Abstract
The staff report for the Fourth Review on Nigeria highlights developments under the Policy Support Instrument (PSI). Robust non-oil sector growth significantly strengthened fiscal and external positions, reducing inflation that surpassed the original program goals. Fiscal risks have increased in the short term because recent practices on the use of an oil price rule and oil savings, which have been important to macroeconomic performance, are being revisited. The government’s consensual approach within the framework of the constitution offers the prospect of a lasting solution.
1. This statement reports developments since the staff report for the fourth review under the Policy Support Instrument was issued to the Board on October 1, 2007. The thrust of the staff appraisal remains unchanged.
2. Macroeconomic indicators remain robust. In August, inflation remained low at 4.2 percent year-on-year, and international reserves rose to US$45 billion by the end of the month. The naira appreciated by 1.3 percent with respect to the U.S. dollar from end-June to end-September 2007.
3. In early October, the Central Bank of Nigeria (CBN) modified the standing facility. It increased the Monetary Policy Rate by one percentage point to 9 percent and set its lending rate at this level. The CBN discontinued the remuneration of overnight deposits to encourage the development of the interbank market.
4. The authorities made progress in implementing structural reforms.
The CBN is implementing its action plan to strengthen banking supervision. The framework for consolidated supervision was approved by the joint executive committee on supervision of the CBN and National Deposit Insurance Corporation, and issued to the industry.
Financial bids for the management contract of the Transmission Company of Nigeria were opened in September, and are being reviewed by the National Council on Privatization.
The auditor for the 2006 NEITI audit has been selected. The appointment is awaiting re-approval of funding.
The Procurement Manual—revised in accordance with the recently approved Procurement Act—has been submitted to the newly appointed Public Procurement Council for final approval.