81. At the beginning of 1995, the Nigerian authorities initiated a substantial liberalization of the country’s exchange system, a process that has been gradually reinforced since. The 1995 measures represented a major turnaround from the abandonment of market-based mechanisms that had occurred during 1993 and especially in 1994, and they were accompanied by strong efforts to restore fiscal and monetary discipline. From early 1995 to the present, these policies have produced a fairly stable market-related exchange rate for most price-sensitive transactions despite the continued existence of an overvalued, pegged official rate for certain government transactions. Moreover, notwithstanding certain residual restrictions, the system has for economic purposes become essentially free of restrictions on payments for current international transactions, and for most capital transactions as well. This chapter describes this recent evolution and the present state of the system.

Abstract

81. At the beginning of 1995, the Nigerian authorities initiated a substantial liberalization of the country’s exchange system, a process that has been gradually reinforced since. The 1995 measures represented a major turnaround from the abandonment of market-based mechanisms that had occurred during 1993 and especially in 1994, and they were accompanied by strong efforts to restore fiscal and monetary discipline. From early 1995 to the present, these policies have produced a fairly stable market-related exchange rate for most price-sensitive transactions despite the continued existence of an overvalued, pegged official rate for certain government transactions. Moreover, notwithstanding certain residual restrictions, the system has for economic purposes become essentially free of restrictions on payments for current international transactions, and for most capital transactions as well. This chapter describes this recent evolution and the present state of the system.

V. Recent Changes in the Exchange System77 78

81. At the beginning of 1995, the Nigerian authorities initiated a substantial liberalization of the country’s exchange system, a process that has been gradually reinforced since. The 1995 measures represented a major turnaround from the abandonment of market-based mechanisms that had occurred during 1993 and especially in 1994, and they were accompanied by strong efforts to restore fiscal and monetary discipline. From early 1995 to the present, these policies have produced a fairly stable market-related exchange rate for most price-sensitive transactions despite the continued existence of an overvalued, pegged official rate for certain government transactions. Moreover, notwithstanding certain residual restrictions, the system has for economic purposes become essentially free of restrictions on payments for current international transactions, and for most capital transactions as well. This chapter describes this recent evolution and the present state of the system.

A. Background Through 1994

82. Over the years, the authorities have tried a variety of exchange arrangements, most more than once. These have ranged from fixed official rates, to market-determined official rates, to dual systems with a fixed or lagging official rate and a more depreciated rate or rates based on interbank dealings or various types of auctions.79 All have occurred in the context of an extensive parallel market, illegal but generally tolerated, that reflected unmet legitimate market demand as well as illicit transactions. In the early 1990s, as substantial macroeconomic and financial imbalances reemerged and pressures in the foreign exchange market intensified, the Central Bank of Nigeria (CBN) found it increasingly difficult to meet market demand and stem the pace of depreciation. In March 1993, having briefly reintroduced a Dutch auction to replace an interbank system in determining the official rate, the authorities pegged the official rate at ₦ 24.9 per U.S. dollar, revaluing from the latest auction rate of ₦ 30 per U.S. dollar. They then repegged it in April-July 1993 at rates around ₦22 per U.S. dollar; the official rate settled at ₦21.886 per U.S. dollar (midpoint), where it has remained since. Foreign exchange allocations at the official rate were made by the CBN on a pro rata basis, in proportion to the authorized banks’ requests, until suspended in November as reserves neared depletion.

83. A sharp further tightening followed in January and February 1994, with all legal transactions being confined to the official rate. Banks and other authorized dealers were prohibited from dealing directly with clients on their own account and were allowed to collect only the normal charges and prescribed commissions. Foreign exchange bureaus, which had been free since 1989 to deal in currency and travelers’ checks at freely negotiated rates, were limited to buying foreign exchange as agents of the CBN at the official rate. These measures apparently sought to preclude profitable arbitrage opportunities that had arisen. The CBN allocated foreign exchange to end users through designated banks on the basis of sectoral shares: 50 percent (later 60 percent) for manufacturing inputs, 10 percent for agricultural inputs, 30 percent (later 20 percent) for finished goods, and 10 percent for service payments.80

84. In 1994 as well, proceeds from exports of goods and services were required to be surrendered to the CBN. All imports over ₦1,000 were required to be financed by letters of credit, while less formal forms of import credit, such as the use of bills for collection and open accounts, were suspended in view of perceived abuses for capital flight. With demand far exceeding supply, the frequency of allocations was reduced, and the bureaus were permitted a 10 percent margin in an ineffective effort to divert some demand. By year’s end, however, the parallel rate stood at ₦84 per U.S. dollar, having briefly breached ₦90 per U.S. dollar (Appendix Table 56). By then, the authorities had come to the conclusion that attempts to stabilize the naira by administrative means had been ineffective.

B. 1995: Liberalization and “AFEM”

Foreign exchange market - initial liberalization

85. In response, the 1995 budget presentation sharply tightened fiscal and monetary policies and called for economic liberalization, “guided deregulation,” and encouragement of private enterprise. The annual CBN guidelines on monetary, trade and foreign exchange matters, issued in mid-January, announced the introduction of an “Inter-bank Foreign Exchange Market (IFEM)” for all nongovernment and nonpetroleum transactions. In this market, also referred to as the “autonomous” market, exchange rates would be determined freely by authorized buyers and sellers of foreign exchange. The CBN would continue to hold official foreign exchange to “meet priority government obligations, strengthen the external reserves and intervene in an influence the IFEM in order to ensure reasonable stability in the market.” While all government transactions (federal and state) with the CBN remained at the official rate, government contractors were directed to the IFEM, together with “commercialized” companies. Parastatals and other public enterprises would in principle deal with the CBN at the autonomous rate through domiciliary foreign exchange accounts that they were obliged to hold with it.81 The foreign exchange bureaus were authorized to buy currency and travelers’ checks and to sell currency (only, and up to $2,500 per transaction) at the interbank rate (autonomous) rate plus 2 percent.

Easing of current restrictions

86. The January 1995 guidelines also announced the abolition, with immediate effect, of the Exchange Control Act of 1962, which had required official approval for all foreign exchange transactions. It was subsequently replaced by a Foreign Exchange (Monitoring and Miscellaneous Provisions) Decree, 1995 in July, which was made retroactively effective to January 16. In legislatively establishing what was by then unambiguously termed the “autonomous” foreign exchange market (AFEM), this decree stated that any otherwise legal transaction “adequately supported by appropriate documentation shall … be an eligible transaction for the purchase of foreign exchange in the Market.” Transactors were to be under no obligation to disclose the sources of foreign currency to be sold in the market, unless required by other laws.

87. The January 1995 guidelines also eased some restrictions, while retaining others from the past. In particular, export surrender requirements were replaced with repatriation requirements. Non-oil exporters were permitted to sell their foreign exchange proceeds in the AFEM or hold them in non-oil export domiciliary accounts. Holders of these and other domiciliary accounts were assured of easy access to the funds therein, A number of specific restrictions on payments or transfers for current international transactions remained in effect, however, for AFEM-sourced foreign exchange. These included limits on travel allowances ($500 per year for individuals and $5,000 per year for companies) and on personal home remittances by expatriates (to 75 percent of after-tax salary). In addition, “accompanying” (non-working) expatriate wives continued to be denied foreign exchange not only for personal home remittances (redundantly, since they had no salary) but also for transfers “for any purpose whatsoever.” In addition, foreign exchange for education abroad remained available for higher education only. Restrictions on income remittances under the debt-conversion program (see below) also remained in effect.

88. Limits, usually set as a percentage of net sales or profits, were also maintained on payments under license, technical services, management, consultancy, and intellectual property agreements; since these limits were imposed on the underlying transactions themselves, however, under both commercial regulations and tax laws, they did not give rise to exchange restrictions. Although also not necessarily exchange restrictions under the Fund’s Articles, rather extensive documentation requirements remained in effect as well.82 These included application forms (so-called Form “M” for imports, “A” for invisibles, “NXP” for non-oil exports, etc.), evidence of pre-shipment inspection for all imports over $1,000, and a variety of supporting invoices, clearances and other papers attesting to the legitimacy of the transaction. The use of bills for collection and open accounts remained suspended. As under earlier market-based systems, forward exchange contracts were permitted between dealers and their customers, provided that they related to underlying import or export transactions; in practice, this market has remained practically nonexistent. Parallel market transactions, although still extensive (see below) and evidently tolerated, remained explicitly illegal.

Evolution of the foreign exchange market and CBN intervention

89. In the new interbank (autonomous) market (IFEM), there was initially some ambiguity as to the intended extent of official intervention in the market and official influence on the rate. The CBN, according to a January 1995 circular, would be an “active participant” and would deal with authorized dealers as needed. It continued, however, to purchase foreign exchange directly from parastatals, other public enterprises, and the foreign oil companies rather than through banks (albeit at “prevailing autonomous rates”)—a provision apparently aimed at precluding a few major enterprises and key banks from dominating the market. The CBN would then “use these funds and other government foreign exchange [such as oil revenues] to intervene in and influence the autonomous market.” Nevertheless, the first specific guidelines on the then IFEM specifically envisaged that there would be “no regular bidding for or allocation of foreign exchange …[by the CBN] for the time being.” The apparent intention was to leave the market largely dependent on sources other than oil revenues, an approach that would be consistent with the announced policy goal of a “deliberate build-up and strengthening of external reserves….” Evidently, the exchange rate that would clear such a market would be considerably more depreciated than the rate of a market sustained by oil revenues. Indeed, the rate quickly established itself at around ₦80 per U.S. dollar, just below the parallel rate.

90. Further specific guidelines on intervention followed in February 1995 that modified the initial policy indication, for what was now referred to consistently as the “autonomous” market. These announced that the CBN would intervene as necessary “to sell foreign exchange directly to end users through selected banks”; as under earlier arrangements, the banks would act only as agents for these transactions between the central bank and end users. Upon notification of a forthcoming intervention, end users were to submit their applications to the banks concerned. The banks, in turn, would summarize them for presentation to the CBN on forms that indicated the name, address and nature of the company purchasing foreign exchange, its turnover, the type and value of the envisaged import or other transaction, and previous recourse to the AFEM. The banks were responsible for verifying and retaining the supporting documentation, but it could be called up for review by the CBN. Although other banks remained free to participate in the market, CBN intervention funds could not be transferred or used for interbank transactions. Banks were not permitted to add to the CBN selling rate anything but the normal transactions charges and commissions prescribed by the existing bankers’ tariffs. It was stated that the CBN would sell its exchange at “the current autonomous rate in the market”—a phrasing that blurred the distinction between an interbank rate proper and its intervention rate. Six AFEM intervention exercises took place in 1995, with funding totaling $1,741 million at rates of ₦80-85 per U.S. dollar, as compared with 15 allocations the year before at the official rate for $1,961 million. Foreign exchange bureau transactions remained much smaller than those in the AFEM, at purchases and sales of about $20 million each.

Capital account liberalization

91. The 1995 measures also included a substantial liberalization of controls on capital movements, as well as on related current income flows. The new foreign exchange decree permitted any person (individual or juridical) to invest in any enterprise through an AFEM dealer, who would register the capital import with the CBN; that done, transferability in convertible currency was guaranteed (after tax) for dividends and profits, debt service, and proceeds of whole or partial sale or liquidation. In addition, any person, whether national or resident, was permitted to “deal in, invest in, acquire or dispose of, create or transfer any interest in securities and other money market instruments whether denominated in foreign currencies in Nigeria or not.” This language, it has been confirmed, means that Nigerians may invest in securities abroad provided there is documentation, but that they may not simply make deposits abroad, a process still regarded as capital flight for want of documentation as to purpose.

92. A new law intended to encourage and monitor foreign investment in the country was also issued in July 1995, with retroactive effect to January, the Nigerian Investment Promotion Commission Decree, 1995. Replacing the Nigerian Enterprise Promotion Decree of 1989 and provisions of earlier “indigenization” measures that had required majority Nigerian ownership of foreign enterprises in the country, the new decree allowed foreigners to invest and participate in any sector to any extent, except for crude oil and gas (if not covered by bona fide joint ventures) and a negative list covering munitions, military goods, and narcotics. It echoed the exchange decree on transferability and also guaranteed that no nationalization would take place without just compensation and the possibility of recourse to the courts. On the other hand, waiting periods remained in effect for remittance under the 1988 debt conversion program of income (five years from investment) and capital (ten years). Accompanying the investment decree and also effective in January 1995 was a decree on money-laundering that sought to curb the placement of illicit drug money and other illegally acquired funds into the financial system.

C. Refinements in 1996 and 1997

93. The policies instituted in 1995 remained in effect during 1996, with a few modifications. In the annual guidelines issued in February, the administration of diverse export incentives was concentrated in a Nigerian Export Promotion Council to reduce bureaucracy and facilitate non-oil exports; requirements that visitors pay hotel bills and official service fees such as airport taxes in foreign currency were abolished; importers were made responsible for paying pre-shipment inspection charges; and all exports (oil and non-oil) were also made subject to pre-shipment inspection. A circular issued in April withdrew the requirement for importers to produce a tax clearance certificate for all their current tax obligations, thus removing an exchange restriction in this regard.83 Meanwhile, in a February 1996 restatement of AFEM rules, the CBN announced that it would now intervene monthly, and in May the pace of intervention was increased to weekly. In all, 35 intervention exercises were conducted in 1996; CBN sales to the market totaled $1,846 million, at rates gradually appreciating from ₦85 per U.S. dollar to ₦80 per U.S. dollar.

94. The beginning of 1997 saw some further liberalization within the same basic system. AFEM purchases were now allowed for all levels of education, and the limitation of expatriates’ personal home remittances to 75 percent of net salary was lifted, subject to evidence of earnings and taxes paid. In addition, the limits on travel allowances for individual Nigerians and for businesses were removed. In light, however, of unexpected demand for large amounts well in excess of any likely travel needs, it proved necessary for the CBN to tighten documentation requirements and require the banks to scrutinize applications closely for bona fide travel, so as to curtail the use of this vehicle for capital flight. Import financing was eased by again permitting the use of bills for collection and open accounts. The practice of denominating contracts in foreign currency as well as in naira was prohibited in favor of naira only.

95. A new Foreign Exchange Instructions Manual was released in August 1997 (dated April) in order to codify existing practice. It removed some further provisions giving rise to exchange restrictions (under Article VIII of the Fund’s Articles); these included a requirement when applying for foreign exchange for training abroad that official certification be obtained to the effect that the training course was not available domestically as well as a stipulation that prior years’ audited accounts be submitted (beyond those of the year concerned) in support of profit and dividend remittances. However, the new manual, apparently through drafting problems, introduced some inconsistencies and inadvertently left some restrictions in place.84 As of early 1998, these matters had been brought to the CBN’s attention and circulars to address these unintended restrictions were subsequently issued in mid-May 1998. However, the Manual still provides that any exporter that fails to repatriate export proceeds within 90 days would be embargoed from access to foreign exchange for any purpose, including meeting bona fide obligations not related to the export transaction.

D. AFEM Operations and Relation to Interbank Rates

96. In the AFEM, practice had evolved by 1997 such that the CBN was conducting interventions every Wednesday, establishing a rate applicable to its sales to end users then and for its further transactions (other than those as agent for the government at the official rate) until the following Wednesday. This intervention rate is what is known as the “AFEM” rate, rather than the interbank rates, which can and do differ from it. The AFEM rate is administratively determined by the CBN on the basis of a review of not only the prevailing interbank market rates but also the parallel market rates, all of which it monitors closely. The CBN also has before it the summaries of end-user applications submitted previously by the banks, which together represent total demand for the weekly exercise. The CBN meets this demand in full at its established rate, deviating if necessary from the weekly amounts set earlier in its indicative budget. Shortfalls between stated and effective demand can arise from banks’ not having adequate naira cover or from deficiencies in the applications, but these are minor. Thus there is a continuous feedback among the parallel, interbank, and AFEM rates that keeps them fairly close and allows the CBN to dominate the markets so long as it freely provides foreign exchange at the AFEM rates it determines. In 1997, the AFEM rate first rose from ₦80 per U.S. dollar to ₦85 per U.S. dollar, then tended back toward ₦80 per U.S. dollar. It ended the year at ₦75 per U.S. dollar, with the appreciation anticipating a then-expected unification with the official rate, which in the event did not take place. CBN AFEM sales totaled $2,939 million, 59 percent more than in 1996.

97. The banks may also sell foreign exchange to the CBN on any day of the week on their own initiative. Petroleum companies and parastatals may also, as previously indicated, sell foreign exchange to the CBNB from their domiciliary accounts at their own initiative. These transactions take place at the CBN’s established AFEM rate for the week, with a spread of about 1 percent between the selling AFEM rate (which is the rate relevant to the weekly interventions) and the corresponding buying rate. Meanwhile, transactions continue among banks and between them and their customers (notably non-oil exporters and expatriate Nigerians remitting funds home) at rates freely determined in the interbank market. Such purchases by clients from banks require the same supporting documentation as for AFEM interventions. Although much smaller in volume than the AFEM interventions, interbank transactions for some banks reportedly exceed one-fourth of their AFEM business.

98. With free rate determination in the interbank market and an administrative (albeit market-related) determination of the AFEM rate, there is no mechanism to ensure that the various buying and selling rates, on any given day, do not differ from each other by more than 2 percent. While the spread is most often within 2 percent, it has at times amounted to 3-5 percent. In the absence of a mechanism to ensure that the spread does not exceed 2 percent, a multiple currency practice arises under the Fund Agreement’s Article VIII, additional to that arising from the simultaneous existence of the official rate. This divergence between the AFEM and interbank rates largely reflects timing, as the rates are virtually identical on intervention days but diverge thereafter. It also reflects the fact that despite the use of the word “intervention,” the AFEM mechanism consists of the provision of foreign exchange to end users at an administratively determined (albeit market-related) rate, rather than conventional central bank intervention proper, with authorized dealers alone in an interbank market. In retaining the mechanism of past allocation practices, even while meeting all demand and eschewing any restrictive allocation, the CBN also retains the capacity to review detailed summaries of transactions by user and purpose and to call up and review the detailed documentation and ensure the bona fide nature of the transactions when it feels that market abuse or turbulence warrant such actions.

E. 1998: Cutback in Access to the Official Rate and Further Measures

99. Policies put in place early in 1998 have reduced further the scope of transactions and allocations made at the official exchange rate. On January 2, it was announced in the annual general guidelines that all foreign exchange transactions by federal, state, and local governments, by parastatals, and by OMPADEC and the Petroleum (Special) Trust Fund85 would be conducted at the autonomous rate, except where the Head of State specifically approved otherwise. In addition, foreign exchange for all official estacodes (per diem), travel expenses, and medical and “other” bills would be provided by the CBN at the AFEM rate. A supplementary notice from the Federal Ministry of Finance on January 9 limited allocations at the official rate to a list comprising diplomatic expenditures, defense and security outlays (as approved by the Head of State), the presidential fleet, police munitions and equipment (again, as approved by the Head of State), official debt service, a key steel project and renovation of the national railway, and a few very specific special purposes (junior championship football infrastructure, certain civil training aircraft, and customs scanning equipment); otherwise, specific authorization was required from the Head of State. The intent was clearly to make official access to the official rate the exception rather than the rule.

100. One effect of this reduction in access to foreign exchange at the official exchange rate was to diminish further the distortive effects of the official rate. Much of the remaining activity at the official rate consists more or less of accounting entries—for receipts in foreign exchange that are then paid out for uses inherently in foreign exchange, such as debt service, petroleum cash calls, and major project contracts. Some bias nevertheless remains in favor of foreign procurement and against local content and value added. Moreover, transparency in government transactions remains obscured by the mixture of rates—a consideration that, together with continuing vested advocacy of the official rate, suggests considerable remaining opportunities for economic rents.

101. Also at the beginning of 1998, the authorities announced the stepwise phasing out of preshipment inspection for imports, in view of the introduction of the United Nations Conference on Trade and Development’s Automated System for Customs Data (ASYCUDA) and the installation of X-ray scanning equipment at the ports during the year. Effective immediately, imports from all of Africa and from 15 European, Asian, and Pacific countries became subject to inspection and assessment of duty only on arrival. Other countries were to be announced later. At the same time, the policy on personal home remittances was clarified to refer to 100 percent of salary net of tax, but banks were still obliged to obtain evidence of earning and taxes paid; no mention was made of transfers by nonworking spouses.

102. AFEM regulations proper remained essentially unchanged in early 1998. Early demand in the interventions, however, proved exceptionally and unexpectedly large, reaching $477 million in January, three-and-a-half times the year-earlier level and 11 times that of January 1996. The authorities continued to meet the demand, but let the rate depreciate to ₦81 per U.S. dollar in late January and to ₦84 per U.S. dollar by late February. Various factors were considered responsible for the situation, including the unusual earliness of the budget speech and accompanying policy measures in a normally wait-and-see period, the more expansionary fiscal stance announced, and the unanticipated decline in world oil prices. It was also suspected that the previous year’s reinstatement of easier import financing and the partial elimination of import pre-inspection were leading to abuse and capital flight through false claims and non-shipment. Accordingly, the authorities reinstituted all import preinspection for the time being, acknowledging that domestic mechanisms to substitute for it were not yet fully in place. The CBN also required the banks to forward to it all documents regarding payments against bills for collection during the first seven interventions. These measures, like the similar episode with travel allowances a year earlier, apparently sufficed to quell the market. Demand fell to more normal seasonal levels and totaled $661 million in the next two months, compared with $614 million a year earlier. The rate remained, however, at ₦84 per U.S. dollar.

F. Summary of the System as of Early 1998

103. Nigeria’s exchange rate arrangements as of early 1998 may be characterized as essentially a dual-rate system but technically a multiple-rate one, with an artificially overvalued official rate pegged at ₦ 21.886 per U.S. dollar used for a positive list of government transactions and a band of rates clustered at market levels influenced by official intervention. In this cluster, the AFEM rate dominates, being administratively determined in a managed float with reference to other rates determined by supply and demand in the interbank and parallel markets, and being supported by substantial net infusions of foreign exchange obtained from government oil revenues. A second multiple currency practice arises from the coexistence of the AFEM rate and the interbank market rate in the absence of a mechanism to prevent spreads in excess of 2 percent from arising between them (i.e., between either the buying or selling rate in the one market and either in the other market). Exchange bureaus conduct a much smaller market in currency and travelers’ checks at rates based on the autonomous rates plus a 2 percent spread, but since these are not spot telegraphic transfer transactions, any spread over 2 percent against other rates does not constitute a multiple currency practice under the Fund’s Articles.

104. The parallel market—conducted curbwise in cash, between customers of domestic commercial banks, and between residents holding accounts at home and abroad and paying each other’s obligations (so-called “free funds” transactions)—is reportedly quite large; illegal but tolerated, it is informally estimated by commercial bankers to amount to roughly $1 billion in cash and half that amount in noncash transactions annually. Its scope reflects in part the willingness of some transactors to pay a premium for avoiding documentation requirements on transactions eligible for AFEM allocations, as well as the demand for capital flight and illegal undertakings. The fact that the parallel rate has generally kept within 5 percent of the AFEM rate reflects the liberal availability of foreign exchange from the CBN and indicates that the documentation requirements and residual restrictions have a limited impact from an economic perspective.

105. The few restrictions on payments and transfers for current international transactions that continue to exist, as well as the few on capital outlays, appear to reflect a continuing concern about capital flight using foreign exchange derived mainly from a public resource. Chief among the restrictions are those imposing lengthy waiting periods for income and capital remittances from investments through the debt conversion program. There is also the embargoing of exporters who fail to repatriate foreign exchange earning from access to funds for unrelated transactions, seen as a means to husband the nation’s reserves. A similar sanction has been reported in the case of importers who fail to provide evidence of physical arrival of goods paid for.

106. In sum, the policies introduced in 1995 have moved Nigeria to a substantially liberalized foreign exchange market, despite persistence of a “dual” exchange rate structure and residual restrictions. The CBN, in opening its 1998 general exchange guidelines, stated:

In order to consolidate its gains, the policy of guided deregulation introduced in 1995 shall continue in 1998. In this regard, it is necessary to emphasize that with the abrogation of the Exchange Control Act of 1962, all exchange restrictions on current transactions have been removed. However, foreign exchange transactions shall continue to be subject to minimum documentation requirements while available foreign exchange is expected to be channeled to the productive sectors.

107. Although the foregoing qualifies the statement on removal of all restrictions from the perspective of Fund jurisdiction and practice, it does not invalidate the intent and policy thrust evident in the recent past.

77

Prepared by Michael C. Niebling.

78

This account is based upon the available documents, extensive investigation of Nigeria’s regulations by Fund legal staff members, and staff mission discussions with pertinent Nigerian officials. However, it has not been reviewed by the Nigerian authorities in this form prior to publication. Invaluable background contributions have been made by two staff members of the Legal Department: Mrs. Pascale De Boeck, who participated in a June 1997 staff visit to Nigeria, and Ms. Isabelle Mouysset, who reviewed the 1997 Foreign Exchange Instructions Manual and has counseled the consultation team since on exchange system matters.

79

The history is outlined in Gary Moser, Scott Rogers, and Reinold van Til, Nigeria: Experience with Structural Adjustment, IMF Occasional Paper No. 148 (Washington: International Monetary Fund, March 1997), pp. 13-15 and pp. 42-43.

80

The increase for manufacturing and the decrease for finished goods were effective March 25, 1994.

81

In practice, certain major parastatals (such as those for power and telecommunications) continued to have access to foreign exchange at the official rate.

82

These were carried over from a 1986 second-tier foreign exchange market (SFEM) decree and the April 1990 version of the Foreign Exchange Instructions Manual.

83

The restriction arose from the fact that the required tax clearance certificate related to the taxes of the importer, as opposed to taxes due specifically on the amount to be remitted.

84

While a requirement that tax clearance certificates accompany applications for expatriates’ personal home remittances was removed, the text still retained the requirement of submission of tax related documentation. In addition, there were inconsistent references to “salary” and “income” and to both 100 percent and the former 75 percent limit on personal home remittances. Moreover, the new Manual retained language denying nonworking expatriate wives access to foreign exchange for purposes such as travel.

85

OMPADEC is a special fund for social and economic development projects in oil-and mineral-producing states; the Petroleum (Special) Trust Fund was set up in 1995 to receive and spend for designated purposes the revenues accruing from increases in domestic petroleum product prices.