Front Matter Page

IMF Country Report No. 21/34

NIGERIA

SELECTED ISSUES

February 2021

This Selected Issues paper on 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 16, 2020.

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© 2021 International Monetary Fund

Front Matter Page

NIGERIA

SELECTED ISSUES

December 16, 2020

Approved By

African Department

Contents

• NIGERIA—STRATEGY FOR A MONETARY POLICY RESET

• A. What Are the CBN’s De Facto Policy Objectives?

• B. Is the CBN’s Operational Framework Effective and Coherent?

• C. A Strategy for a Monetary Policy Reset

• References

• FIGURES

• 1. CBN Lending, 2017–20

• 2. Stock of CBN Bills 2017–20

• 3. Consumer Price Index

• 4. Real and Nominal Effective Exchange Rate

• 5. Nigeria Reserve Money

• 6 Tanzania Reserve Money

• 7. Nigeria Interest Rates

• 8. Uganda Interest Rates

• 9. CBN Loan to FGN Bond Shift: Illustration

• TABLES

• 1. Data Summary

• 2. An Analysis of CBN’s Key Monetary Policy Tools

• APPENDIX I

• CBN’s Policy Reaction

• DIVERSIFICATION OF THE NIGERIAN ECONOMY

• A. Introduction

• B. The Omnipresence of Oil in the Nigerian Economy

• C. Why Diversification Has proven Difficult?

• D. Successful Country Experience of Diversification

• E. Nigeria’s Path Forward

• References

• BOX

• 1. Digitalization: The Next Engine of Growth?

• FIGURES

• 1. Oil Price and Non-Oil GDP Growth

• 2. Sectoral Dependence On Oil Price

• 3. The Dominant Role of Oil in Exports

• 4. Similar Composition of Non-Oil Exports Over Three Decades

• 5. Heavy Dependence of Fiscal Revenue on Oil

• 6. Real GDP per Capita: A Long View

• 7. Public Expenditure and Electoral Cycle

• 8. Foreign Direct Investment Before and After Reforms

• 9. Labor Productivity: Nigeria and Comparator Countries

• 10. Industry Average Labor Productivity, Top 20 Industries Between 2009 and 2019

• 11. Declining Foreign Direct Investment

• 12. Average Annual Growth Rate of Revenues and Productivities, Top 10 Industries Between 2009 and 2019

• ANNEXES

• I. Malaysia’s Early Economic Success in the 1970s

• II. The Political Economy of Indonesia’s Reforms in the 1980s

• III. India’s Break with the License-Permit Raj in 1991

• CREATING FISCAL SPACE DURING THE COVID-19 PANDEMIC IN NIGERIA

• A. Background

• B. Nigeria’s COVID-19 Response

• C. Creating Fiscal Space in the Near Term

• D. Conclusion

• References

• BOXES

• 1. Social Safety Nets in Nigeria

• 2. International Best Practices of Fiscal Transparency of COVID-19 Policy Measures

• 3. Estimating Nigeria’s COVID-19 Health Spending Needs

• FIGURES

• 1. Performance in the Health SDG, in Income-Group and Regional Comparison

• 2. Fiscal Financing Needs and Sources

• 3. Nigeria Fiscal Financing Needs and Costs

• 4. 2020 Budget Revisions and COVID-19 Support

• 5. Estimated COVID-19 Health Spending Needs (no second wave)

• 6. Total COVID-19 Cases per Million Population

• 7. COVID-19 Tests per Million Population

• 8. Petrol Expenditure by Income Percentile

• NIGERIA—CORPORATE PERFORMANCE, INVESTMENT AND FINANCING

• A. Background

• B. Data Collection and Sample Properties

• C. Corporate Performance and Debt Sustainability

• D. Capital Stock, Investment and Financing

• E. Concluding Remarks

• References

• FIGURES

• 1. Nigeria and Selected Emerging Markets: Value Added by Sector

• 2. Nigeria and Selected Emerging Markets: Private Investment Flows

• 3. Credit to Private Sector

• 4. Sectoral Profile

• 5. Herfindahl-Hirschman Index

• 6. Overview of Firm-Level Variables

• 7. Total Asset Growth

• 8. Sales Growth

• 9. Growth of Post-Tax Income

• 10. Revenue, Costs and Income

• 11. Operating Efficiency: EBITDA Margin

• 12. Productivity: Asset Turnover Ratio

• 13. Leverage: Liabilities-to-Assets Ratio

• 14. Distribution of Debt-to-EBITDA Ratio

• 15. Distribution of Interest Coverage Ratio

• 16. Median Interest Coverage Ratio

• 17. Distribution of Stressed Debt-to-EBITDA Ratio

• 18. Distribution of Stressed Interest Coverage Ratio

• 19. Capital Stock Growth

• 20. Capital Stock-to-Assets Ratio

• 21. D&A-to-Capital Stock Ratio

• 22. Investment Flow-to-D&A Ratio

• 23. Cash Flow from Operations-to-Cash Flow for Investment Ratio

• 24. Cash Flow from Financing-to-Cash Flow for Investment Ratio

• 25. Market Concentration

• 26. Financing by Source (Top 30)

• 27. Breakdown of Financing (Top 30)

• TABLES

• 1. Shocks Assumed in Corporate Stress Test

• 2. Median Growth Rate of Bank Credit to Top 30 Firms, 2014–19