2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nigeria

Abstract

2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nigeria

Fund Relations

(As of January 31, 2019)

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Outstanding Purchases and Loans: None

Latest Financial Arrangements:

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Overdue Obligations and Projected Payments to Fund 1/

(SDR Million; based on existing use of resources and present holdings of SDRs):

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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 Catastrophe Containment and Relief (CCR): Not Applicable

Exchange Rate Arrangement

The de jure exchange rate arrangement is floating, with the CBN beginning operations on a flexible exchange rate regime on June 20, 2016. The CBN explicitly aims to maintain an exchange rate principally driven by market forces but intervenes to reduce volatility and to counteract speculative attacks on the national currency. The de facto exchange rate has been reclassified twice: first to other managed from stabilized, effective June 21, 2016, and then to stabilized from other managed, effective August 26, 2016. Nigeria participates in the W-ERM II of the WAMZ, which requires maintaining the spot exchange rate between the naira and the U.S. dollar within ±15% of the central rate, but the CBN has not implemented this regime.

Nigeria maintains the following exchange restrictions subject to Fund approval under Article VIII, Section 2(a) 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 42 categories of items;1 (ii) an exchange restriction arising from the rationing of foreign exchange in the CBN’s IFEM and SMIS windows, and its allocation based on the CBN’s determination of priority categories of transactions; and (iii) an exchange restriction arising from existing limits on the amounts of foreign exchange available when traveling abroad (BTA/PTAs), which cannot be exceeded even upon verification of the bona fide nature of the transaction. In addition, Nigeria maintains the following MCPs subject to Fund approval under Article VIII, Section 3 of the IMF’s Articles of Agreement: (i) an MCP arising from the intervention practice of the CBN that results in the establishment of an official exchange rate for use in all official transactions, which in practice differs by more than 2 percent from the rate used by commercial banks in the CBN FX windows (SMIS, SME, IEFX and Invisibles), and by money transfer operators; and (ii) an MCP arising from the large spread between the official exchange rate and the rates in the parallel market, caused by the CBN’s limitation on the availability of foreign exchange which channels current international transactions to such market; and (iii) an MCP arising from the potential spread of more than 2 percent in the exchange rates at which the CBN sells foreign exchange to successful auction bidders in the SMIS window.

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 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 March 5, 2018.

Technical Assistance (TA) since January 2017

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West Africa Regional Technical Assistance Center 2 (AFRITAC 2)

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Senior Resident Representative:

Mr. Amine Mati is the IMF’s Senior Resident Representative (and Mission Chief) in Abuja since February 2017.

Resident Technical Assistance Advisor:

Mr. Leonard Chumo is the IMF resident advisor for banking supervision at the Central Bank of Nigeria, since February 2017.

Relations with other International Financial Institutions

A: World Bank:

https://www.worldbank.org/en/country/nigeria

B: African Development Bank

https://www.afdb.org/en/countries/west-africa/nigeria/

Statistical Issues

(As of February 2019)

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Nigeria: Table of Common Indicators Required for Surveillance

(As of February 26, 2019)

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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.

1

The CBN issued a December 2018 circular that added fertilizer to the list of import items not eligible for access to foreign exchange, bringing the number of items on the list to 42.