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Nigeria: Staff Report For The 2016 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. African Dept.
Published Date:
April 2016
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Fund Relations

(As of February 29, 2016)

Membership Status: Joined: March 30, 1961; Article XIV

General Resources Account:

SDR Million%Quota
Quota2454.50100.00
IMF’s Holdings of currency2279.10100.00
Reserve Tranche Position0.180.01

SDR Department:

SDR Million%Allocation
Net cumulative allocation1,675.38100.00
Holdings1,499.7999.98

Outstanding Purchases and Loans: None

Past Engagement:

ArrangementDate ofExpirationAmount ApprovedAmount Drawn
TypeArrangementDate(SDR Million)(SDR Million)
Policy Support InstrumentOct. 17, 2005Oct. 16, 2007n.a.n.a.
Stand-ByAug. 04, 2000Oct. 31, 2001788.940.00
Stand-ByJan. 09, 1991Apr. 08, 1992319.000.00
Stand-ByFeb. 03, 1989Apr. 30, 1990475.000.00
Projected Payments to Fund1(SDR Million; based on existing use of resources and present holdings of SDRs):
Forthcoming
20162017201820192020
Principal
Charges/Interest0.030.030.030.030.03
Total0.030.030.030.030.03

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Implementation of HIPC Initiative: Not Applicable.

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable.

Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable.

Exchange Rate Arrangement

In Nigeria, the foreign exchange market comprises the interbank and bureau de change segments. The de jure exchange arrangement is a managed float. Nigeria’s de facto exchange rate arrangement is a stabilized arrangement, as the Central Bank of Nigeria (CBN) has maintained the naira at a pegged rate within a 2 percent band against the U.S. dollar in the interbank market since March 9, 2015. Nigeria currently maintains the following exchange restrictions and MCP subject to Fund approval under Article VIII, Sections 2(a) and 3, of the IMF’s Articles of Agreement: (i) an exchange restriction arising from the prohibition to access foreign exchange at the Nigerian foreign exchange markets for the payment of imports of 40 categories of items; (ii) an exchange restriction arising from the rationing of foreign exchange and its allocation based on the CBN’s determination of priority categories of transactions; and (iii) an MCP arising from the large spread between the rate set by the CBN for commercial banks, and the rates in the BDC and parallel market. In addition, existing limits on the amounts of FX available when traveling abroad, which cannot be exceeded even upon verification of the bona fide nature of the transaction, also give rise to an exchange restriction under Article VIII. Nigeria continues to avail itself of the transitional arrangements of Article XIV, although it no longer maintains any restrictions under this provision.

Safeguards Assessment

Under the Fund’s safeguards assessment policy, the CBN was subject to a full safeguards assessment with respect to the Stand-By Arrangement that expired on October 31, 2001. The assessment, which included an on-site visit, was completed on November 28, 2001. The assessment concluded that, at that time, vulnerabilities existed in the areas of financial reporting and legal structure of the Central Bank.

Article IV Consultation

Nigeria is on the standard 12-month Article IV consultation cycle. The previous Article IV consultation was concluded on February 27, 2015.

Technical Assistance (TA)

A. Headquarters:

DepartmentPurposeTime of Delivery
FADTSA and cash managementJanuary 1–14, 2014
FADJSA Fiscal transparency & reporting (JSA4)January 10–23, 2014
MCMBank SupervisionJanuary 12, 2014–January 11, 2015
MCMBank ResolutionJanuary 15–24, 2014
STACollaboration with AfDB on Open Data PlatformJanuary 20–24, 2014
STABalance of Payments StatisticsApril 22–May 5, 2014
STANational Accounts StatisticsMay 12–23, 2014
LEGFiscal TaxMay 12–16, 2014
STAFSI: Financial Soundness IndicatorsMay 19–23, 2014
FADPublic Financial ManagementJuly 1–12, 2014
FADPublic Financial ManagementAugust 4–15, 2014
MCMMonetary and Foreign Exchange PolicyAugust 25–September 5, 2014
STANational Accounts StatisticsSeptember 15–26, 2014
STAConsumer Prices/Producer PriceSeptember 15–26, 2014
FADTax AdministrationOctober 1–12, 2014
FADPublic Financial ManagementOctober 1–12, 2014
MCMBank RestructuringOctober 1–30, 2014
STABalance of Payments StatisticsNovember 17–28, 2014
FADPublic Financial ManagementDecember 1–12, 2014
MCMBank RestructuringDecember 1–30, 2014
FADTax AdministrationDecember 15–26, 2014
FADProgram Budgeting, TSA and Cash Management PerformanceJanuary 22–February 4, 2015
STABalance of Payments StatisticsMarch 16–27, 2015
MCMIFRS ProvisioningMarch 23–27,
MCMTraining Workshop on Financial Holding Companies SupervisionMarch 30–April 2, 2015
STAPrice StatisticsApril 13–24, 2015
MCMInternational Financial Reporting Standards (IFRS) ProvisioningJune 15–19, 2015
FADTax and Customs AdministrationJuly 7–31, 2015
MCMInternational Financial Reporting Standards (IFRS) ProvisioningAugust 17–28, 2015
LEGAML/CFT reform agendaJanuary 11–25, 2016
STAMonetary and financial statisticsJanuary 18–29, 2016
FADBudget preparation, expenditure review, treasury single account, and cash management reformsJanuary 20–February 9, 2016
STAEnhanced General Data Dissemination System (e-GDDS)February 15–19, 2016

B. West Africa Regional Technical Assistance Center 2 (AFRITAC 2)

DepartmentPurposeTime of Delivery
STANational Accounts StatisticsMarch 18–20, 2014
AW2OutreachNovember 25–27, 2014
STANational Accounts StatisticsDecember 1–12, 2014
FADTax AdministrationJuly 20–31, 2015
FADTax AdministrationJuly 27–August 7, 2015
FADPublic Financial ManagementAugust 31–September 10, 2015
FADPublic Financial ManagementOctober 19–23, 2015
STANational Accounts StatisticsOctober 26–30, 2015
FADPublic Financial ManagementNovember 19–December 3, 2015
FADTax AdministrationJanuary 18–29, 2016
FADPublic Financial ManagementJanuary 20–February 9, 2016
FADPublic Financial ManagementFebruary 1–5, 2016
FADTax AdministrationFebruary 22–March 4, 2016

Resident Representative:

Mr. Gene Leon is the IMF’s Senior Resident Representative in Abuja since September 2013.

Joint World Bank and IMF Work Program

(As of January 31, 2016)

The IMF and World Bank staff collaborate closely in their work on Nigeria. Bank staff participates in IMF missions, while the Bank’s analysis and advice to the government in key structural reform areas informs Fund surveillance. Bank and IMF staffs collaborated on assistance related to the Petroleum Industry Bill, FSAP update and financial sector deepening, and public financial management reform.

TitleProductsProvisional Timing of Missions (if relevant)Expected Delivery Date
A. Mutual Information on Relevant Work Programs
Bank work program in next 12 months(i) Lending Programs
Federal Development Policy OperationFebruary and March 20162016
Lagos Development Policy Operation (III)June 2016Ongoing
Edo Development Policy Operation (II)June 2016Ongoing
Nigeria PFM Reform & Statistical Capacity Building Project2016 / 2017

2016
Nigeria Electricity Transmission ProjectOngoing
Nigeria Electricity and Gas Improvement ProjectContinuous
Power Sector Guarantees Project II2016
Nigeria Electricity Sector Credit Facility2016
Public/Private Partnership ProjectContinuousOngoing
Growth, Employment, and Markets in States (GEMS)ContinuousOngoing
Public Sector Reform and Governance Development ProjectContinuousOngoing
State Expenditure Effectiveness for Opportunities and Results (SEEFOR)ContinuousOngoing
Nigeria Development Finance ProjectApril 2016Ongoing
Agriculture DPO 22016
(ii) Analytical and Advisory Activities
Nigeria Economic Report IV and VContinuous-2016
Nigeria Growth and Trade StudyContinuous-2016
Programmatic Poverty Assessment− Continuous-2016
(iii) Trust Funds, other analyses, and on-going dialogue
Governance Partnership Facility Phase 2: Oil Revenue Model Sub-ComponentContinuousStarting in 20151
IMF work program in next 12 monthsArticle IV ConsultationJanuary, 2015Board: March 30, 2015
Technical assistance
(i) Fiscal issues
Budget Preparation, Expenditure Review, Treasury Single Account, and Cash Management ReformsJanuary–February 2016
(ii) Monetary and financial issues
Bank supervision (MCM)Long-term expertUntil Jan. 2017
(iii) Statistics
Consumer Price IndexApril 2016
B. Request for Work Program Inputs
Fund request to BankSummary of Bank analysis and support for public financial management at all tiers of governments (including PERs)Ongoing
Bank request to FundRegular update of Fund macroeconomic projectionsOngoing
C. Agreement on Joint Products and Missions
Joint MissionMedium-Term Debt Management Strategy (MTDS)February 2016March 2016

Statistical Issues

(As of March 1, 2016)

I. Assessment of Data Adequacy for Surveillance
General: Data are broadly adequate for surveillance; however data deficiencies remain—in particular, inadequate information on subnational public finances and large errors and omissions in the balance of payments. The Statistics Act of 2007, which established the National Bureau of Statistics (NBS) as the main coordinating agency for data management, has led to a number of improvements, including better information sharing between data producing and collecting agencies. There has been an improvement in the compilation of timely and internally consistent data, for example, the Government Integrated Financial Management Information System (GIFMIS) is now used for budget preparations and the coverage of the Treasury Single Account (TSA) is now completed at the Federal Government level. These efforts are being extended to the subnational levels, including through Fund TA support.
National accounts: Basic statistics are extensively available for the compilation of national accounts and the NBS employed major methodological updates in 2014 by adopting the System of National Accounts (SNA 2008 version), the International Standard Industrial Classification (ISIC revision 4). The weaknesses associated with the reliance on the consumer price index to construct the constant price GDP series has improved by developing the supply and use table (SUT) framework (first time in its history) and collecting producer price data. The introduction of additional indices, such as a producer price index, would facilitate more accurate estimation of the constant price measure. The authorities received Technical Assistance (TA) from the Fund, World Bank, and African Development Bank in completing the GDP rebasing exercise, and ongoing assistance will support the next rebasing, scheduled for 2016. The rebased GDP (base year=2010) and supply and use table reflected the significant change that had taken place in the structure of the economy since the previous rebasing in 1990. In addition, the conduct of a census of businesses, a census of agriculture, and a household living conditions survey in 2014 contributed to further improvements in the measurement of GDP. Further TA support since the rebasing has focused on finalizing the SUT and backcasting for the rebased annual national accounts.
Prices statistics: The official monthly consumer price index (CPI), a composite of urban and rural price data, is available on a timely basis. The index expenditure weights are still based on the 2003/04 National Consumer Expenditure Survey (and therefore are unlikely to be representative of current expenditure patterns) even though a Harmonized Nigeria Living Standard Survey (HNLSS) was conducted during 2009/2010. A TA mission is planned for early 2016 to assist with updating the CPI.

The producer price index (PPI) survey was suspended in 2013. The authorities have expressed interest in receiving TA to resume compilation, but a timeline has not been established.
Government finance statistics: The most pressing shortcoming is related to inadequate data coverage, particularly of the subnational governments, which comprise almost one half of total government expenditure. The federal government has limited information on the subnational fiscal accounts, making it difficult to target a consolidated fiscal balance; efforts to address this issue have been stymied by constitutional restrictions. However, the oil price shock and need for financial bailouts at the state and local governments could provide a catalyst for this effort. The CBN disseminates survey data on state and local governments budgets, but survey responses do not necessarily follow the same definitions, and these data are not consolidated with data from other levels of government. To facilitate the timely preparation of a consolidated set of fiscal accounts, however, governments at all levels need to use budget classification, chart of accounts, and accounting systems that will allow consistent classifications of the data. Current plan for nationwide adoption of International Public Sector Accounting Standards (IPSAS) on a cash basis at the Federal and State levels is ongoing and are instrumental to this end.
Monetary and financial statistics: There have been improvements in the compilation of monetary statistics. Most recently a TA mission from STA visited Abuja (January 18-29, 2016) to discuss and address methodological and compilation issues in monetary and financial statistics (MFS). After the implementation of the International Financial Reporting Standards (IFRS) in the financial statements in most of the other depositary corporations (ODCs), the CBN recently embarked on a project to expand the institutional coverage of MFS. There is need to expedite the implementation of the new technological platform by providing the data breakdown for national and foreign currency, as well as better sectorization to help improve the compilation of MFS data. Follow-up work is needed to introduce the standardized report forms (SRF) for other financial corporation’s (OFCs), which will be contingent on meeting the established benchmarks, namely: (1) expansion of the ODCs coverage in the MFS compilation; (2) implementation of the call report forms for pension funds, specialized finance and development institutions, and asset management companies; and (3) improve granularity of the currency and maturity breakdown of the monetary survey.
Financial sector surveillance: The CBN compiles financial soundness indicators (FSIs) on a quarterly basis and these FSIs are submitted to STA for public dissemination. The reported FSIs are ten out of twelve of the core set and seven of the encouraged set. The CBN received support from STA to improve the methodology used to compile FSIs. However, efforts need to be made by the CBN to enhance the consolidation basis to capture cross-border activities of Nigerian bank subsidiaries and branches, as well as to report FSIs using a breakdown into domestic and foreign currency.
External sector statistics: There have been significant efforts to improve the compilation of Nigeria’s balance of payments data in recent years. Supported by IMF technical assistance, the authorities have expanded the range and improved the quality of data sources, aimed at strengthening the balance of payments and producing an international investment position (IIP). However, large errors and omissions in the balance of payments continue to complicate the assessment of external sustainability. There is a need for improved validation of transactions reported by banks, measurement of transactions outside the banking system, appropriate treatment of transactions of enterprises in free trade zone (using a residency criterion) and improved coverage of estimates of the external assets and liabilities of the banking sector. The five-year DFID/GDDS Phase III Module that ended in 2015 has helped CBN improve source data by recording more accurately cross-border private capital flows and stocks. Further TA from the Fund was requested to assess recent work to reduce large errors and omissions and improve the IIP as well as to validate work on the compilation of flow of funds.

Public external debt data are of good quality and available on a timely basis. The Debt Management Office (DMO) is collaborating closely with the CBN to extend the coverage of their database to include private sector liabilities and foreign investment in domestically issued debt securities.
II. Data Standards and Quality
Participant in the General Data Dissemination System (GDDS) since 2003. Nigeria is implementing the Enhanced General Data Dissemination System (e-GDDS), including the National Summary Data Page (NSDP), which is available on the National Bureau of Statistics website, utilizing the Open Data Platform.No Data ROSC is available.
Nigeria: Table of Common Indicators Required for Surveillance(As of end-February 2016)
Date of latest observationDate receivedFrequency of Data1Frequency of Reporting1Frequency of Publication1
Exchange RatesFeb. 2016Feb. 2016DDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities2Dec. 2015Jan. 2016MMM
Reserve/Base MoneyNov. 2015Jan. 2015MMM
Broad MoneyNov. 2015Jan. 2016MMM
Central Bank Balance SheetNov. 2015Jan. 2016MMM
Consolidated Balance Sheet of the Banking SystemNov. 2015Jan. 2016MMM
Interest Rates3Feb. 2016Feb. 2016DDD
Consumer Price IndexJan. 2016Feb. 2016MMM
Revenue, Expenditure, Balance and Composition of Financing4—General Government5 and Central Government2015March

2016
AAA
Revenue, Expenditure, Balance and Composition of Financing4—General Government5 and Central GovernmentDec. 2015March

2016
MMM
Stocks of Central Government and Central Government-Guaranteed Debt6Dec. 2015Feb. 2016QQQ
External Current Account BalanceSep. 2015Dec. 2016QQQ
Exports and Imports of Goods and ServicesSep. 2015Dec. 2016QQQ
GDP/GNPSep. 2015Dec. 2015QQQ
Gross External Debt (public and private)2014Mar. 2015AAA
International Investment Position72014Mar. 2015AAA

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. However, the expenditure data for state and local governments are not available.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. However, the expenditure data for state and local governments are not available.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

1The oil revenue model will be delivered in phases, the first version of which will allow testing of different oil prices, production levels, and costs using the current fiscal regime.

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