713368,671442,382840,499
Currency outside banks186,457274,011338,671386,942369,827
Public sector demand deposits 3/7153,70215,84451,577235,281
Private sector demand deposits3,73215,00014,1563,862235,391
Other items (net)-10,93191,012-12,027-157,133-11,936
Capital accounts238,409322,564302,72270,553313,822
Source: Central Bank of Nigeria.
Table 22.Nigeria: Consolidated Accounts of the Commercial Banks, 1999-2003 1/(In millions of naira; end of period)
19992000200120022003
Net foreign assets130,002179,719287,843379,259416,578
Foreign assets135,223194,585305,029398,210437,659
Foreign liabilities-5,221-14,867-17,185-18,951-21,081
Reserves118,522167,630318,986321,495362,400
Currency21,89234,97664,83576,21190,099
Deposits at central bank96,630132,654254,151245,284272,301
Reserve requirements62,00177,782125,258139,702152,276
Current accounts34,62454,87294,359105,320120,025
Stabilization securities50000
CBN Certificates0034,53500
Domestic credit540,758732,251998,2601,363,3501,501,640
Federal government (net)148,155204,302153,774414,886298,441
Claims188,576278,130182,116467,522378,205
Deposits-40,422-73,828-28,342-52,636-79,764
State and local governments (gross)2,0957,50126,79617,32720,235
Claims on private sector390,508520,448817,690931,1381,182,964
Deposit liabilities 2/476,351702,105947,1831,157,1121,337,296
Demand deposit202,152345,001448,021503,870577,664
Quasi-monetary deposits (time, savings and foreign exchange)274,199357,103499,162653,241759,633
State and local government deposits20,69645,93227,32647,45343,936
Net of state and local government455,655656,172919,8571,109,6581,293,361
Other items (net)-119,692-147,407-267,411-380,830-374,318
Bonds and money market instruments11,33712,99526,23725,41031,796
Capital accounts181,903217,094364,259500,751537,208
Source: Central Bank of Nigeria.
Table 23.Nigeria: Liquidity of Commercial Banks, 1999-2003
19992000200120022003
(In millions of naira)
Total liquid assets275,063398,254477,317747,621655,760
Cash in vault (currency)21,89234,97664,83576,21172,983
Reserves with central bank 1/90,705127,787239,605223,126214,694
Of which:
Reserve requirements62,00177,782125,258139,702156,248
Stabilization securities50000
Current accounts34,62454,87294,359105,320108,297
Net interbank positions-24,176-39,748368-11,232-32,487
Balances held with other banks (net)36,02937,08654,87251,3773,114
Interbank placements (net)2,54011,7863,2394,933310
Money at call (net)1,479-1,086-5,305-10,547-4,664
Uncleared effects-64,223-87,534-52,438-56,996-31,247
Treasury bills186,143275,774173,107460,229401,096
Treasury certificates446000750
Other liquid assets 2/53-534-598-712-1,277
Certificate deposits (net)-63-572-627-877-1,281
Bills discounted11638301654
Free liquid assets213,057320,472352,059607,919499,512
Total deposit liabilities476,351702,105947,1831,157,1121,394,977
Of which:
Demand deposits202,152345,001448,021503,870613,175
Time, savings, and foreign currency deposits274,199357,103499,162653,241781,802
(In percent)
Liquidity reserve ratios 3/
Actual44.745.637.252.535.8
Required30.030.040.040.042.0
Cash reserves (deposits at the CBN)
In percent of demand deposits44.937.053.544.335.0
In percent of total deposit liabilities19.018.225.319.315.4
Required 4/10.010.012.512.514.5
Source: Central Bank of Nigeria.
Table 24.Nigeria: Balance of Payments, 1999-2003
19992000200120022003
(In millions of U.S. dollars)
Trade balance2,80213,2088,1164,33110,531
Exports12,90723,76119,59817,67227,416
Of which: oil and gas12,17823,09318,92716,93526,607
Imports-10,105-10,553-11,482-13,342-16,885
Of which: non-oil & gas-7,817-8,276-9,084-8,868-11,039
Services & Incomes Balance-7,169-10,082-8,138-10,836-13,746
Factor services balance-3,440-6,308-4,258-6,401-8,444
Of which: interest due on public debt-1,972-1,719-1,535-1,557-1,619
Nonfactor services balance-3,729-3,774-3,880-4,436-5,302
Private transfers (net)1,2881,7031,3031,4211,677
Official transfers (net)-57-135-25-22-20
CURRENT ACCOUNT BALANCE-3,1374,6941,255-5,107-1,559
Official capital (net)-2,031-1,552-1,642-1,268-1,291
Disbursements1361647010676
Amortization due-2,168-1,715-1,713-1,373-1,368
Other capital flows (net)1,1711,2362,0512,4813,246
Direct and portfolio investment1,1711,2362,0512,4813,246
Private borrowing (net)00000
Short-term capital (net)-184-294-648-431-39
CAPITAL ACCOUNT BALANCE-1,045-610-2397821,916
Errors and omissions91-1,847-1,114-177-1,963
Overall balance-4,0912,238-98-4,503-1,606
Financing4,091-2,238984,5031,606
Net reserves (increase -)1,666-3,959-1,0232,742213
Exceptional financing2,4251,7211,1211,7611,393
Net accumulation of arrears (decrease -)2,425-20,3813751,9001,177
Rescheduling 1/022,10274600
Recovered funds 2/216
Debt buyback (net)-139
(In percent; unless otherwise indicated)
Memorandum items:
Gross official reserves (in US$ millions)5,4419,40010,4237,6817,468
(In months of imports (GNFS))4.47.37.64.93.8
Current account (in percent of GDP)-8.410.32.6-11.1-2.7
Non-oil current account (in percent of non-oil GDP)-39.9-42.4-41.3-39.6-42.6
Primary balance/GDP-13.76.5-0.6-14.5-5.5
Trade balance/GDP7.528.917.09.418.3
Non-oil trade balance/Non-oil GDP-28.5-33.1-31.9-29.5-32.9
Total external debt/GDP76.966.162.367.256.9
Total external debt/Exports (GNFS) 3/207.4182.9150.2144.7144.3
Total external debt/Consolidated revenue268.1155.6147.9185.9156.0
Debt service due/GDP11.13.75.26.45.2
Oil export price (U.S. dollars per barrel)18.028.224.325.029.0
Oil exports (million barrels per day)2.152.031.742.33
Sources: Nigerian authorities; and staff estimates and projections.
Table 25.Nigeria: Selected Interest Rates, 1999–2003(In percent; end of period)
2003
1999200020012002Q1Q2Q3Q4
Minimum rediscount rate20.014.020.516.516.516.515.015.0
Treasury bill rate (stop rate)14.013.020.313.815.216.413.814.9
Seven-day Nibor17.215.925.315.115.118.314.020.8
Savings deposit rate 1/5.24.95.03.75.03.64.83.2
Prime lending rate 1/22.519.526.020.621.221.220.019.6
Source: Central Bank of Nigeria.
Table 26.Nigeria: Imports, 1999–2003 1/
19992000200120022003
(In millions of U.S. dollars)
Imports from the wo7,6968,97111,67512,44214,452
Industrial countries4,6535,1676,7847,0747,997
Of which
United States7097891,0531,1631,132
Japan271318487286328
France6317468321,0761,157
Germany740635971811854
Italy366458546578817
Netherlands383448610640936
United Kingdom8218811,0821,1851,351
Africa330438424425471
Of which
Cóte d’Ivoire4175565864
Ghana6986868998
Niger5686685763
South Africa91112142147163
Asia (excluding Japan)2,0922,5173,2983,7124,645
Of which
China, P.R.: Mainland4366301,0111,1521,966
China, P.R.: Hong Kong195184198166164
India311398396410456
Indonesia226260311323360
Korea185273456756840
Singapore213257269263258
Thailand259247384321246
Other6218481,1681,2311,338
Of which
Russia2890707177
Turkey4150766966
Ukraine1088414799110
Brazil249271489586652
(In percent of total)
Industrial Countries60.557.658.156.955.3
Africa4.34.93.63.43.3
Asia27.228.128.229.832.1
Other8.19.510.09.99.3
(In millions of U.S. dollars)
Memorandum items:
Total merchandise imports in BoP10,10510,55311,48213,34216,885
Source: IMF, Direction of Trade statistics, and staff estimates.
Table 27.Nigeria: Exports, 1999–2003 1/
19992000200120022003
(In millions of U.S. dollars)
World13,22721,17420,07217,01224,746
Industrial countries7,63615,66014,27811,06017,882
Of which
United States4,2209,4098,3455,6549,953
Canada261311138130296
Japan1891952516811,026
Austria83189240260245
France6841,0551,0739741,246
Germany189463627488615
Netherlands130217378214702
Portugal292727657482677
Spain8762,1891,7471,2582,063
Switzerland211325270249278
United Kingdom19013090131132
Africa1,4662,1081,8942,0012,426
Of which:
Cameroon141260235250303
Cóte d’Ivoire359601435462561
Ghana439545588625758
Senegal103185154155188
South Africa202250270287348
Asia3,1231,8021,7662,3722,642
Of which:
China, P.R.: Mainland16626720712265
India2,264709765814986
Indonesia1714014051,0291,145
Korea21679696680
Other1,0021,6052,1331,5791,796
Of which:
Turkey4120207165175
Brazil7387381,3721,0911,323
Chile11928511117197
(In percent of total)
Industrial Countries5874716572
Africa111091210
Asia24991411
Other881197
(In millions of U.S. dollars)
Memorandum items:
Total merchandise exports in BoP12,90723,76119,59817,67227,416
of which: oil exports12,12922,25018,03115,87824,683
Source: IMF, Direction of Trade statistics, and staff estimates.
Table 28.Nigeria: External Public Debt Stock, 1999–2003 1/
19992000200120022003
(In millions of U.S. dollars)
Multilateral3,6653,3423,0372,9613,042
World Bank2,3402,1491,9581,9511,988
African Development Bank1,119990909838873
Other206203170172181
Bilateral21,24323,29623,21125,38427,373
Paris Club 2/21,21923,27223,19925,38127,371
Medium- and long-term debt23,27222,83122,96623,897
Pre-cutoff21,73121,058
Post cutoff1,5411,774
Arrears03682,4153,474
Other bilateral24241132
Commercial3,8093,5963,4382,6492,403
Par bonds (London Club debt)2,0432,0432,0431,4421,442
Promissory notes1,6671,4461,2921,153911
Other (including arrears)991071035450
Total28,71730,23429,68630,99332,818
(In percent of total)
Multilateral12.811.110.29.69.3
World Bank8.17.16.66.36.1
African Development Bank3.93.33.12.72.7
Other0.70.70.60.60.6
Bilateral74.077.178.281.983.4
Paris Club 2/73.977.078.181.983.4
Other bilateral0.10.10.00.00.0
Commercial13.311.911.68.57.3
Par bonds7.16.86.94.74.4
Promissory notes5.84.84.43.72.8
Sources: Nigerian authorities; Paris Club; and Fund staff estimates.
Table 29.Nigeria: External Debt Service 1999–2003
19992000200120022003
(In millions of U.S. dollars)
Total debt service due4,1403,4343,2482,9312,987
Interest payments due before rescheduling1,9721,7191,5351,5571,619
Multilateral283187132143142
Bilateral1,4591,3451,2041,2241,335
Commercial230187199191142
Amortization payments before rescheduling2,1681,7151,7131,3731,368
Multilateral443423364331367
Bilateral1,5681,1661,225914876
Commercial158126124129124
Rescheduling (principal, interest)22,102746
current maturities247149
arrears21,3620
capitalized moratorium interest493597
Flow accumulation of arrears2,425-20,3813751,9001,177
Cash Debt Service Payments:1,7151,7142,1271,0311,809
Multilaterals751610497474509
Bilaterals5767901,3082371,034
Paris Club4637251,2741621,021
Other bilaterals11366357613
Commercial banks388313322320267
Brady bonds12912913412890
Promisory notes259185188192176
Debt conversion program4958272218
Cash interest paid8151,823350548
Cash principal paid8983046801,262
Source: Central Bank of Nigeria; Debt Management Office; Creditors; and Fund staff estimates.
Nigeria: Tax Summary(As of February 2004)There are numerous restrictions and/or bans on importation and exports. The import prohibition list in effect in early 2004 includes 28 items or categories banned for commercial or retail purposes (e.g., vehicles older than 8 years, poultry, cassava, toothpicks, fruit juice, textile fabrics, used refrigerators and air conditioners, mosquito repellant and cement) and 19 items or categories banned for import for both commercial or personal use (e.g., air pistols, cowries, second-hand clothing).



The current export prohibition list includes maize, timber, raw hides, scrap metals, unprocessed rubber, artifacts and wild animals.
TaxesTax BaseExemptions, Allowances, and DeductionsTax Rates
1. Tax on net income and profits
1.1 Company income tax (Companies Income Tax Act of 1979, as amended to date); (Industrial Development Income Tax Relief Act)Taxable personsExemptionsGeneral tax rates
Annual tax on profits of companies, except those engaged in exploration, drilling, and extraction of petroleum. Gas operations are subject to companies income tax, though upstream gas investment can be deducted against oil income.



Total profits are defined as assessable profits from all sources after adjusting for balancing charges, losses, investment, and capital allowances. Losses may be carried forward against future profits for four years.



Profits of a non-resident corporation are taxable if attributable to operations carried out in Nigeria. This includes contracts awarded in Nigeria on surveys, deliveries, installation or construction (whether or not executed in Nigeria).
  • nonprofit organizations, including religious and educational institutions where the profit is not derived from trade or business;

  • companies with pioneer status, which have a tax holiday of between three to five years;

  • statutory corporations established by states or local governments;

  • state purchasing authorities established to acquire any commodity for exports;

  • enterprises operating in an export processing zone will have a tax holiday of three years;

  • profits from export activities that are used for the purchase of raw materials, plant, equipment and spare parts;

  • three-year tax holiday for enterprises whose supplies are exclusively inputs to the manufacturing of products for exports;

  • three-year tax holiday for enterprises engaged in mining of solid minerals;

  • interest on public loans; and

  • dividends paid by unit trusts, between related companies and by companies with pioneer status.

Dividends received from investments in export-oriented companies, from small companies in the manufacturing sectors in the first five years of operation, and from unit trusts are exempt. Dividends received by resident companies are recorded as franked income and are excluded from taxable income.



Deductible expenses



Deductions include expenditure incurred in the earning of income. Apart from the usual expenses, those include contributions to pension funds, Industrial Training Fund contributions, donations out of profits to a maximum of 10 percent of total profits, and reserves made out of profits for research and development, up to a maximum of 10 percent of total profits.



Depreciation allowances



Instead of a depreciation provision, there is a system of capital allowances for prescribed assets (effectively amounting to depreciation allowances). These allowances are calculated on a straightline basis by spreading annual allowances over the specified period of write-off. The annual claim for capital allowances by companies (except manufacturing, agro-allied and agricultural trade or business) may not exceed 66 2/3 percent of profits in any year.



The following rates apply for capital allowances:
30 percent of taxable income; 20 percent if engaged in manufacturing, mining, exports or agricultural production, and the turnover is N1 million or less for the first 3–5 years of operation.



Tax must be deducted at source from construction-related activities at the rate of 5 percent from payments. The tax is credited against the final tax assessment



The profit of an export-oriented undertaking within or outside an Export Free Zone benefits from a 3 year tax holiday, provided that exports are not less than 75 percent of the turnover.



Minimum tax



There is a minimum tax base, for turnover of N500,000 or less, of



  • 0.5 percent of gross profits, or

  • 0.5 percent of net assets, or

  • 0.25 percent of paid-up capital, or

  • 0.25 percent of turnover, whichever is the highest.

For turnover of more than N500,000, the minimum tax on turnover up to N500,000 plus 0.125 percent of the turnover in excess of N500,000 is applied.
(i) buildings10%
(ii) plant and machinery in agricultural productionnil
(iii) other plant and machinery25%
(iv) ranching and plantation expenditure50%
(v) motor vehicles25%
(vi) housing estate25%
(vii) furniture and fittings20%
Other allowances



(a) Initial allowance



An additional initial allowance is granted for certain expenditure items at the following rates:
(i) buildings15%
(ii) plant and machinery in agricultural production95%
(iii) plant and machinery replacing oil manufacturing plant and machinery95%
(iv) other plant and machinery50%
(v) ranching and plantation expenditure30%
(vi) motor vehicle expenditure50%
(vii) motor vehicles for public transportation95%
(viii) housing estate expenditure50%
(ix) furniture and fittings25%
(x) research and development95%
(xi) plantation equipment95%
Export-processing companies in an Export Processing Zone will be entitledto 100 percent first-year capital allowance on their qualifying expenditure.
Agro-allied companies receive in addition an investment allowance of 10 percent.
(b) Investment allowance

An investment allowance at the rate of 10 percent will be given in addition to the annual and initial allowances where a company incurs expenditure on plant and machinery.
(c) Rural investment allowance

Graduated allowances at a rate of 5–100 percent for infrastructure expenditure in remote areas.
(d) Investment tax credit

There is an investment tax credit for research and development (20 percent), capital expenditure for the acquisition of tools (25 percent), locally manufactured machinery and equipment (15 percent), and for replacement of obsolete plant and machinery (15 percent).
Incentives to gas development

Any company engaged in gas utilization will benefit from a three-year tax holiday (renewable for an additional 2 years) or an additional investment allowance of 35 percent.
In addition, there are accelerated capital allowances following the tax holiday period (an annual allowance of 90 percent for plant and machinery), and an additional investment allowance of 15 percent.
1.2 Petroleum profit tax and royalties (Petroleum Profit Tax Act of 1959, as amended in 1979 and 1990)Annual tax on profits of companies engaged in exploration, drilling, and extraction of petroleum and natural gas. Income generated by a petroleum company not related to its petroleum operations is subject to the company income tax. Tax payments are spread over 12 monthly installments. In determining profits, exports of crude oil are valued at a posted price, which is determined by the government, while domestic sales are valued at the actual price.



Projects operating under a Memorandum of Understanding (MOU) fiscal regime are subject to the fiscal terms specified in these. Currently, between 96 and 98 percent of total crude is produced under the MOU fiscal terms.



Projects operating under a Production Sharing Contract (PSC) regime are subject to the fiscal terms specified in these contracts and the Deep Offshore and Inland Basin Production Sharing Contract Decree, 1999. The share of projects producing under PSCs is expected to increase over the medium term.
Deductible expenses



Deductions include any current expenditure (incl. interest) incurred in the earning of income, and royalties and duties to the federal government or local authorities.



Profits in the form of dividends derived from manufacturing companies in petrochemical and liquefied natural gas are tax exempt for the first 3–5 years.



Depreciation allowances



Qualifying expenditure in respect of petroleum operations benefit from the following petroleum investment allowances:



  • operations onshore, 5 percent;

  • operations in offshore areas of water depth up to 100 meters, 10 percent;

  • operations in offshore areas of water depth between 100 and 200 meters, 15 percent; and

  • operations on offshore areas of water depth beyond 200 meters, 20 percent.





In addition, the following annual capital allowances are granted for five years:



1st year—20 percent



2nd year—20 percent



3rd year—20 percent



4th year—20 percent



5th year—19 percent



The capital allowances are restricted so that tax payable is not less than 15 percent of the tax that would have been payable without any allowances.



Other allowances



Qualifying capital expenditure incurred for the purpose of petroleum operations carried out under the terms of a PSC benefit from a 50 percent investment tax credit for all PSCs executed before July 1998, and a 50 percent investment tax allowance for PSCs executed after July 1998).



The following incentives are provided to the gas industry:



  • All development gas projects, including those engaged in power generation, liquid plants, fertilizer plants, gas transmission, and distribution pipelines, are to be taxed under the company income tax instead of the petroleum profit tax;

  • Capital investment for associated and non-associated gas may be treated as part of the capital investment for oil development (and therefore be deductible at the 85 percent PPT rate).

In general, a tax rate of 85 percent applies. However, for new operations which have not yet commenced sales, a reduced rate of 65.75 percent applies until pre-production costs are fully amortized.



Under the 2000 MOU, producers are guaranteed a profit margin of US$2.5 or US$2.7 per barrel (depending on capital costs) when oil prices are between US$15–19 per barrel.



The royalty rate is graduated as follows:



  • onshore operations, 20 percent;

  • offshore operations between 0–19 percent depending on water depth (the rate is gradually reduced by water depth)





Under the PSC fiscal terms, the profit oil after deduction of cost oil is split between the NNPC and the Contractor at a progressive split depending on cumulative production in the contract area. Under the 1993 Deep Water model the profit oil is split between the NNPC and the Contractor at progressive rates reaching a maximum of 60:40 percent whereas more recent PSC terms have split profit oil at the progressive rates reaching 70:30 percent.



Royalty oil is a first call on production at variable rates between 0–12 percent depending on location (deep water blocks in excess of 1000 meters water depth face a zero percent royalty rate).



Petroleum profit tax is applied at a rate of 50 percent for projects operating under PSC terms.
1.3. Personal Income Tax (Decree no. 104 of 1993)Taxable personsDeductible expensesGeneral tax rates
For resident individuals, taxable income includes both domestically and foreign sourced income. Individuals pay tax to the state of residence. However, persons employed in the armed forces, the foreign service, residents of the Federal Capital Territory, and residents outside Nigeria who derive income in Nigeria pay taxes to the Federal Board of Inland Revenue (FBIR).



Non-residents are liable to tax on income from sources in Nigeria. Only the personal allowance is available to non-residents.



For employment-sourced income, tax is deducted at source and is paid under the PAYE system each month.



Concept of income



Progressive tax on income arrived at after deducting personal allowances and exempted categories of income. Taxes on rents, dividends, royalties, and interest are withheld at source at a rate of 2.5–10 percent depending on the activity. For nonresidents, the withholding constitutes the final tax.



Income includes:

(i) gains from trade, profession or vocation,

(ii) salary, wages and other benefits

(iii) property gains and profits

(iv) dividends and interest

(v) pension or annuity

(vi) any other personal gain or profit



Benefits in kind are included in taxable income, with the exception of reimbursement of expenses, medical costs, and cost of passage to or from Nigeria.



Exempted salary income include:

(a) housing allowance paid by the employer not exceeding N 150,000 per year;

(b) transport allowance not exceeding N 20,000 per year;

(c) meal subsidy not exceeding N 5,000 per year;

(d) utility allowance of N 10,000 per year;

(e) entertainment allowance of N 6,000 per year; and

(f) leave grant not exceeding 10 percent of basic salary.
The following deductions and allowances are provided:

  • personal allowance of N 5,000, plus 20 percent of earned income;

  • N 2,500 per annum per unmarried child (maximum of 4 children);

  • N 2,000 each for two dependent relatives;

  • for disabled persons, N 3,000 or 20 percent of his/her earned income, whichever is higher; and

  • alimony deductions, not exceeding N 1,000.





Exemptions



The following exemptions apply to individuals:



  • official emoluments of the President and Vice President, and State Governors and Deputy Governors;

  • investment income of any pension fund;

  • death gratuity and compensation for death, or injuries;

  • retirement gratuities;

  • gratuities paid to public officers;

  • compensation for loss of office;

  • proceeds of foreign earnings that are repatriated into Nigeria in convertible currencies, to which concessional tax rates apply;

  • all salaries, dividends, interest, rent, royalties, fees, commissions, etc., earned from abroad and brought into Nigeria by Nigerian residents, provided the income is received in convertible currency that is paid into a domiciliary account in a bank approved by the government;

  • interest paid by the Nigerian Post Office Savings Bank or in respect of Nigerian Savings Certificates and on specific government bonds; and

  • income earned by non-residents under a technical assistance agreement.

  • all life assurance premiums subject to N5,000 limit;

  • interest on loans for owner-occupied house;

  • contributions to pension, provident, or other retirement benefit funds;

  • losses incurred in trade or business, profession, or vocations;

  • equity shareholding in company floated exclusively for research and development on 25 percent of chargeable income in year of assessment; and

  • dividends for three years if (a) company is incorporated in Nigeria, (b) equity participation was imported into the country between January 1, 1987 and December 31, 1992, and (c) the recipient’s equity in company constitutes at least 10 percent of the company’s share capital.





Dividend income for resident individuals is grossed up by the withholding tax and the grossed-up amount is subject to tax as other income. The withholding tax is credited against the personal income tax.



Capital allowances



Personal income taxpayers can also benefit from capital allowances, albeit at different rates than corporate taxpayers:
Annual income



0 – 30,000



30,000 – 60,000



60,000 – 110,000



110,000 – 160,000



Over 160,000



A minimum tax of 0.5 percent of total income applies.
In percent



5



10



15



20



25
InitialAnnual
Buildings510
Industrial buildings1510
Mining expenditure2010
Plant and machinery2010
Plant for manuf., agric.25
Furniture and fittings1510
Motor vehicles2520
Public motor vehicles30
Plantation equipment2033.33
Housing estate2010
Ranching and plantat.3015
Research and develop.2512.5
1.3 Taxation of capital gains (Capital Gains Tax Act of 1967)A tax levied on capital gains by individuals or companies accruing and derived from the sale, lease, or transfer of property rights in chargeable assets in or outside of Nigeria. Capital losses cannot be offset against capital gains. However, where two or more assets are disposed on in a single transaction, they are treated as a single disposal. Chargeable assets consist of loans, buildings, and movable assets (such as motor vehicles).Exempted institutions include charitable, religious, and educational organizations, pension funds, and trade unions, provided that the gain is not derived in connection with trade or business carried out by the institution. Exempted items include the main private residence of an individual, life insurance policies, Nigerian government securities, sale of stocks and shares, and unit trusts.10 percent
3. Taxes on goods and services
3.1 Value added tax (VAT) Decree no. 102 of 1993Taxable transactionsExemptionsTax rates
VAT is payable on the supply of goods and services provided in Nigeria by a taxable person and on the importation of goods by any person, irrespective of whether they are taxable persons, unless explicitly exempted.



The deduction of input tax against output tax charged on sales is limited to the tax on goods purchased or imported directly for resale or as an input for production. However, input tax on (i) any overhead, service and general administration; and (ii) any capital item and asset is not allowed as a deduction from output tax.



The legislation does not specify a turnover threshold.
Exempted items (with no credit for VAT paid) include the following goods:



  • exported goods;

  • medical and pharmaceutical products;

  • basic food items—beans, yam tubers, cassava, maize, millet, rice, milk, meat, fish, and infant food;

  • books and educational materials, including exercise books, laboratory equipment, school fees, PTA levies, etc.;

  • baby products, including feeding bottles, carriages, clothes, napkins, baby cream and powder, soap, toys, and baby dresses;

  • plant and machinery imported for use in an EPZ;

  • plant and machinery for gas utilization in downstream petroleum operations;

  • locally produced fertilizer; and

  • agricultural equipment and products, fertilizer, and veterinary medicine.





The following services are exempt:



  • medical services;

  • services by community banks, peoples’ banks, and mortgage institutions;

  • exported services; and

  • plays and performances conducted by educational institutions as part of learning.





Educational goods and services incidental to education for an educational institution are also exempt.



Input tax on the following is not allowed as a deduction from output tax:

(a) on overhead, service, and general administration of any business which otherwise can be expended through the income tax; and

(b) on any item and asset which is to be capitalized along with cost of the capital asset.
There is only one statutory rate of 5 percent.
3.2 Excise dutiesTax base

Excise duties are levied at ad valorem rates on selected goods manufactured or produced in Nigeria.
Tax rate

Excisable goods
In percent
Beer20
Other alcoholic beverages40
Cigarettes and other tobacco products40
4. Taxes on international transactions
4.1 Customs duties Customs Tariff Consolidation Decree, 1995 as amended 1996–2002.





Customs duties are levied on goods imported into Nigeria calculated on the c.i.f. value. Nigeria uses the Harmonized Tariff System.



Other levies on imports are:



Port development levy—7 percent of duty payable;

National automotive council levy—2 percent tax on vehicles and parts;

Sugar levy of 10 percent of sugar imports; Rice development levy of 10 percent of rice imports;

ECOWAS community levy of 0.5 percent of c.i.f. value of imports; and Comprehensive Import Supervision Scheme (CISS) charge of 1 percent on f.o.b. value of imports for pre-shipment inspection.






Exemptions include the following:



  • aircraft equipment used by foreign airlines;

  • films of educational, scientific, or cultural character imported by the United Nations or its agencies or an approved educational or scientific organization;

  • fuel, lubricants, etc., used exclusively for operation of military equipment or aircraft;

  • government imports by internationally recognized nonprofit organizations or by the Head of State, consular offices, or under diplomatic privilege, or for other technical assistance purposes; and

  • life-saving appliances.





There are various incentive schemes in place. The so-called Export Expansion Grant provides tax vouchers for either 5 percent or 40 percent of non-traditional exports (depending on the sector) that can be used to offset other duty or tax payments, and is administered by the Ministry of Commerce. A 40 percent



EEG applies to all textile products (e.g., yarn, cloth, polyester, etc.) and a 5 percent EEG applies to all agricultural cash crops (e.g., cocoa, groundnuts, rubber, ginger, etc.).



Importation under the ECOWAS Trade Liberalization Scheme (ETLS) attract zero duty for specific products (e.g., pharmaceuticals) and companies (e.g., tobacco companies).



The Duty Draw Back scheme ceased to exist in 2003.






The tariff structure in effect in 2003 and early 2004 is based on the 1995 Customs and Excise Tariff Book (which was extended for two years beyond its initial expiration date of end-2001). The number of bands (six) and rates (20 rates, ranging from 2.5 percent to 150 percent) is unchanged from 2002. The trade weighted statutory average tariff was 17.4 percent in 2002 (weighted by 2002 imports), and has not been recalculated for 2003 due to lack of data on the weighted distribution of trade and lack of specificity on information on changes in the application of tariffs to certain items in the 2003 budget.



Raw materials2.5-25
Components5-50
Clothing55-75
Luxury consumer goods (except automobiles)30-50
Paper products5-100
Vehicles5-50
Soy meal, soy cake, and groundnut cake35
Refined petroleum products10
Rice75
Wheat15
Machin. and elect. equip.5-20
Food5-100
Cigarettes and tobacco150
Alcoholic beverages100
5. Other taxes
3.1 Stamp duty Stamp Duty ActStamp duty is levied on a number of instruments, including agreements, bills of exchange, leases and licenses, mortgages, and insurance policies.No stamp duty is payable on instruments executed by the government and on all forms of securities.Rates of stamp duty vary depending on the nature of the instrument and the value thereof.
Sources: Ministry of Finance, various tax legislation; Nigerian Tax Companion, 2001; and International Bureau of Fiscal Documentation.
H. References

Prepared by Ulrich Bartsch.

Natural gas is dissolved in crude oil under the high pressure that exists in hydrocarbon reservoirs, and is freed once the pressure is released. It is therefore not possible to produce oil entirely without having to deal with some associated natural gas. Most crude oil reservoirs also have a gas cap. In some reservoirs there is more gas than oil, although there are no reservoirs without any liquids.

“Proved reserves of natural gas - generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions” (BP Statistical Review of World Energy June 2003). The Nigerian authorities put current proven oil reserves at 33 bn bl.

In the liquefaction process, all by-products other than methane are filtered out of the LNG. Heavier hydrocarbon compounds are sold as condensates and LPG.

Project financing means that repayment of the loan will come from project revenue only, and banks cannot have recourse to the project shareholders’ capital in case of adverse developments.

The trend in the industry is to build ever larger trains. While the first two trains had a capacity of 2.7mt each annually, the third had 3.4mt, trains four and five will have 3.7mt, and train number six is estimated to reach more than 4mt. Investment figures have been provided by NNPC.

The first two trains of NLNG use gas from designated gas fields. Increasingly, expansions of the plant will use gas associated with oil production and contribute to the reduction of flaring.

Operating costs are estimated at US$0.40 per 1000 cft or a total of US$175 million. The LNG venture purchases 440bn cft (1.2bn cft per day) of natural gas at US$0.76 per 1000 cft, at a cost of US$333 million. Operating costs, the upstream gas price, and the LNG sales price in Europe are assumed to be the same as for the Oman LNG project described in Bartsch (1998).

Company results for 2003 are not yet available. One of the joint venture partners indicated however, that a ‘small dividend’ would be paid by NLNG.

Assumes that two more LNG trains come on stream in 2008–09.

Note that profits are different from cash flow in that they are calculated as gross revenue minus maintenance, capital depreciation, debt service, and operating costs, so they do not depend on the financing of investment activities.

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