Front Matter Page

© 2003 International Monetary Fund

March 2003

IMP Country Report No. 03/60

This Selected Issues paper and Statistical Appendix for Nigeria was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on December 4, 2002. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of Nigeria or the Executive Board of the IMF.

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Front Matter Page

INTERNATIONAL MONETARY FUND

NIGERIA

Selected Issues and Statistical Appendix

Prepared by a staff team consisting of Mr. Katz (head),

Mr. McDonald, Ms. Gobat, Mr. Blavy (all AFR)

Mr. C. Lane (PDR) and Mr. Baunsgaard (FAD)

Approved by the African Department

December 4, 2002

Contents

• I. Introduction

• II. Issues and Prospects in the Oil and Gas Sector

  • A. Introduction

  • B. The Oil and Gas Upstream Sector; Endowment, Structure and Prospects

    • Resource endowment and structure.

    • Prospects

  • C. Fiscal Regimes

  • Memoranda of understanding

    • Domestic crude receipt

    • Production-sharing contracts

    • Implications of a shift in production from MOUs to PSCs

    • Taxation of the gas sector

  • D. The Downstream Oil Sector

    • Structure of the downstream sector

    • Issues and prospects

  • E. Governance

    • Production and revenue collection

    • Accounting for revenue flows

    • Strengthening transparency and accountability

  • F. Conclusion

• Text Tables

• II-1. Implicit Subsidy to NNPC on Domestic Crude, 2001–02

• II-2. Impact on Government Revenues of a Shift in Production from Memoranda Of Understanding to PSCs, 2003–07

• II-3. Impact of Tax Incentives on PPT Payments on Gas (US$ million), 2003–07

• II-4. Oil-Related Government Revenues as Reported by Different Sources, December 2001–August 2002

• II-5. Production of Crude Oil as Reported by Different Sources, December 2001–August 2002

• Text Figures

• II-1. Production, Proven Reserves, and Oil Prices

• II-2. Decomposition of a Barrel of Crude Oil

• II-3. Flow of Funds Under the MOU

• II-4. Production of Crude Oil and OPEC Quota, January 1999–September 2002

• II-5. Realized Export Prices Versus Bonny Light and Brent Prices, January 1999–August 2002

• II-6. Main Oil-Related Government Revenues, January 2001–June 2002

• II-7. Domestic Allocation of Crude Oil Refining Versus NNPC Exports, January 1999-June 2002

• Text Boxes

• II-I. Desirable Features of Fiscal Regimes for Petroleum and Gas Extraction

• III. Fiscal Policy Rules

  • A. Introduction

  • B. Fiscal Policy Rules

  • C. Long-Run Fiscal Sustainability

  • D. Policy Rules

  • E. Other Issues

  • F. Conclusion

  • Text Tables

  • III-1. Long-Run Fiscal Sustainability Simulations, Annual Averages, 2002–45

  • Text Figures

  • III-1. Composition of Total Real Wealth

  • III-2. Fiscal Policy Rules, WEO Price Scenario, 2002-07

  • Text Boxes

  • III-1. Examples of Fiscal Policy Rules

  • III-2. Fiscal Links to the Other Sectors in an Oil Dependent Economy

  • Annex Tables

  • III-1. Assumptions for Long-Run Fiscal Policy Simulations

  • III-2. Short-Run Fiscal Policy Rules, Illustrative Projections

• IV. Issues in Intergovernmental Finance in Nigeria

  • A. Introduction

  • B. Fiscal Federalism in a Macroeconomic Context in Nigeria

  • C. Stabilizing Intergovernmental Finance in Nigeria

Text Boxes

IV-1. The Evolution of Federation Account Revenue Sharing in Nigeria

• V. Conduct of Monetary Policy in Nigeria

  • A. Introduction

  • B. Challenges Facing Monetary Policy in Nigeria

  • C. Monetary Policy Framework

    • Instruments of monetary policy

  • D. Weaknesses in the Implementation of Monetary Policy

    • Banking agent of the government

    • Financing of the fiscal deficit

    • Fiscal agent of the government

    • Banking sector soundness

    • Forecasting liquidity and money multiplier

  • E. Conclusion

• Text Tables

• V-1. Outcome of Monetary, Financial, and Other related targets

• Text Figures

• V-1. Money and Inflation, December 1998–August 2002

• V-2. Developments in Monetary Multipliers, December 1998–August 2002

• V-3. The Exchange Rate of the Naira, December 1998–September 2002

• V-4. Developments in Key Short-Term Interest Rates, January 1999–September 2002

• V-5. CBN’s Liquidity Operations, 2001

• V-6. CBN’s Exposure to the Federal Government, December 1997–August 2002

• V-7. CBN’s Take up of Treasury Bills

• V-8. Nigeria and Selected Comparators, Broad Money, 1985–2001

• V-9. Developments in Money Multipliers, December 1998–August 2002

• VI. Trade and Openness Policies in Nigeria

  • A. Trade and Openness Policies in Nigeria

  • B. Export Policies

  • C. Tariff Policy Developments

  • D. Nontariff Barriers (NTBs)

  • E. Trade-Related Exchange Rate Issues

  • F. Institutional Factors

  • G. Conclusion

• Text Tables

• VI-1. Long-Term Export Growth, 1971-2000

• VI-2. Imports by Tariff Band, 2002

• VI-3. Selected Export and Imports Prohibitions, 2002

• VI-4. Nigeria and African and Oil Exporter Comparators: NontariffBarriers, 2002

• Text Figures

• VI-1. Export Trends

• VI-2. Import Tariff Comparisons

• VI-3. Nigeria and Indonesia: Import Tariff Developments, 1982-2002

• VI-4. Nigeria Tariff Protection Estimates for Publicly Listed Companies

• VI-5. Tariff Convergence with ECOWAS

• VII. Debt Sustainability Analysis

  • A. The Origin and Development of External Debt in Nigeria

  • B. Prospects for Future Debt Sustainability

• Text Tables

• VII-1. Debt-Service Ratios, 1999–2002

• VII-2. Nigeria and Comparator Groups: Ratio of Debt Service to Exports, 1999–2002

• VII-3. Summary Balance of Payments, 2001–20

• VII-4. Debt Stock and Forthcoming Debt Service, 2002–05

• VII-5. Naples Terms Flow Rescheduling, 2002–20

• VII-6. Naples Terms Flow and Stock Rescheduling, 2001–20

• VII-7. Sensitivity Analysis, 2001–20

• Text Figures

• VII-1. External Public Debt Developments, 1977–2001

• VII-2. Projected NPV of External Debt Before Rescheduling, 2001–20

• VII-3. Debt Indicators with Concessional Reschedulings, 2001–20

• VII-4. Debt-Service Ratios with Concessional Reschedulings, 2001–20

• VII-5. Standardized Sensitivity Tests, 2001–20

• Statistical Appendix Tables

• 1. Revised Gross Domestic Product by Sector of Origin at Current Prices, 1997–2001

• 2. Revised Gross Domestic Product by Sector of Origin at Constant 1990 Prices, 1997–2001

• 3. Revised Gross Domestic Product by Expenditure Category at Current Prices, 1997–2001

• 4. Revised Gross Domestic Product by Expenditure at Constant 1990 Prices, 1997–2001

• 5. Index of Industrial Production, 1997–2001

• 6. Selected Indicators of Agricultural Production and Prices, 1997–2001

• 7. Selected Petroleum Statistics, 1997–2002

• 8. National Consumer Price Indices, 1997–2002

• 9. Urban Consumer Price Indices, 1997–2002

• 10. Rural Consumer Price Indices, 1997–2002

• 11. Consolidated Government Finance, 1997–2002

• 12. Consolidated Government Revenue, 1997–2001

• 13. Consolidated Government Expenditure, 1997–2001

• 14. Federation Account Operations, 19997–2001

• 15. Summary Federal Government Fiscal Operations, 1997–2001

• 16. Total Expenditure of the Federal Government by Functional Classification, 19997–2001

• 17. Recurrent Expenditure of the Federal Government by Functional Classification, 1997–2001

• 18. Capital Expenditure of the Federal Government by Functional Classification, 1997–2001

• 19. Federal Governmment Outstanding Domestic Debt, 1997–2001

• 20. Summary of Budgetary Operations of State and Local Governments and Special Funds, 1997–2001

• 21. Monetary Survey, 1997–2002

• 22. Consolidated Accounts of the Central Bank, 1997–2002

• 23. Consolidated Accounts of the Commercial Banks, 1997–2002

• 24. Liquidity of Commercial Banks, 1997–2002

• 25. Sectoral Distribution of Bank Credit, 1997–2001

• 26. Selected Interest Rates, 1997–2002

• 27. Number of Financial Institutions, 1997–2002

• 28. Balance of Payments, 1997–2001

• 29. Imports, 1997–2001

• 30. Exports, 1997–2001

• 31. External Public Debt Stock, 1997–2002

• 32. External Debt Service 1997–2002

• Summary of the Tax System as of October 2002