## 1ngaea2023001

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### Background and context
- Economic recovery has broadened despite headwinds from the COVID-19 pandemic and the war in Ukraine.
- Oil production accounts for roughly one tenth of GDP and has suffered from security and technical challenges since the pandemic.
- Higher oil prices led to increased PMS subsidies that disproportionately benefit the well-off; various NNPC deductions produced limited fiscal revenues from crude oil sales.
- Progress on reforms under the 2020 RFI loan agreement has been slow; specific transparency commitments remain partially met or not met.

### Recent macroeconomic developments
- Real GDP and growth:
  - 2022Q3 output growth: 2.4 percent (y/y).
  - Real GDP had reached its pre-crisis level in 2021Q1.
  - Recovery broadened to all sectors except oil; non-oil sectors leading the recovery.
- Inflation and labor:
  - Headline inflation: 21.5 percent (y/y) in November 2022; 21.34 percent in December 2022.
  - Latest official unemployment: 33 percent as of December 2020; updated estimates expected in 2023.
- Fiscal (January–September 2022):
  - Non-oil revenues increased by 38 percent (y/y).
  - Oil revenues increased by 9 percent (y/y) reflecting larger NNPC deductions.
  - Current spending rose mainly due to higher debt service; fiscal financing relied heavily on domestic borrowing including from the CBN overdraft facility.
- External sector and reserves:
  - Merchandise trade surplus in 2022Q1; current account moved into surplus in 2022.
  - CBN launched RT200 aiming to raise $200 billion in FX earnings from non-oil proceeds over the next 3-5 years.
  - Large net private outflows in offshore deposits led to a steady decline in gross international reserves since September 2021.
  - At end-November 2022, gross international reserves stood below $37 billion covering 5.7 months of imports and 58 percent of the IMF’s ARA metric.
  - Long-standing administrative FX restrictions and multiple exchange rate windows persist; in 2022H2 the parallel market rate stayed above 50 percent of the I&E rate.
- Monetary and financial sector:
  - CBN raised the MPR by a cumulative 500 basis points in 2022.
  - CRR raised from 27.5 to 32.5 percent.
  - Despite tightening, monetary expansion remained strong driven by budget financing and strong credit growth.
  - New high-denomination naira notes rolled out December 15, 2022 (parallel use with old notes until January 31).

### Outlook and key projections
- Oil sector:
  - Trans Niger Pipeline and Forcados (carrying 400,000 bpd) are back in usage.
  - Ikike field capacity: 50,000 bpd.
  - Oil production projected to increase starting in 2023 but medium-term production projected to remain below pre-pandemic levels.
- Growth and inflation:
  - Agriculture growth projected to slow to 1.5 percent in 2023.
  - Overall real GDP growth projected: 3 percent in 2022 and 3.2 percent in 2023.
  - Headline inflation expected to decline further in 2023 assuming continued slowdown in world food prices and a stabilized exchange rate.
- External and capital flows:
  - Small current account surplus expected for 2022, swinging back to deficit in 2023 as oil prices soften.
  - Capital inflows projected to remain subdued in the medium term pending major FX reforms.
- Inflation downside scenario:
  - Assumes no agricultural growth in 2022Q4 and 2023Q1 compared to 2.2 and 1.4 percent (y/y) in baseline, and a 30 percent depreciation in the parallel market rate.

### Fiscal outlook, staff projections and risks
- Under staff baseline:
  - General Government (GG) fiscal deficit projected to widen to 6.2 percent of GDP in 2022, mainly due to fuel subsidy costs.
  - Overall fiscal deficits remain elevated at around 6 percent of GDP over the medium term.
  - Public debt projected to increase to about 43 percent of GDP in the medium term.
  - Interest payments could take up over 40 percent of GG revenues in interest payments by 2027; under adverse shocks, interest payments could take up over 80 percent of GG revenues.
- Staff’s Fiscal Projections for the General Government (Percent of GDP)
  - Total revenue: 2021 7.3 | 2022 8.4 | 2023 8.9 | 2024 8.3 | 2025 8.0 | 2026 7.7 | 2027 7.5
    - Oil revenue: 2.8 | 3.6 | 4.0 | 3.4 | 3.0 | 2.6 | 2.4
    - Non-oil revenue: 4.5 | 4.8 | 4.9 | 4.9 | 5.0 | 5.1 | 5.1
  - Total expenditure: 13.3 | 14.6 | 14.5 | 14.1 | 13.8 | 13.7 | 13.7
    - Fuel subsidies: 1.1 | 2.2 | 1.3 | 0.9 | 0.9 | 0.7 | 0.6
    - Interest payments: 2.3 | 2.4 | 2.4 | 2.6 | 2.7 | 3.0 | 3.3
    - Capital expenditure: 3.4 | 3.2 | 3.5 | 3.3 | 3.2 | 3.2 | 2.9
  - Overall balance: -6.1 | -6.2 | -5.6 | -5.7 | -5.8 | -6.0 | -6.2
  - Public Debt: 36.5 | 37.3 | 38.2 | 39.5 | 40.7 | 41.9 | 43.1
  - Memorandum items:
    - GG interest/revenue: 32.7 | 28.2 | 27.4 | 30.9 | 34.1 | 38.7 | 43.3
    - FGN interest/revenue: 87.8 | 96.3 | 82.0 | 89.5 | 99.0 | 110.3 | 124.3
    - Oil price (US$/barrel): 70.8 | 100.5 | 88.6 | 83.4 | 79.6 | 76.8 | 74.6
- Downside fiscal risks:
  - Higher interest costs, pre-election spending pressures, and oil production/price volatility.

### Fiscal recommendations and reform scenario (staff)
- Cumulative net savings of 5.7 percent of GDP over 2023-27 after social assistance under staff reform scenario, including:
  - Fuel subsidies and oil sector reforms:
    - Permanent removal of fuel subsidies by mid-2023; projected cumulative fiscal savings of 3.7 percentage points of GDP over 2023-27.
    - Actions to address oil theft, increase transparency of NNPC oil fiscal transfers, resume monthly reports and audit of oil fiscal revenues.
  - Tax administration (near-term):
    - Expand automation system (TaxPro Max); strengthen taxpayer segmentation focusing on LTOs; review penalty regime.
  - Tax administration (medium-term):
    - Develop a Compliance Improvement Program; comprehensive customs modernization beyond e-customs; improve State IRS administration of PAYE; modernize controls on excise-taxed products; strengthen inter-agency coordination and data sharing.
  - Tax policy:
    - As compliance improves, consider gradually adjusting tax rates to ECOWAS average.
    - Recommendations include streamlining VAT exemptions, streamlining tax expenditures, increase VAT to at least 10 percent by 2023 and to 15 percent by 2027, increase excise rates on alcohol and tobacco and broaden the base.
  - Social assistance:
    - Increase social spending by up to 1.7 percent of GDP cumulatively for 2023-27 in well-targeted programs.
    - World Bank plans to disburse USD 1.5 billion in the current fiscal year, almost half for social assistance.

### Monetary policy, exchange rate and safeguards
- Monetary policy guidance:
  - Decisive and effective tightening recommended; recent CBN tightening steps seen as positive but monetary conditions remain accommodative and characterized by fiscal dominance.
  - Staff recommends lower reliance on CBN overdrafts and full sterilization of any CBN financing of the fiscal deficit; adhere to statutory limit (5 percent of previous year’s revenues) once overdraft securitized.
  - Stand ready to further increase the MPR; restore a credible and binding interest rate corridor.
  - Cautious management of naira note renewal given adverse impacts on people without bank accounts.
  - Gradually phase out quasi-fiscal activities.
- Exchange rate policy:
  - Staff urged decisive action to implement a unified, market‑clearing exchange rate (RFI commitment).
  - Staff estimate that "a 15 percent depreciation of the I&E rate in June 2023 would have a peak inflation impact of 0.93 percent in 2024."
  - Recommended multi-step unification starting with greater flexibility in the I&E rate, dismantle CBN exchange rate windows, limit CBN FX intermediation to smoothing volatility.
  - Phasing out CFMs should be timed and sequenced in line with the IMF’s Institutional View on Liberalization and Management of Capital Flows.
- Central bank governance and safeguards:
  - Modernize 2007 CBN Act to strengthen autonomy and governance and establish price stability as primary objective.
  - Bolster CBN financial reporting via full adoption of IFRS and resumption of publication of annual financial statements.
  - Implement recommendations from the 2021 Safeguards assessment.

### External sector and reserves
- Reserve adequacy:
  - At end-2021, gross reserves: $40.2 billion (76 percent of ARA metric including oil buffer).
  - Gross reserves declined to $36.8 billion at end-November 2022; reserves estimated to remain around this level at end-2022 (58 percent of ARA metric).
  - Reserves projected to increase gradually over the medium term with improved CA outlook but remain below 100 percent of the ARA metric absent major policy adjustments.
- External position assessment:
  - CA-based assessment: broadly in line with fundamentals and desired policy setting.
  - REER-based assessment: points to a substantially weaker external position.
  - Overall staff assessment: external position moderately weaker than warranted due to FX shortages for private sector, capital outflow pressures, and reliance on import/FX restrictions.

### Banking sector, financial inclusion and eNaira
- Banking sector:
  - Profitable and liquid; system capital adequacy receded slightly to just under 15 percent.
  - IFRS Stage 3 and 2 loan shares declined in 2022; sector stress tests suggest a more than doubling of NPLs would be required to breach regulatory minimum capitalization.
  - AMCON asset recoveries slowed; AMCON’s debt to CBN about "1½ percent of GDP" requires a sustainable repayment plan.
  - Retail credit growth reached "40 percent (y-o-y) in June 2022" then slowed markedly.
  - Authorities encouraged to devise regulation for less supervised fintech lenders and tighten macroprudential policy as needed.
- Financial inclusion and eNaira:
  - Ambitious inclusion target: "95 percent by 2024."
  - eNaira (CBDC) launched October 2021; retail wallet downloads: "942,000 at end-November 2022—0.8 percent of active bank accounts."
  - Total eNaira retail transactions since inception: "802,000" (less than number of wallets).
  - Recommendations: public‑private partnerships with mobile money, integrate eNaira with existing mobile payment systems, use eNaira for social assistance delivery, facilitate remittances (potential cost savings up to "¼" of current cost; current cost "10.4 percent in 2020Q2").

### Structural policies, AML/CFT, agriculture and jobs
- AML/CFT:
  - Authorities enacted legislation, adopted a 2022 National Inherent Risk Assessment, improved resourcing and training, and activated a sanctions committee following 2021 GIABA report.
  - Staff recommended expanding risk‑based toolkits, ensure beneficial ownership identification, manage PEP risks, continue implementing targeted financial sanctions, and improve financial intelligence utilization.
- Agriculture and jobs:
  - Over the next decade about "25 million" additional jobs will be needed for new labor market entrants; bulk need to be in agriculture.
  - Policy priorities: increase affordable fertilizer and quality seeds, improve storage, coordinate agency support, improve rural financial inclusion and mobile money usage.
- Governance and transparency in oil sector:
  - Recommended reinstatement of monthly publication of NNPC fiscal oil revenue transfers and greater transparency on cost deductions.
  - Positive steps: passage of CAMA and Proceeds of Crimes Act; increased asset declarations.

### Risks — Annex I Risk Assessment Matrix (selected)
- External risks:
  - Intensifying spillovers from Russia’s war in Ukraine: Likelihood High; Time Horizon Short Term; Impact High.
  - Commodity price shocks: Likelihood High; Time Horizon Short Term; Impact High.
  - De-anchoring of inflation expectations and stagflation: Likelihood Medium; Time Horizon Short to Medium Term; Impact High.
  - Natural disasters related to climate change: Likelihood Medium; Time Horizon Medium to Long Term; Impact High.
- Nigeria‑specific risks:
  - Continued high food prices keeping overall inflation high: Likelihood High; Time Horizon Short to Medium Term; Impact High.
  - Further decline in oil production due to theft/security: Likelihood Medium; Time Horizon Medium Term; Impact High.
  - Slow progress on corruption, tax evasion, AML/CFT: Likelihood Medium; Time Horizon Short Term; Impact Medium.

### Data, capacity development and IMF engagement
- Data and statistics:
  - CPI weights based on 2003/04 survey; update using 2018 NHLS ongoing.
  - Main GFS weaknesses: inadequate coverage, incomplete federal coverage, limited subnational data (subnational accounts for almost one half of total government expenditure).
  - Nigeria does not report any GFS data to STA; quarterly debt data reported to IMF/World Bank QPSD.
  - CBN reports MFS using SRFs; reporting expanded to OFCs (pension funds) in late 2020 with planned further expansion.
- Capacity Development Strategy FY2023 (summary):
  - CD should align with revenue-based fiscal consolidation, credible monetary policy framework, unified market‑clearing exchange rate.
  - CD priorities: revenue mobilization, public financial management, banking supervision, macroeconomic statistics.
  - Resident expert deployed July 2022 on revenue mobilization; World Bank Program for Results on revenue mobilization forthcoming.
  - Mission Chief: Ms. Jesmin Rahman (since May 2020). Resident Representative: Mr. Ari Aisen (since October 2020).

*Source: 1ngaea2023001, IMF.*

### 1. Successful Domestic Revenue Mobilization Episodes in SSA    ____________________________________ 16

### 1. Successful Domestic Revenue Mobilization Episodes in SSA

### Background and context
- Economic recovery has broadened despite headwinds from the COVID-19 pandemic and the war in Ukraine.
- Oil production accounts for roughly one tenth of GDP and has suffered from security and technical challenges since the pandemic.
- The war in Ukraine has transmitted into higher domestic food prices and compounded pandemic scarring, with Nigeria among the countries with lowest food security.
- Higher oil prices created an opportunity to build fiscal space and FX reserves but instead led to increased subsidies for the petroleum motor spirit (PMS), which disproportionately benefit the well-off.
- Various deductions by the Nigerian National Petroleum Company (NNPC), including the costs of PMS subsidies, produced limited fiscal revenues from crude oil sales.
- Progress has been slow on long-standing policy recommendations and governance reforms committed under the 2020 RFI loan agreement; specific transparency commitments remain partially met or not met.

### Recent macroeconomic developments
- Real GDP:
  - 2022Q3 output growth: 2.4 percent (y/y).
  - Real GDP had already reached its pre-crisis level in 2021Q1.
  - Recovery broadened to all sectors except oil; non-oil sectors leading the recovery.
- Inflation and prices:
  - Headline inflation reached 21.5 percent (y/y) in November 2022, a 17-year high.
  - Pace of inflation has slowed in recent months reflecting moderation in food price increases.
- Labor market:
  - Latest official unemployment observation: 33 percent as of December 2020; updated estimates expected in 2023.
- Fiscal developments (January–September 2022):
  - Non-oil revenues increased by 38 percent (y/y), mainly from stronger private consumption and improved tax administration.
  - Oil revenues increased by only 9 percent (y/y), reflecting larger NNPC deductions.
  - Current spending increased mainly due to higher debt service payments; fiscal financing relied heavily on domestic borrowing including from the CBN overdraft facility.
- External sector and reserves:
  - Rising oil prices increased export revenues and generated a merchandise trade surplus in 2022Q1.
  - Current account moved into surplus in 2022 despite higher profit repatriation.
  - CBN launched RT200 non-oil export proceed repatriation rebate scheme aiming to raise $200 billion in FX earnings from non-oil proceeds over the next 3-5 years.
  - Large net private outflows in offshore deposits led to a steady decline in gross international reserves since September 2021.
  - At end-November 2022, gross international reserves stood below $37 billion covering 5.7 months of imports and 58 percent of the IMF’s ARA metric.
  - Long-standing administrative FX restrictions and multiple exchange rate windows persist; in 2022H2 the parallel market rate stayed above 50 percent of the rate in the main market window (I&E rate).
- Monetary and financial sector:
  - The CBN raised the Monetary Policy Rate (MPR) by a cumulative 500 basis points in 2022.
  - The CBN discontinued COVID-19-related interest rate forbearance on intervention facilities.
  - The cash reserve ratio (CRR) was raised from 27.5 to 32.5 percent; some banks already faced an effective CRR higher than the new rate due to discretionary use.
  - Despite tightening, monetary expansion remained strong driven by budget financing and strong credit growth.
  - The CBN rolled out newly-designed high denomination naira notes on December 15, 2022, for parallel use with old notes until January 31 (after which old notes will no longer be valid).

### Fiscal and governance findings
- Implementation status of past macroeconomic policy advice (select):
  - Introduce greater exchange rate flexibility and establish a unified and market-clearing exchange rate: Partially met.
  - Permanently remove fuel subsidies through market-based pricing and compensatory measures: Not met.
  - Move to full cost-reflective electricity tariffs in 2021: Delayed, expected by end 2022.
  - Strengthen monetary policy operational framework and establish primacy of price stability: Ongoing.
  - Fully open land borders, reduce tariff escalation, and simplify customs procedures: Not met.
- Governance commitments under the RFI (select):
  - Create specific budget lines for emergency response expenditures: Met.
  - Report funds released and expenditures monthly on the transparency portal: Partially met.
  - Publish procurement plans and procurement notices for emergency response activities including awarded companies and beneficial owners on Bureau of Public Procurement website: Partially met.
  - Publish an independent audit of emergency response expenditures and related procurement no later than three to six months after fiscal year-end: Not met.
- Fuel subsidy dynamics:
  - Increased subsidies for PMS disproportionately benefit the well-off.
  - Deductions by NNPC and other deductions (government project payments, joint venture contributions, fuel subsidies, other deductions) reduced net crude oil receipts; monthly data available only until July 2022.

### Outlook and key projections
- Oil sector and production:
  - Measures to tackle oil theft and pipeline repairs have begun bearing results.
  - Two large pipelines, Trans Niger Pipeline and Forcados, carrying 400,000 barrels per day (bpd) are back in usage.
  - Ikike field coming on stream with production capacity of 50,000 bpd.
  - Oil production projected to increase starting in 2023 but medium-term production projected to remain below pre-pandemic levels due to retrenchment of oil majors from onshore delivery and exploration.
- Growth and inflation projections:
  - Agriculture growth projected to slow to 1.5 percent in 2023 due to lower acreage from flooding and lower fertilizer usage from high prices.
  - Overall real GDP growth projected: 3 percent in 2022 and 3.2 percent in 2023.
  - Headline inflation expected to decline further in 2023 assuming continued slowdown in world food prices and a stabilized exchange rate.
- External and capital flow outlook:
  - A small current account surplus expected for 2022 on favorable oil prices, which swings back to deficit in 2023 as oil prices soften.
  - Capital inflows projected to remain subdued in the medium term pending major FX reforms.
- Inflation downside scenario:
  - The inflation downside scenario assumes worse impacts from recent flooding with no growth in agricultural production in 2022Q4 and 2023Q1 compared to a growth of 2.2 and 1.4 percent, respectively (y/y), and a 30 percent depreciation in the parallel market rate.

### Policy priorities and recommendations
- Restore macroeconomic stability and advance structural reforms as a priority for the incoming administration.
- Reconcile inconsistent policy mix:
  - Address the current mix of loose monetary and fiscal policies and limited exchange rate adjustment, which is unsustainable.
  - Prevent further reserve losses and chronic FX shortages facing the private sector by pursuing near-term monetary and exchange rate measures.
- Fiscal policy and revenue mobilization:
  - Strengthen efforts to mobilize domestic revenues and address long-standing structural weaknesses.
  - Reduce reliance on central bank financing and domestic borrowing for fiscal financing.
  - Consider permanent removal of fuel subsidies through market-based pricing combined with compensatory measures for the poor and transparent use of savings (past advice: Not met).
- FX regime and external policies:
  - Move toward a unified and market-clearing exchange rate with clear communication and supportive macroeconomic policies (past advice: Partially met).
  - Address long-standing administrative FX restrictions and multiple exchange rate windows to attract capital inflows and stabilize the exchange rate.
- Governance and transparency:
  - Fulfill RFI governance commitments, including publishing independent audit reports for emergency spending and ensuring consistent access to procurement information.
- Monetary policy:
  - Strengthen monetary policy operational framework and re-establish primacy of price stability.
  - Maintain measures to contain inflation while supporting a market-clearing exchange rate.

*Source: 1ngaea2023001, IMF Nigeria country chapter excerpt.*

### 9.      The near-term outlook faces downside risks, while there are upside risks in the

### 9.      The near-term outlook faces downside risks, while there are upside risks in the medium term

### Near-term risks and medium-term upside
- Downside risks in the near term:
  - Higher international food and fertilizer prices and continued widening of the parallel market premium could cause high inflation to persist longer or inflation expectations to be de-anchored, with adverse effects on food prices.
  - The oil sector faces downside risks from possible production and price volatility.
  - Climate-related natural disasters (e.g., floods) pose downside risks to agriculture.
  - A synchronized monetary policy tightening across advanced economies could increase debt servicing costs.
- Medium-term upside risks:
  - Stronger reform momentum by the new government.
  - A larger rebound in oil and gas production.
  - The Dangote refinery reaching its full potential more rapidly than assumed in the baseline.
- Note on Dangote refinery assumptions (staff baseline):
  - The Dangote refinery expects to start production in 2023 and reach full capacity of 650,000 bpd by end-2024.
  - Staff’s baseline projections assume a more gradual production path: 100,000 bpd in 2024, 200,000 bpd in 2025, rising to 300,000 bpd during 2026-27.
  - The impact on the CA is expected to be limited, mostly in the form of savings in transportation costs, as lower imports are, to a large extent, countered by lower crude exports as the refinery is expected to purchase crude oil locally.

### Authorities’ views (growth, inflation, oil)
- Growth forecasts:
  - CBN predicts a slightly higher growth rate of 3.3 percent for 2023.
  - Ministry of Finance forecast: 3.75 percent for 2023.
  - Authorities more optimistic on oil production than staff.
- Inflation forecasts:
  - Authorities project headline CPI inflation average of around 17-18 percent for 2023.
  - IMF staff projection: 17.4 percent for 2023.
  - Staff and authorities expect inflation to fall further in the medium term.

### Policy discussion — overarching guidance
- Ensuring macroeconomic stability requires tightening across all policy levers:
  - Stronger revenue mobilization and fuel subsidy reforms to create fiscal space.
  - Decisive monetary policy tightening to head off inflation drifts.
  - Exchange rate adjustment to quell FX shortages and capital outflows.
- Lower adjustment in one area implies heavier burden on others—particularly fiscal—if the policy mix remains unsustainable.
- Tighter macroeconomic policies should be complemented by structural reforms to improve governance, reduce corruption vulnerabilities, create jobs, and increase social cohesion.
- Staff’s proposal is calibrated to avoid unduly one-sided adjustments.

### A. Fiscal Policy: Rejuvenate critical fiscal reforms — key projections and risks
- Under staff baseline projections, fiscal deficits expected to stay elevated.
- Despite higher non-oil revenues, General Government (GG) fiscal deficit projected to widen to 6.2 percent of GDP in 2022, mainly due to fuel subsidy costs.
- Over the medium term, oil revenues projected to steadily decline reflecting price moderation and continued fuel subsidies pending a decision from the incoming government.
- Overall fiscal deficits remain elevated at around 6 percent of GDP, significantly above pre-pandemic levels.
- Downside risks:
  - Higher interest costs (somewhat mitigated by over 80 percent of debt having medium-to-long-term maturity and agreed securitization terms of the CBN overdraft stock implying a lower interest rate).
  - Pre-election spending pressures.
  - Uncertainties regarding volatilities in oil production and/or prices.
- Public finance outlook:
  - Public debt projected to increase to about 43 percent of GDP in the medium term.
  - Such level of debt is projected to take up over 40 percent of GG revenues in interest payments by 2027.
  - Under adverse macro-fiscal shocks, interest payments could take up over 80 percent of GG revenues.

### Staff’s Fiscal Projections for the General Government (Text Table 2) (Percent of GDP)
- 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027
- Total revenue: 7.3 | 8.4 | 8.9 | 8.3 | 8.0 | 7.7 | 7.5
  - Oil revenue: 2.8 | 3.6 | 4.0 | 3.4 | 3.0 | 2.6 | 2.4
  - Non-oil revenue: 4.5 | 4.8 | 4.9 | 4.9 | 5.0 | 5.1 | 5.1
- Total expenditure: 13.3 | 14.6 | 14.5 | 14.1 | 13.8 | 13.7 | 13.7
  - Fuel subsidies: 1.1 | 2.2 | 1.3 | 0.9 | 0.9 | 0.7 | 0.6
  - Interest payments: 2.3 | 2.4 | 2.4 | 2.6 | 2.7 | 3.0 | 3.3
  - Capital expenditure: 3.4 | 3.2 | 3.5 | 3.3 | 3.2 | 3.2 | 2.9
- Overall balance: -6.1 | -6.2 | -5.6 | -5.7 | -5.8 | -6.0 | -6.2
- Public Debt: 36.5 | 37.3 | 38.2 | 39.5 | 40.7 | 41.9 | 43.1
- Memorandum items:
  - GG interest/revenue: 32.7 | 28.2 | 27.4 | 30.9 | 34.1 | 38.7 | 43.3
  - FGN interest/revenue: 87.8 | 96.3 | 82.0 | 89.5 | 99.0 | 110.3 | 124.3
  - Oil price (US$/barrel): 70.8 | 100.5 | 88.6 | 83.4 | 79.6 | 76.8 | 74.6

### Fiscal recommendations and measures (staff reform scenario)
- Staff highlighted urgent need for revenue mobilization and fuel subsidy reform.
- Steps already underway:
  - Steady implementation of automation system (TaxPro Max).
  - Introduction of excise taxes on sweetened beverages and telecom services.
- Additional measures recommended (estimated cumulative net savings of 5.7 percent of GDP over 2023-27, after social assistance):
  - Fuel subsidies and oil sector reforms:
    - Permanent removal of fuel subsidies by mid-2023 as planned; projected cumulative fiscal savings of 3.7 percentage points of GDP over 2023-27.
    - Continued actions to address oil theft and increased transparency of NNPC’s oil fiscal transfers.
    - Resumption of monthly reports of oil fiscal transfers and audit of oil fiscal revenues received from NNPC.
  - Tax administration (near-term measures):
    - Further expand automation system under a well-designed roadmap.
    - Strengthen taxpayer segmentation with focus on Large Taxpayer Office (LTO)s, including reviewing penalty regime for non-compliance.
  - Tax administration (medium-term measures):
    - Develop a Compliance Improvement Program.
    - Design and implement comprehensive customs modernization program beyond e-customs.
    - Improve State Internal Revenue Service administration of Pay-As-You-Earn (PAYE).
    - Modernize controls on excise-taxed products.
    - Strengthen inter-agency coordination and data sharing.
  - Tax policy:
    - As compliance improves, consider gradually adjusting tax rates to levels comparable to the ECOWAS average.
    - Recommended measures include:
      - Streamline VAT exemptions based on systemic reviews accompanied by proper input tax credits and a registration threshold.
      - Streamline tax expenditures based on comprehensive periodic reviews.
      - Further increase the VAT rate to at least 10 percent by 2023 and to 15 percent by 2027.
      - Increase excise rates on alcoholic and tobacco products while broadening the base.
  - Social assistance:
    - Increase social spending by up to 1.7 percent of GDP cumulatively for 2023-27 in well-targeted programs to mitigate food insecurity and cushion impacts of high inflation and fuel subsidy removal.
    - World Bank plans to disburse USD 1.5 billion in the current fiscal year, almost half for social assistance; technical preparatory work for a targeted cash transfer program completed and awaiting National Assembly approval.

### Fiscal transparency and procurement
- PEFA 2018 highlighted weaknesses in procurement processes:
  - Lack of comprehensiveness of published contracts.
  - Low share of open contracting.
  - Absence of an independent authority to review procurement complaints.
- Staff recommended addressing procurement weaknesses and improving coordination among key budgetary institutions.

### Authorities’ fiscal stance and commitments
- Authorities expect fiscal balance to improve significantly in the medium term, citing:
  - Bottoming out of contraction in oil production.
  - Strong non-oil revenue performance and progress in tax administration reforms.
  - Expected savings on debt servicing costs from securitization terms of CBN overdraft stock.
  - Year-to-date underspending of non-interest current spending relative to original budget.
- Authorities reaffirmed commitment to remove fuel subsidies by mid-2023 and have allowed increases in pump prices of PMS to reduce subsidy costs.
- Authorities assess Nigeria’s public debt to be sustainable but are aware of risks from high GG interest payment-to-revenue ratios.
- Near-term fiscal financing plans: domestic and concessional IFI borrowing; allocated SDR as contingent source if external borrowing shortfall occurs.

### B. Monetary and Exchange Rate Policies: fend off inflationary risks and address external pressures
- Monetary policy priority: decisive and effective tightening.
  - Recent CBN tightening measures are steps in the right direction but monetary conditions remain accommodative and characterized by fiscal dominance.
  - Medium-term inflation projections around 11 percent (largely unchanged), but risks of de-anchored inflation expectations with core prices in double digits for prolonged periods.
- Staff recommendations:
  - Lower reliance on CBN overdrafts and full sterilization of any CBN financing of the fiscal deficit.
    - Once legacy CBN overdraft stock securitized, adhere to statutory limit (5 percent of previous year’s revenues) and limit use to short-term liquidity management.
    - Fill any in-year fiscal financing gaps through issuance of supplementary budgets and addressing institutional constraints on debt issuance.
    - Full sterilization of any CBN credit to the government to date—in principle through market-based instruments.
    - Cautious management of planned naira note renewal given potential adverse impact on people without bank accounts and system-wide liquidity.
  - Stand ready to further increase the MPR.
    - Despite weak transmission, higher short-term interest rates send a strong signal and help quell depreciation pressures by strengthening incentives to hold naira assets.
    - Restore a credible and binding interest rate corridor.
  - Gradually phase out quasi-fiscal activities.
    - Quasi-fiscal activities expanded rapidly since the pandemic, including discretionary CRR as main liquidity management instrument.
    - While some activities fill market gaps (e.g., Anchor Borrowers’ Program), efficiency concerns and risks include financial repression, undermining CBN price stability mandate, and exacerbating fiscal deficit monetization.
    - Phasing out quasi-fiscal activities would address high M3 growth and high base inflation.

### Central bank governance and safeguards
- Complementary priority reforms from 2021 Safeguards assessment:
  - Modernize 2007 CBN Act to strengthen autonomy and governance and establish price stability as primary objective.
  - Bolster CBN financial reporting via full adoption of International Financial Reporting Standards and resumption of publication of annual financial statements.
  - Implement recommendations from the safeguards assessment given limited progress to date.

### External sector assessment
- External position:
  - CA-based assessment: external position broadly in line with fundamentals and desired policy setting.
  - REER-based assessment: points to a substantially weaker external position.
  - Overall staff assessment: external position moderately weaker than warranted by fundamentals and desired policy settings due to persistent FX shortages for private sector, capital outflow pressures, and reliance on import and FX restrictions.
- Gross international reserves:
  - Projected to increase gradually over the medium term on account of improved CA outlook but remain below levels recommended by IMF’s ARA metric in the medium term.

*Source: IMF staff projections and analysis as presented in the chapter.*

### 20.      Staff urged   the authorities to take decisive actions on the exchange rate. Implementing

### 1ngaea2023001 - 20.      Staff urged   the authorities to take decisive actions on the exchange rate. Implementing

### Exchange rate: need for a unified, market‑clearing rate
- Staff urged decisive action to implement a unified and market‑clearing exchange rate—a commitment under the RFI—to address FX shortages, stop capital outflows, build up buffers and reduce high parallel market premiums that are keeping inflation elevated.
- Staff analysis suggests an exchange rate adjustment in the order of "14-15 percent" on inflation would be limited because the parallel market rate is already reflected in prices of imported goods.
- Staff estimates that "a 15 percent depreciation of the I&E rate in June 2023 would have a peak inflation impact of 0.93 percent in 2024."
- Recommended approach:
  - Multi‑step approach to exchange rate unification, starting with greater flexibility in the I&E rate.
  - Be prepared to increase interest rates if needed to prevent excessive overshooting (SM/21/33).
  - Institutionally dismantle various exchange rate windows at the CBN.
  - In the medium term, CBN should step back from its role as main FX intermediator, limit interventions to smoothing market volatility, and allow banks to freely determine FX buy‑sell rates.

### Phasing out restrictions and Capital Flow Measures (CFMs)
- A gradual move toward a unified and market‑clearing exchange rate would help phase out restrictions on current transactions and existing CFMs.
- Administrative controls on FX allocation generate distortions, hinder transparency, and hamper diversification.
- Progress toward unification may help remove Multiple Currency Practices (MCPs) and increase FX supply in the official FX market, supporting removal of administrative measures.
- Phasing out CFMs should be properly timed and sequenced, considering external vulnerability risks and progress on institutional and financial reforms, in line with the IMF’s Institutional View on Liberalization and Management of Capital Flows.
- Examples of CFMs (as reported in the content):
  - Prohibition of FX purchases in the official market for foreign currency bond and equity instruments.
  - Payment limits on naira‑denominated credit and debit cards for overseas transactions.
  - Repatriation of oil (non‑oil) export proceeds within 90 (180) days of the date of shipment.

### Authorities’ views on exchange rate and monetary policy
- Authorities agreed with the need to further tighten monetary policy if inflationary pressures persist and recognized dangers posed by recent high levels of inflation.
- CBN’s monetary program projects significant moderation of credit growth starting from end-2022 as intervention program loans wind down.
- Authorities intend to reinforce pass‑through of MPR to lending rates, including through moral suasion, and expect fiscal dominance to moderate once the stock of CBN’s overdraft to the government is securitized.
- Authorities found IMF advice useful but were mindful of potential adverse effects; they attributed FX pressures in the official market to transitory global shocks and favored a combination of demand and supply measures (including administrative controls and FX incentive schemes like the RT200).
- Authorities prefer gradual, deliberate adjustments in the I&E rate and reaffirmed a de facto classification of the exchange rate system as a stabilized arrangement.

### Banking sector: prudently navigate the credit cycle
- Banking sector remains profitable and liquid with overall improvement in loan quality.
- Profitability of large banks unchanged through mid‑2022 as stable net interest income and higher fee and trading income offset rising provisioning costs.
- Regulatory liquidity ratio broadly stable; banks substituted CBN OMO bills with higher yielding government bonds.
- Share of impaired (IFRS Stage 3) and questionable (IFRS Stage 2) loans declined in 2022, though NPL ratios in some sectors (e.g., oil & gas, ICT) remain elevated.
- CBN stress tests suggest more than a doubling of NPLs would be required to drive system capitalization below regulatory minimum.
- System capital adequacy ratio receded slightly to just under 15 percent due to faster asset growth.
- AMCON and weak banks:
  - AMCON’s asset recoveries have slowed due to court challenges ahead of envisaged winddown at end-2023.
  - A plan for sustainable repayment of AMCON’s debt to CBN (about "1½ percent of GDP") still needs to be devised.
  - Staff reiterated recommendation to resolve weak banks swiftly if corrective measures are not feasible.
- Macro‑financial linkages and regulatory guidance:
  - CBN resumed implementation of key Basel III elements; countercyclical capital buffer is not among them.
  - Rising exposures to the government could give rise to crowding out of private sector credit.
  - Retail credit growth reached "40 percent (y-o-y) in June 2022" then slowed markedly.
  - Authorities should monitor risks from new regulation allowing households to tap pension savings for mortgage down payments and tighten macroprudential policy as needed.
  - Authorities encouraged to devise a specific regulatory framework for less supervised fintech lenders to guard against predatory pricing and stability risks.

### Financial inclusion and eNaira (CBDC)
- CBN efforts to improve financial inclusion include proliferation of mobile money usage and onboarding clients from non‑bank/informal sector.
- Banking agents have risen well beyond target, but financial inclusion rates lag targets, particularly in access to financial products and number of agents in rural areas.
- Additional efforts will likely be needed to reach the ambitious inclusion target of "95 percent by 2024."
- eNaira (CBDC) one year after launch:
  - Launched October 2021; direct liability of the CBN; uses Hyperledger blockchain technology.
  - Retail wallets subject to transaction and balance ceilings; client onboarding expanded to all with national identification numbers in August 2022.
  - Uptake in first year slow: retail wallet downloads amounted to "942,000 at end-November 2022—0.8 percent of active bank accounts."
  - Total number of eNaira retail transactions since inception (around "802,000") is less than number of eNaira wallets, indicating low active use.
  - Recommendations / issues to address for public adoption:
    - Set the right relationship with mobile money via well‑designed public‑private partnerships; integrate eNaira into existing mobile payment system (e.g., integrated mobile‑CBDC wallet or bridge instrument for interoperability).
    - Use eNaira to facilitate delivery of social assistance via last mile fiscal agents with quick KYC and appropriate financial integrity safeguards.
    - Facilitate remittances: cost savings under a well‑designed framework could be up to "¼" of current cost; current cost was "10.4 percent in 2020Q2" (but such savings are unlikely without exchange rate reforms and a reduced gap between parallel market and official exchange rates).

### AML/CFT, governance, and structural policies
- AML/CFT:
  - Authorities have taken measures following the 2021 GIABA Mutual Evaluation Report: enacted legislation to correct deficiencies, adopted a 2022 National Inherent Risk Assessment, capacity building for AML/CFT supervisors, activated sanctions committee, and improved resourcing/training for law enforcement.
  - Staff recommended further actions: expand risk‑based toolkits focusing on high‑risk sectors (e.g., banks, real estate); ensure compliance with preventive measures including beneficial ownership identification and management of PEP risks; continue implementing targeted financial sanctions obligations; improve utilization of financial intelligence and enforcement.
  - Priority: ensure preventive measures by eNaira intermediaries and risk‑sensitive AML/CFT supervision.
- Agriculture and jobs:
  - Over the next decade, about "25 million" additional jobs will be needed for new labor market entrants; the bulk of these jobs will need to be created in agriculture.
  - Strengthening agriculture is important for job creation, food security, and social cohesion; constraints include forged seeds, limited domestic fertilizer production (affordability issues since fertilizer prices reflect world prices), and exchange rate pressures raising local tractor prices.
- Corruption and rule of law:
  - Nigeria perceived to have severe and systemic corruption with governance weaknesses; perception of corruption worsened since 2016.
  - Authorities addressed some recommendations: disclosure of NNPC revenue transfers to the Federation Account; passage of CAMA with beneficial ownership disclosure; passage of Proceeds of Crimes Act to clarify collection of illicit funds to the Treasury Single Account.
  - Challenges remain: limited staffing/capacity, weak financial resources, high staff turnover, manual documentation processes impede implementation (e.g., verification of a claimed 75 percent declaration rate by the Code of Conduct bureau).
  - Staff recommended faster progress in digitization and additional resources to realize benefits from reform Acts.

*NIGERIA — INTERNATIONAL MONETARY FUND (excerpt from the provided content unit).*

### 2012. Agriculture employment is the residual that keeps the employment/population ratio constant.

### 2012. Agriculture employment is the residual that keeps the employment/population ratio constant.

### Government effectiveness and governance indicators
- Nigeria fares poorly compared to its peer group on government effectiveness.
- Improvements noted:
  - Expansion of the Integrated Payroll and Personnel Information System (IPPIS) to include the police and the military.
  - Electronic salary payment for all those in the payroll system.
- Remaining challenges:
  - Need to eliminate payroll fraud and reduce general mistrust of civil servants, which negatively impacts tax morale and tax efficiency.
- Corruption Perception Index and Rule of Law context:
  - The Transparency International Corruption Perception Index scores countries on a scale of 0 (highly corrupt) to 100 (very clean), with confidence intervals shown in the source figures.
  - The World Justice Project Rule of Law Index includes measures such as Regulatory Enforcement, Open Government, Criminal Justice, Order and Security; comparisons with SSA and historical scores are presented in the source figures.

### Trade and AfCFTA participation
- Nigeria announced its intention to participate in the African Continental Free Trade Agreement (AfCFTA) by 2023Q4.
- Operational and implementation measures under way:
  - Reopening of land borders as of April 2022.
  - Creation of a trading module incorporating harmonized tariff lines and rules of origin.
  - Deployed scanners expected to be operational by end-December 2022.
  - Upgraded fast-track program to pre-qualify importers for a new scheme to manage trade and enhance customs clearance.
- Staff recommendation: steady implementation of these developments.
- Note from source: A total of 36 countries have expressed interest in trading under the pilot phase of the AfCFTA and seven countries (Cameroun, Egypt, Ghana, Kenya, Mauritius, Rwanda, and Tanzania) are taking part in this pilot.

### Authorities’ views (selected)
- Agriculture:
  - Authorities highlighted policy efforts to strengthen the agricultural sector.
  - Financial support through the CBN’s intervention programs is viewed as instrumental in raising yields.
  - Authorities expect structural transformation to occur faster than staff assume, with more jobs in services and industry reducing reliance on agriculture.
  - They recognize better coordination across government agencies would enhance policy effectiveness.
- Governance:
  - Authorities argued standard indicators may overlook recent steps to improve governance.
  - Efforts to reduce ghost workers include analysis of employment certificates in specific MDAs, though progress is slow and resources are insufficient for comprehensive convictions.
  - Collection of illicit funds is reported to be growing; the Proceeds of Crime Act is expected to support addressing this if accompanied by clarity on resource use.
  - Asset declarations are rising; pilots of online asset declarations are underway.
- Energy and gas:
  - Gas is a high priority for energy transition and diversification.
  - New legislation in the Petroleum Industry Act (PIA) for non-associated gas is expected to stimulate gas production.
  - Confidence that international companies will remain in the onshore gas sector.
  - Nigeria LNG’s increased presence in domestic LPG provision is expected to help moderate gas prices.
  - Recent electricity pricing reforms (with World Bank support) are expected to bring greater stability and investment, increasing gas and electricity use and reducing reliance on oil.

### Food insecurity: stylized facts (Box 3)
- Nigeria is among the least food secure countries.
  - Official 2018 estimate: 40 percent of Nigeria’s population are food insecure, with large rural/urban gaps.
- Trends and consumption:
  - Food security improved during 2005-19 according to EIU Food Insecurity Index.
  - FAO data show improvement in per capita consumption of carbs and pulses.
- Regional concentration and recent deterioration:
  - Food insecurity is concentrated in the north; aggregate figures mask intra-regional differences.
  - The situation may have worsened since the COVID-19 pandemic.
  - World Food Program data indicate a significant increase in acute malnutrition estimates for 2022, with an additional 5.4 million people estimated to have become food insecure since 2021.
  - Increased food insecurity is especially relevant in north-east states: Borno, Yobe and Adamawa.
- Food insecurity estimates and categories (source figures and notes):
  - Food Insecurity at level 2 (minimally adequate food consumption) and level 3 (acute malnutrition) reported in the source tables and maps.
  - Location of high food risk areas and Cadre Harmonise/WFP classifications are presented in source maps and tables.

### Staff appraisal — growth and macro outlook
- Recent performance:
  - Despite higher oil prices, the economy is expanding at slightly above the population growth rate.
  - After a short-lived recession in 2020, recovery continued and broadened to all sectors except oil.
  - Output growth is expected to pick up slightly after a moderation in 2022 but remain around 3 percent, slightly above the population growth rate.
  - Headline inflation is expected to moderate at end-2022 with the start of the harvest season.
- Risks:
  - Near-term downside risks include effects of recent flooding and high fertilizer prices impacting agricultural production and food prices in 2023.
  - Further volatility in the parallel market exchange rate and continued dependence on central bank financing of the budget deficit could exacerbate price pressures.
  - Medium-term upside risks include stronger reform momentum, stronger rebound in oil and gas sector, and Dangote refinery reaching full potential more rapidly than in the baseline.

### Policy recommendations — fiscal, monetary, external, banking
- Fiscal policy and public finances:
  - Tightening across all policy levers is required to ensure macroeconomic stability.
  - Missed opportunities: double-digit increases in Nigeria’s terms of trade and improved trade balance were not harnessed to build fiscal space and FX reserves.
  - Fuel subsidies remain a formidable drain on fiscal revenues.
  - Bold fiscal reforms needed to reduce vulnerabilities and create policy space:
    - Near-term priorities: removing fuel subsidies; expanding coverage of tax automation system under a well-designed roadmap; strengthening taxpayer segmentation centering on the Large Taxpayer Offices.
    - Medium-term measures: compliance improvement; comprehensive customs modernization; rationalization of tax incentives; raising tax rates to the ECOWAS levels.
  - Without stronger revenue mobilization, projections indicate overall fiscal deficits above 6 percent of GDP in the medium term and public debt rising to about 43 percent of GDP by 2027.
- Monetary policy:
  - Decisive and effective monetary tightening is a priority to prevent de-anchored inflation expectations.
  - Recent measures (policy rate increases) have made stance less accommodative but more is needed.
  - Recommended actions:
    - Fully sterilize central bank financing of fiscal deficits.
    - Further increases in the policy rate as needed.
    - Gradual phasing out of the CBN’s credit intervention programs.
    - Establish price stability as the primary objective of the central bank.
  - Progress in securitization of the CBN’s existing stock of overdrafts is welcomed.
  - Future use of CBN overdrafts for fiscal financing should strictly adhere to statutory limits.
- External sector and exchange rate policy:
  - Nigeria’s external position is assessed to be moderately weaker than implied by fundamentals.
  - Continued FX shortages, elevated parallel market premiums, and administrative restrictions on current transactions fuel exchange rate uncertainties.
  - Recommendation: move towards a unified and market-clearing exchange rate by dismantling various exchange rate windows at the CBN, accompanied by clarity on exchange rate policy and supportive fiscal and monetary policies.
  - Reopening of land borders and measures to harmonize tariff lines and ease customs processes support readiness to implement AfCFTA.
- Banking sector and financial stability:
  - Banking sector is profitable and liquid; NPLs have receded; stress tests indicate resilience.
  - Implementation of Basel III regulation is proceeding.
  - Recommendation: increased vigilance and use of selected macroprudential instruments to manage potential risks from dynamic retail credit growth.
  - AML/CFT: measures to address weaknesses identified in the 2021 GIABA Mutual Evaluation Report are welcome; further actions needed to expand risk-based supervisory toolkits, ensure compliance with preventive measures, and improve enforcement to avoid public listing by the FATF.

### Agriculture, jobs, and food security policy recommendations
- Strengthening agriculture is important for job creation and food security.
- Policy measures recommended:
  - Increase input usage through affordable fertilizers and higher quality seeds.
  - Improve storage facilities.
  - Provide more coordinated support across agencies.
  - Improve financial inclusion in rural areas:
    - Raise usage of mobile money and electronic transactions.
    - Advance financial literacy initiatives.
    - Increase number of agents in underserved regions.

### Governance and transparency in the oil sector
- Steady implementation of governance reforms and improved transparency in the oil sector are critical to reducing perceptions of high corruption.
- Positive steps noted:
  - Passage of the Companies and Allied Matter Act (CAMA) and the Proceeds of Crimes Act.
  - Increased rate of asset declarations by public sector employees and politicians.
- Further transparency measures recommended:
  - Reinstate publication of monthly data on NNPC’s fiscal oil revenues remitted to the Federation account.
  - Provide greater transparency on cost deductions to help establish public trust in government’s management of oil resources.

*Source: 1ngaea2023001 - 2012. Agriculture employment is the residual that keeps the employment/population ratio constant.*

### 44.      It is proposed that the next Article IV consultation take place on the standard 12-

### 1ngaea2023001 - 44.      It is proposed that the next Article IV consultation take place on the standard 12-

### Consultation schedule
- It is proposed that the next Article IV consultation take place on the standard 12-month cycle.

### National income and prices (selected series)
- Real GDP (at 2010 market prices): 1.9, 2.2, -1.8, 3.6, 3.0, 3.2, 2.9, 3.0, 3.0, 3.0
- Oil and Gas GDP: 1.0, 4.6, -8.9, -8.3, -8.2, 5.6, 0.6, 3.7, 2.2, 2.2
- Non-oil GDP: 2.0, 2.0, -1.1, 4.7, 3.8, 3.0, 3.1, 3.0, 3.1, 3.1
- Non-oil non-agriculture GDP: 2.0, 1.8, -2.4, 5.7, 4.5, 3.7, 3.3, 3.1, 3.3, 3.2
- Production of crude oil (million barrels per day): 1.93, 2.01, 1.77, 1.62, 1.42, 1.51, 1.53, 1.58, 1.58, 1.58
- Nominal GDP at market prices (trillions of naira): 129.1, 145.6, 154.3, 176.1, 206.6, 235.8, 267.7, 303.9, 344.9, 389.4
- Nominal non-oil GDP (trillions of naira): 115.7, 133.2, 144.1, 166.4, 193.7, 223.8, 256.3, 292.6, 333.8, 378.4
- GDP deflator: 10.2, 10.4, 7.8, 10.1, 14.0, 10.6, 10.3, 10.2, 10.2, 9.6
- Consumer price index (annual average): 12.1, 11.4, 13.2, 17.0, 18.8, 17.4, 12.6, 11.5, 11.5, 11.5
- Consumer price index (end of period): 11.4, 12.0, 15.8, 15.6, 21.0, 15.1, 11.5, 11.5, 11.5, 11.5

### Investment, savings, and current account
- Gross national savings: 20.7, 21.6, 23.0, 25.2, 23.4, 21.3, 20.1, 19.4, 18.5, 17.1
- Investment: 19.0, 24.6, 26.7, 25.6, 23.3, 21.6, 20.3, 19.6, 18.7, 17.2
- Public investment (percent of GDP): 3.0, 3.0, 2.5, 3.2, 3.0, 3.4, 3.2, 3.0, 3.0, 2.8
- Private investment (percent of GDP): 16.0, 21.7, 24.3, 22.4, 20.2, 18.2, 17.1, 16.6, 15.7, 14.4
- Current account balance (percent of GDP): 1.7, -3.1, -3.7, -0.4, 0.1, -0.3, -0.2, -0.2, -0.2, -0.1

### Consolidated government operations (percent of GDP)
- Total revenues and grants: 8.5, 7.8, 6.5, 7.3, 8.4, 8.9, 8.3, 8.0, 7.7, 7.5
- Of which: oil and gas revenue: 2.8, 4.4, 2.4, 2.8, 3.6, 4.0, 3.4, 3.0, 2.6, 2.4
- Total expenditure and net lending: 12.8, 12.5, 12.1, 13.3, 14.6, 14.5, 14.1, 13.8, 13.7, 13.7
- Fuel subsidies (percent of GDP): 0.5, 0.4, 0.1, 1.1, 2.2, 1.3, 0.9, 0.9, 0.7, 0.6
- Overall balance (percent of GDP): -4.3, -4.7, -5.6, -6.1, -6.2, -5.6, -5.7, -5.8, -6.0, -6.2
- Non-oil primary balance (percent of GDP): -7.2, -6.7, -5.9, -6.4, -7.5, -7.2, -6.5, -6.1, -5.6, -5.3
- Non-oil revenue (percent of GDP): 4.0, 4.1, 4.1, 4.5, 4.8, 4.9, 4.9, 5.0, 5.1, 5.1

### Public debt and interest burden
- Public gross debt (percent of GDP): 27.7, 29.2, 34.5, 36.5, 37.3, 38.2, 39.5, 40.7, 41.9, 43.1
- Of which: FGN debt (percent of GDP): 25.0, 26.5, 31.0, 32.5, 32.9, 33.6, 34.6, 35.5, 36.4, 37.3
- Of which: External debt (percent of GDP): 6.4, 6.2, 8.2, 9.0, 8.7, 8.2, 8.3, 8.2, 8.5, 8.4
- FGN interest payments (percent of FGN revenue): 60.8, 54.9, 86.1, 87.8, 96.3, 82.0, 89.5, 99.0, 110.3, 124.3
- Interest payments (percent of consolidated revenue): 19.9, 21.4, 32.5, 32.7, 28.2, 27.4, 30.9, 34.1, 38.7, 43.3

### Money, credit, and reserves
- Broad money (percent change; end of period): 15.0, 6.4, 11.6, 14.2, 20.3, 20.5, 19.7, 19.2, 15.0, 14.0
- Net foreign assets (percent change): 3.0, -18.0, 8.7, 0.9, -4.0, 1.0, 0.7, 0.4, 0.3, 0.3
- Net domestic assets (percent change): 12.0, 24.5, 3.0, 13.3, 24.4, 19.5, 19.0, 18.8, 14.7, 13.6
- Credit to the private sector (y-o-y, %): -11.9, 23.5, 15.8, 25.9, 25.0, 13.8, 17.3, 17.7, 11.6, 8.4
- Velocity of broad money (ratio; end of period): 3.5, 3.8, 3.7, 3.7, 3.6, 3.4, 3.3, 3.1, 3.1, 3.1
- Gross international reserves (US$ billions): 42.8, 38.1, 36.5, 40.2, 36.9, 37.5, 38.5, 39.3, 40.1, 40.9
- Reserves (equivalent months of imports of G&Ss): 5.1, 6.3, 6.6, 6.0, 5.7, 6.2, 6.6, 7.1, 7.2, 7.2

### External sector and balance of payments (US$ billions)
- Current account balance: 7.3, -13.7, -16.0, -1.8, 0.7, -1.5, -1.3, -1.3, -1.4, -1.2
- Trade balance: 20.5, 2.9, -16.4, -3.3, 5.8, 2.4, 0.9, -0.3, -1.8, -3.5
- Exports: 61.2, 65.0, 35.9, 46.8, 66.8, 60.0, 53.2, 48.2, 43.2, 42.2
  - Oil/gas exports: 56.6, 54.5, 31.4, 40.7, 59.3, 52.4, 45.3, 40.3, 35.1, 34.1
  - Other exports: 4.7, 10.5, 4.5, 6.0, 7.5, 7.6, 7.9, 8.0, 8.1, 8.1
- Imports: -40.8, -62.1, -52.3, -50.1, -61.1, -57.6, -52.3, -48.6, -44.9, -45.7
- Services (net): -26.1, -33.8, -15.8, -12.0, -14.9, -15.7, -15.8, -16.9, -16.7, -16.6
- Income (net): -11.3, -9.2, -4.9, -8.6, -12.5, -11.4, -10.2, -9.2, -8.9, -7.6
  - Interest due on public debt (income outflow): -0.8, -1.0, -, 1.2, -1.3, -1.3, -1.7, -2.0, -2.5, -2.9, -3.4 (as presented)
- Transfers (net): 24.1, 26.4, 21.0, 22.0, 22.4, 23.3, 23.9, 25.1, 26.0, 26.5
- Capital and Financial account balance: 3.2, 16.9, -2.6, 7.6, -4.0, 2.0, 2.4, 2.0, 2.2, 2.0
- Overall balance: 3.2, -4.7, -1.6, 3.7, -3.3, 0.6, 1.1, 0.7, 0.8, 0.8
- Net international reserves (increase -): -3.2, 4.7, -1.9, -3.7, 3.3, -0.6, -1.1, -0.7, -0.8, -0.8
- Price of Nigerian oil (US dollar per barrel): 71.6, 64.2, 43.3, 70.8, 100.5, 88.6, 83.4, 79.6, 76.8, 74.6

### Federal Government operations (selected nominal series, Billions of Naira)
- Total revenue and Grants: 3,596; 4,449; 3,789; 4,811; 5,101; 6,973; 7,714; 8,377; 9,320; 10,210
- Oil revenue: 2,076; 2,209; 1,424; 1,614; 1,340; 2,763; 2,884; 2,824; 2,830; 3,031
- Non-oil revenue: 1,520; 2,240; 2,272; 3,197; 3,697; 4,167; 4,804; 5,489; 6,427; 7,116
- Total expenditure: 9,046; 10,981; 11,492; 13,887; 16,082; 18,506; 21,079; 23,519; 27,192; 30,670
- Recurrent expenditure: 7,364; 8,896; 9,891; 10,624; 12,559; 13,992; 16,519; 18,746; 21,780; 25,380
- Interest: 2,186; 2,442; 3,261; 4,222; 4,914; 5,721; 6,905; 8,290; 10,279; 12,687
- Capital expenditure: 1,682; 2,084; 1,602; 3,263; 3,523; 4,514; 4,560; 4,773; 5,412; 5,289
- Overall balance (billions of naira): -5,450; -6,532; -7,704; -9,076; -10,982; -11,533; -13,365; -15,143; -17,873; -20,460
- FGN Total Debt (billions of naira): 32,232; 38,536; 47,859; 57,272; 68,047; 79,289; 92,653; 107,796; 125,668; 145,328

### Consolidated government (selected nominal and percent-of-GDP items)
- Consolidated total revenue and Grants (billions of naira): 10,978; 11,407; 10,019; 12,893; 17,417; 20,901; 22,341; 24,300; 26,571; 29,329
- Consolidated total expenditure (billions of naira): 16,549; 18,238; 18,635; 23,384; 30,215; 34,120; 37,645; 41,973; 47,289; 53,279
- Overall balance (percent of GDP): -4.3, -4.7, -5.6, -6.1, -6.2, -5.6, -5.7, -5.8, -6.0, -6.2
- Budget oil price (US dollar a barrel): 47.0, 64.2, 43.3, 70.8, 100.5, 88.6, 83.4, 79.6, 76.8, 74.6

### State and local governments (percent of GDP)
- Revenue: 5.4, 4.7, 3.7, 3.6, 3.5, 4.1, 4.0, 4.0, 4.0, 3.7
- Expenditure: 5.4, 5.0, 4.6, 4.5, 4.5, 4.8, 4.9, 4.9, 4.9, 4.8
- Overall balance: -0.1, -0.3, -0.9, -0.9, -1.0, -0.8, -0.9, -0.9, -0.9, -1.1

### Central Bank of Nigeria (CBN) and monetary aggregates (selected end-December levels, Billions of Naira)
- CBN net foreign assets (Dec.): 12,127; 7,797; 10,177; 8,990; 6,904; 7,133; 7,577; 7,878; 8,197; 8,545
- Net domestic assets (Dec.): -4,947; 884; 2,931; 4,305; 14,096; 17,166; 21,234; 25,257; 29,910; 34,883
- Reserve money (Dec.): 7,180; 8,681; 13,108; 13,295; 21,000; 24,299; 28,811; 33,135; 38,108; 43,428
- Currency in circulation (Dec.): 2,330; 2,443; 2,908; 3,325; 6,814; 7,884; 9,348; 10,751; 12,365; 14,091
- Banks reserves with the CBN (Dec.): 4,850; 6,238; 10,199; 9,970; 14,186; 16,415; 19,462; 22,383; 25,743; 29,337
- Reserve money y/y growth rate: 10.7, 21.5, 1.0, 1.4, 57.9, 15.7, 18.6, 15.0, 15.0, 14.0
- Money multiplier: 4.64, 3.03, 3.32, 2.52, 2.72, 2.72, 2.82, 2.82, 2.8, 2.8

### Monetary survey and broad money (end-December, Billions of Naira)
- Net foreign assets (Monetary Survey, Dec.): 11,838; 6,235; 9,788; 10,892; 9,102; 9,644; 10,088; 10,389; 10,708; 11,056
- Net domestic assets (Dec.): 20,917; 28,907; 29,938; 35,124; 45,952; 56,356; 68,586; 83,104; 96,581; 110,993
- Broad money (M3, Dec.): 32,755; 34,851; 38,905; 44,444; 53,483; 64,428; 77,102; 91,921; 105,717; 120,478
- Broad money (y-o-y, %): 15.2, 6.4, 11.6, 14.2, 20.3, 20.5, 19.7, 19.2, 15.0, 14.0
- Credit to the private sector (y-o-y, %): -11.9, 23.5, 15.8, 25.9, 25.0, 13.8, 17.3, 17.7, 11.6, 8.4
- Gross international reserves (billions of US dollar): 42.5, 38.1, 36.5, 40.2, 36.9, 37.5, 38.5, 39.3, 40.1, 40.9

### Financial soundness indicators (selected)
- Regulatory Capital to Risk-Weighted Assets: 15.2, 14.6, 14.9, 14.9, 15.4, 15.1, 16.1, 15.5, 15.0
- Regulatory Tier 1 Capital to Risk-Weighted Assets: 13.5, 12.8, 13.0, 13.0, 13.2, 14.1, 14.8, 14.3, 13.9
- Non-Performing Loans to Total Gross Loans: 11.7, 6.1, 6.4, 6.4, 6.0, 6.0, 6.0, 5.7, 5.4
- Return on Assets: 2.0, 2.5, 2.2, 2.5, 2.2, 2.1, 1.0, 1.2, 1.2
- Return on Equity: 22.7, 26.9, 23.7, 27.9, 25.0, 23.4, 11.4, 13.2, 14.0
- Liquid Assets to Total Assets: 22.6, 23.0, 21.1, 18.2, 18.5, 27.8, 26.4, 25.7, 25.5

*Source: Nigerian authorities; and IMF staff estimates and projections.*

### Annex I.  Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### External Risks
- Intensifying spillovers from Russia’s war in Ukraine
  - Likelihood: High
  - Time Horizon: Short Term
  - Impact on Nigeria: High
  - Policy Responses:
    - Prioritize fiscal intervention to relieve food insecurity
    - Tighten monetary policy to prevent de-anchoring of inflation expectation.  
    - Allow greater exchange rate flexibility to preserve external buffers.

- Commodity price shocks
  - Likelihood: High
  - Time Horizon: Short Term
  - Impact on Nigeria: High
  - Policy Responses:
    - Prioritize fiscal intervention to relieve food insecurity
    - Tighten monetary policy to prevent de-anchoring of inflation expectation.  
    - Allow greater exchange rate flexibility to preserve external buffers.

- De-anchoring of inflation expectations and stagflation
  - Likelihood: Medium
  - Time Horizon: Short to Medium Term
  - Impact on Nigeria: High
  - Description: Supply shocks to food and energy prices sharply increase headline inflation and pass through to core inflation, de-anchoring inflation expectations and triggering a wage-price spiral in tight labor markets. Central banks tighten monetary policy more than envisaged leading to weaker global demand, currency depreciations in EMDEs, and sovereign defaults. Together, this could lead to the onset of stagflation.
  - Policy Responses:
    - Tighten monetary policy.  
    - Use exchange rate adjustment as the first line of defense, while also deploying full range of Integrated Policy Framework tools for both secondary and contingency responses.
    - Develop contingency planning and strengthen crisis management institutional framework.

- Natural disasters related to climate change
  - Likelihood: Medium
  - Time Horizon: Medium to Long Term
  - Impact on Nigeria: High
  - Policy Responses:
    - Rebuild fiscal and external buffers to counter effects demand shortfalls and adverse effects on vulnerable groups.  
    - Continue improving the business environment to boost productivity and competitiveness, and to foster diversify to dampen negative effects.

### Nigeria-specific Risks
- Continued high food prices keeping overall inflation high
  - Likelihood: High
  - Time Horizon: Short to Medium Term
  - Impact on Nigeria: High (medium-term de-anchoring risk noted)
  - Description: Inflation expectation may become de-anchored and drift toward a new higher steady state if global commodity price shocks get a renewed momentum or domestic food inflation rise further following historical lead-lag patterns vis-à-vis international price. Such a de-anchoring could negatively affect consumption and investment, trigger disorderly asset price adjustment, and further exchange rate pressures due to private sector’s intensified inflation hedge-induced FX demand.
  - Policy Responses:
    - Decisively tighten monetary policy to re-anchor inflation expectation, while keeping fiscal policy stance neutral or tight.   
    - Use exchange rate adjustment as the first line of defense, while also deploying full range of Integrated Policy Framework tools for both secondary and contingency response instruments.
    - Unify exchange rates and allow the I&E rate to clear the market to remove its spread with the parallel market rates.  
    - Develop contingency planning and strengthen crisis management institutional framework.

- Further decline in oil production due to unabated theft and deterioration of security conditions
  - Likelihood: Medium
  - Time Horizon: Medium Term
  - Impact on Nigeria: High
  - Policy Responses:
    - Strengthen security and investment environment including in the oil and gas sector.  
    - A coordinated effort in both military and developmental fronts essential to address security challenges.  
    - Strengthen governance in the oil and gas sector including through consistent implementation of PIA.

- Slow progress in addressing corruption, tax evasion, and related money laundering
  - Likelihood: Medium
  - Time Horizon: Short Term
  - Impact on Nigeria: Medium
  - Description: A failure to make rapid progress could further discourage inward foreign investment. Public listing by the FATF for strategic AML/CFT deficiencies could impact correspondent banking relationships and transnational financial flows and diminish international confidence in the Nigerian financial system.
  - Policy Responses:
    - Step up anti-corruption and governance efforts including asset declaration, measures to manage risks posed by politically exposed persons, transparency of beneficial ownership, and corporate governance.  
    - Strengthen the AML/CFT regime, including implementing past Fund recommendations as well as recommendations of the 2021 Mutual Evaluation Report.

### Notes on the Risk Assessment Matrix (RAM)
- The RAM shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff).
- The relative likelihood is staff’s subjective assessment: “low” indicates a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent.
- The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly.
- “Short term” and “medium term” indicate that the risk could materialize within 1 year and 3 years, respectively.

*Source: Fund staff.*

### 8.      Gross international reserves remain below the ARA metric. At end-2021, gross reserves

### 8. Gross international reserves remain below the ARA metric

### Reserve adequacy status and recent developments
- At end-2021, gross reserves reached $40.2 billion, equivalent to 76 percent of the Assessment of Reserve Adequacy (ARA) metric including the oil buffer (See the 2016 ARA Board paper), helped by the SDR allocation and Eurobond issuances.
- Gross reserves declined to $36.8 billion at end-November 2022, despite significantly higher oil export revenues.
- Reserves are estimated to remain around this level at end-2022, corresponding to 58 percent of the ARA metric.
- Reserve accumulation has been constrained; reserves remain below 100 percent of the ARA metric.

### Projections and drivers
- Reserves are expected to increase gradually over the medium term on account of improved current account (CA) outlook.
- In the absence of major policy adjustments, including greater clarity on exchange rate policies, the accumulation of FX reserves is projected to remain limited over the medium term, keeping gross international reserves below 100 percent of the ARA metric.

### Notes on metrics and methodology
- The ARA metric referenced includes the oil buffer (per the 2016 ARA paper).
- Chart/figure labels in the source refer to "Contributions to Reserve Adequacy Metric (Billion U.S. dollars)" and "Reserve Adequacy Measures (Billion U.S. dollars)"; note in the source: "Oil price gap multiplied by oil exports, following 2016 ARA paper."

---

### Annex IV. Capacity Development Strategy FY 2023 — summary points
- IMF CD in Nigeria should align with staff-advised policy adjustment: revenue-based fiscal consolidation, establishing a credible monetary policy framework, and introducing a unified and market-clearing exchange rate.
- TA provision should consider the authorities’ track record and receptiveness to staff’s advice.
- The proposed CD strategy continues to focus on: revenue mobilization, public financial management, banking supervision, and macroeconomic statistics—the same priorities as in the 2021 Article IV consultation.
- Monetary and exchange rate policy is a key priority, but authorities have only indicated interest in training on modeling and not in TA on monetary policy operations. Initial interest on Fund TA on CBDC has not yet led to a concrete request.
- The current mix of HQ/RTAC missions (about 1:2) is considered appropriate.
- Training activities should expand gradually; resident advisor program (revenue administration) should be maintained.

### Key CD priorities and objectives
- Tax policy and revenue administration
  - Traction: TA advice on tax policy were partially incorporated in the 2021 Finance Bill. The Strategic Revenue and Growth Initiative and future finance bills are expected to benefit from recent TA.
  - Going forward: Revenue mobilization through comprehensive oil and non-oil tax policy reforms, review/rationalization of tax expenditures, comprehensive review of tax system, and strengthening tax and customs administrations.
- Public financial management
  - Traction: TSA in place, good progress on Medium-term debt strategy and cash management, and on budget planning. Little intake so far on monitoring and classification of Government-Owned Enterprises.
  - Going forward: TA to focus on integrated cash, asset, liability (including public debt) management, PPP fiscal risks management, and fiscal reporting.
- Financial supervision and regulation
  - Traction: Good intake on bank supervision—Pillar II implementation, risk-based supervision, regulation of Cyber/Fintech risks.
  - Going forward: CD in banking supervision and strengthening supervisory and regulatory tools, including onsite and offsite functions.
- Macroeconomic and financial statistics
  - Traction: Progress on GDP, CPI, and BOP statistics was disrupted by pandemic-induced delays in Census and surveys. Little intake on GFS from the budget office.
  - Going forward: Continued improvement in national accounts compilation and support on price measurement.

### Implementation, risks, and authorities’ views
- Progress on implementing TA recommendations has been made, albeit slower for revenue mobilization and some statistics areas.
- Main risks: absorptive capacity and data quality; mitigation recommended via hands-on support (resident advisor program) and merit-tested resource allocation for new TAs based on implementation record.
- Long-term resident expert (LTX) on revenue mobilization (identified in November 2021) was deployed in July 2022—along with World Bank’s upcoming Program for Results on revenue mobilization.
- Authorities agreed with priorities, appreciate rebalancing toward hands-on support, and requested an LTX on fiscal transparency/budget reporting. CBN’s TA priority is on FPAS modelling and expressed renewed interest on a stress test TA. NBS priorities are GDP and CPI rebasing. NFIU expressed interest in CD on AML/CFT issues.

### Operational and staffing notes
- The current mix of HQ/RTAC missions is about 1:2.
- Mission Chief: Ms. Jesmin Rahman has been the IMF’s Mission Chief since May 2020.
- Resident Representative: Mr. Ari Aisen has been the IMF’s Resident Representative since October 2020.

*Source: IMF staff report text provided in the content unit.*

### 2023. These surveys are necessary inputs for the GDP rebasing exercise, which is planned to be

### 1ngaea2023001 - 2023. These surveys are necessary inputs for the GDP rebasing exercise, which is planned to be 

### Price statistics
- Official monthly consumer price index (CPI) is a composite of urban and rural price data and is available on a timely basis.
- CPI weights and basket are based on expenditures derived from the 2003/04 National Consumer Expenditure Survey; the weights are described as "severely outdated" and "not representative of current expenditure patterns."
- The update of the CPI—using new weights from the 2018 National Household Livings Standards Survey—is still ongoing.
- Compilation of an updated producer price index is ongoing but funding for the survey is uncertain.
- AFW2 plans to provide additional technical assistance to support the CPI update and improvements to Nigeria’s price statistics.

### Government finance statistics (GFS)
- Main weaknesses: inadequate data coverage, incomplete coverage of federal government institutions, and limited data at the subnational governments level, which accounts for "almost one half of total government expenditure."
- Authorities are working to:
  - improve quality, coverage, and timeliness of fiscal reports across federal, state, and local governments;
  - standardize budget classification, chart of accounts, and accounting systems to allow consistent classifications, including use of International Public Sector Accounting Standards (IPSAS)—cash basis—at the federal and state levels;
  - formalize publication of government accounts on a monthly or quarterly basis;
  - increase coverage to report operations of state-owned enterprises and improve delineation between general government units and public nonfinancial and financial corporations.
- Reporting status: "Nigeria does not report any GFS data to STA," though quarterly debt data is reported to the IMF / World Bank Quarterly Public Sector Debt Database.

### Monetary and financial statistics (MFS) and Financial Access
- The Central Bank of Nigeria (CBN) reports MFS to the Fund using the Standardized Report Forms (SRFs) for the central bank and other depository corporations (ODCs).
- In late 2020, the CBN began reporting data for other financial corporations (OFCs), covering the pension fund sector.
- CBN is expected to gradually expand OFC coverage to include finance companies, development finance institutions, and insurance companies.
- Nigeria reports some data and indicators to the Financial Access Survey (FAS), including mobile money and two indicators adopted by the UN to monitor Target 8.10 of the SDGs: "commercial bank branches per 100,000 adults" and "ATMs per 100,000 adults."
- Nigeria “doesn’t report gender disaggregated data.”

### Financial soundness indicators (FSIs)
- The CBN reports quarterly data for all of Nigeria’s core and eleven additional FSIs for deposit takers.
- The CBN is working with support from STA to:
  - improve the methodology used to compile FSIs in accordance with the 2019 FSIs Guide;
  - expand coverage to include the additional FSIs for insurance corporations and pension funds.

### Balance of payments (BoP)
- Significant efforts and IMF TA have expanded the range and improved the quality of BoP data to reduce large errors and omissions and improve consistency with the international investment position (IIP).
- Remaining needs:
  - further reduce errors and omissions to better assess external sustainability;
  - improved validation of transactions reported by banks;
  - measurement of transactions outside the banking system;
  - appropriate treatment of transactions of enterprises in free trade zones (using a residency criterion);
  - improved coverage of estimates of external assets and liabilities of the banking sector.
- TA helped the CBN diversify data collection for the External Sector Statistics (ESS), including introducing private financial flows and stocks surveys.
- A survey of private transfers is recommended to improve estimates of private transfers, especially those received through informal channels and in-kind values (which are currently not estimated).
- The June 2019 mission assisted CBN in addressing source data deficiencies (ITRS in particular) and improving measurement of transactions and positions data.
- More efforts needed to improve quality and frequency of foreign assets and liabilities currently collected via an annual survey.
- Collection of position data for both inward and outward portfolio investment with country breakdown needs to be initiated to allow participation in the CPIS.
- The authorities have not yet initiated compilation of international reserves data in line with the Data Template on International Reserves and Foreign Currency Liquidity.

### External debt
- Public external debt data are "of good quality and available on a timely basis."
- The Debt Management Office (DMO) is collaborating with the CBN to extend database coverage to include private sector liabilities and foreign investment in debt securities issued domestically.
- IMF and World Bank staff worked with the DMO to develop analytical capacity to formulate a debt management strategy based on detailed cost-benefit analysis.

### Data standards and quality
- Nigeria has participated in the IMF’s General Data Dissemination System (GDDS) since April 2003.
- In March 2016, Nigeria implemented recommendations of the Enhanced General Data Dissemination System (e-GDDS) by publishing critical data through the National Summary Data Page (NSDP).
- "No Data ROSC is available."

### Table of Common Indicators Required for Surveillance (selected entries; As of November 28, 2022)
- Exchange Rates: Date of Latest Observation "Oct. 2022"; Date Received "Nov. 2022"; Frequency of Data/Reporting/Publication "M M M"
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation "Aug. 2022"; Date Received "Oct. 2022"; Frequency "M M M"
- Reserve/Base Money: Date of Latest Observation "Aug. 2022"; Date Received "Oct. 2022"; Frequency "M M M"
- Broad Money: Date of Latest Observation "Aug. 2022"; Date Received "Oct. 2022"; Frequency "M M M"
- Central Bank Balance Sheet: Date of Latest Observation "Aug. 2022"; Date Received "Oct. 2022"; Frequency "M M M"
- Consolidated Balance Sheet of the Banking System: Date of Latest Observation "Aug. 2022"; Date Received "Oct. 2022"; Frequency "M M M"
- Interest Rates: Date of Latest Observation "Aug. 2022"; Date Received "Oct. 2022"; Frequency "D D D"
- Consumer Price Index: Date of Latest Observation "Oct. 2022"; Date Received "Nov.  2022"; Frequency "M M M"
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: Date of Latest Observation "Sep. 2022"; Date Received "Nov.  2022"; Frequency "M M M"
- Revenue, Expenditure, Balance and Composition of Financing – General Government and Central Government: Date of Latest Observation "Sep. 2022"; Date Received "Nov.  2022"; Frequency "M M M"
- Stocks of Central Government and Central Government-Guaranteed Debt: Date of Latest Observation "Jun. 2022"; Date Received "Sep. 2022"; Frequency "Q Q Q"
- External Current Account Balance: Date of Latest Observation "Jun. 2022"; Date Received "Sep.  2022"; Frequency "Q Q Q"
- Exports and Imports of Goods and Services: Date of Latest Observation "Jun. 2022"; Date Received "Sep. 2022"; Frequency "Q Q Q"
- GDP/GNP: Date of Latest Observation "Sep. 2022"; Date Received "Nov. 2022"; Frequency "Q Q Q"
- Gross External Debt: Date of Latest Observation "Jun. 2022"; Date Received "Sep. 2022"; Frequency "Q Q Q"
- International Investment Position: Date of Latest Observation "Jun. 2022"; Date Received "Nov. 2022"; Frequency "Q Q Q"

### Staff statement update (February 6, 2023) — key facts
- The statement provides a factual update on developments since the staff report of January 17, 2023 and "does not change the thrust of the staff appraisal."
- The Central Bank of Nigeria (CBN) raised its benchmark policy rate by 100 basis points to "17.5 percent" on January 24—the fifth hike since the beginning of the current tightening cycle.
- The Monetary Policy Committee indicated intention to sustain the current policy stance until inflation is further reined in.
- In December 2022, CPI inflation (year-on-year) declined for the first time in 11 months to "21.3 percent"—in line with staff’s projection ("21 percent")—although there was some pick up in annualized month-on-month CPI inflation led by food prices.
- On January 27, Moody's Investors Service downgraded Nigeria's sovereign rating from "B3" to "Caa1"; this was a second downgrade after the October 2022 downgrade from "B2" to "B3."
- Fitch and S&P ratings stand at "B-."
- On January 30, 2023, Nigeria’s sovereign spread increased by "53 bps to 784 bps."
- On January 29, the CBN extended the deadline for the exchange of high-denomination naira notes by 10 days to "February 10."
  - Since roll-out on December 15, 2022, about "1.9 trillion naira" worth of old notes ("70 percent of all cash held outside banks") were brought back as deposits (a requirement for the note exchange).
  - CBN tightened cash withdrawal limits on January 9, 2023.
  - After February 10, 2023, old notes will cease to be legal tender and no longer be accepted by banks; CBN introduced a 7-day grace period (until "February 17") during which old notes will be accepted at CBN’s branch offices.

### Authorities' statement (February 6, 2023) — summary of outlook and policies
- Authorities broadly share staff’s assessment and remain committed to:
  - prudent fiscal management to place public debt onto a sustainable footing;
  - a tight monetary policy aimed to restore price stability;
  - steadfast structural reform efforts to accelerate post-pandemic recovery, foster inclusive, diversified, and sustained economic growth as articulated in the National Development Plan (NDP 2021–2025).
- Recent economic performance:
  - Real GDP growth: "-1.8 percent" in 2020; "3.6 percent" in 2021; "3.0 percent" in 2022.
  - Growth drivers: higher performance in non-oil sector (services, agriculture, and manufacturing) and firming international oil prices; oil sector setbacks included illegal activities and limited investment resulting in below OPEC quota oil production.
  - Authorities are optimistic about the impact of Dangote’s refinery coming onstream and efforts to curb leakages in the oil industry; growth is projected at "3.2 percent in 2023."
  - Headline inflation rate fell slightly from "21.47 percent in November 2022" to (text truncated in source).

*Source: 1ngaea2023001, IMF.*

### 21.34  percent  in  December  2022,  due  to  an  increase  in  food  supply  at  the  onset  of  the

### 1ngaea2023001 - 21.34  percent  in  December  2022,  due  to  an  increase  in  food  supply  at  the  onset  of  the

### Inflation and Growth Outlook
- Headline inflation: 21.34 percent in December 2022, due to an increase in food supply at the onset of the harvesting season.
- Inflation projections:
  - 15.1 percent in 2023
  - 11.5 percent in 2024
- Growth outlook constrained by higher international prices of imported commodities and rising global interest rates.

### External Sector Performance
- Current account balance:
  - Improved from -0.4 percent of GDP in 2021 to 0.1 percent of GDP in 2022, supported by favorable terms of trade and improved external demand.
- Gross official reserves: decreased from 6 to 5.7 months of import on the back of net capital outflows.
- Outlook: external sector performance expected to improve due to expected improvements in oil production and reduced imports of petroleum products.

### Fiscal Policy and Revenue Measures
- Authorities committed to strengthening fiscal management and moderating debt-related risks.
- Revenue diversification and administration:
  - Introduction of yearly Finance Acts to enhance domestic revenue generation.
  - Priority on strengthening non-oil revenues; expansion of excise duties in the 2022 Finance Act aligned with Nigeria’s National Tax Policy.
  - Actions under the Strategic Revenue Growth Initiative (SRGI) expected to boost tax collections and eliminate leakages.
  - Plans to bring more informal-sector businesses into the tax bracket; NCS to introduce frameworks for recovering duties, uncollected taxes, and appropriate fees from electronic transactions.
  - Technology and ICT solutions to be deployed to ensure compliance and enhance revenue streams.
- Port and customs reforms: enhance port efficiency, anti-smuggling measures, review tariffs and waivers, issue more licenses to build modern terminals outside Lagos.
- Government-owned enterprises (GOEs):
  - Optimize operational and collection efficiency.
  - Enforce existing laws to limit GOEs' cost-to-revenue ratio to a maximum of 50 percent.
  - Implement approved Performance Management Framework to enhance GOE performance.
- Expenditure rationalization and social protection:
  - Plan to gradually remove the Petrol subsidy starting in April 2023, with goal of eliminating the expenditure line altogether by mid-2023.
  - Conduct awareness campaigns on subsidy removal while taking measures to prevent social unrest.
  - Rationalize expenditures and strengthen social safety nets.
  - Expand IPPIS coverage to include all MDAs to reduce ghost employees and wasteful salary payments.
- Debt management:
  - Aim to strike optimal external/domestic debt mix, shift domestic debt portfolio to long-term maturities, mitigate refinancing risks.
  - Operate within the Fiscal Responsibility Act of 2007, restricting borrowing to high-return capital and human development spending.

### Monetary and Exchange Rate Policy
- Monetary stance: tight monetary policy to contain inflation, reduce negative real effective interest margin, boost market sentiment, and restore investor confidence.
- CBN policy rate increases: increased the policy rate at its last two MPC meetings in November 2022, and January 2023, by 100 basis points, respectively.
- Month-on-month inflation trending downwards; CBN to sustain disinflationary efforts and anchor inflation expectations.
- Exchange rate regime:
  - CBN phased out the official exchange rate and regards the Nigerian Autonomous Foreign Exchange (NAFEX) market-determined Investor and Exporters (I&E) rate as the key reference exchange rate.
  - Commitment to ultimately permit complete market mechanisms subject to careful planning and management of the transition (noting eNaira rollout risks).
  - Strengthen exchange rate supply policies and initiatives to improve FX supply.
  - Policies cited: "Race to $200 billion in FX Repatriation (RT-200 policy)" and the "Naira for Dollar Scheme" to support FX inflows.
  - Commitment to completing securitization of CBN overdraft to the federal government.
- Monetary policy framework: periodic review to maintain consistency with changing global and domestic macroeconomic conditions.

### Financial Sector Policy and Inclusion
- Financial system status: safe and sound with strong capital buffers and ample liquidity.
- Non-performing loans (NPLs) ratio: declined to 4.8 percent, below the prudential benchmark of 5.0 percent.
- Regulatory measures and initiatives:
  - Continued implementation of the Global Standing Instruction (GSI) Policy and effective credit risk management.
  - Recent CBN initiatives such as the Naira redesign expected to enhance monetary policy transmission.
- Financial inclusion targets and measures:
  - Expand features and uses of the eNaira (including offline eNaira payment solutions, cross-border payments, interoperability with other CBDCs, multiple signatory wallets).
  - Increase number of banking agents in underserved regions and provide targeted training.
  - Adopted five key policy frameworks/initiatives to increase adoption and usage of financial services, expand digital financial services and platforms, and improve financial inclusion coordination, capacity, and governance.
  - Government target: achieving 95 percent financial inclusion rate by 2024.
  - Regulatory engagement with fintech: regulatory sandbox, code-based phone transactions, mandatory data exchange between banks and fintechs.
- Appreciation of Fund technical and policy support for the eNaira initiative.

### Structural Reforms and Governance
- Development plan: NDP 2021–2025 to promote inclusive, diversified, and sustained growth; focus on private sector development, competitiveness, employment creation, and living standards.
- Priorities: economic diversification away from oil dependence, reducing inequality and unemployment, building strong institutions, addressing governance challenges.
- Public utilities and infrastructure: prioritize investment in transportation networks, energy supply, and human capital.
- Anti-corruption and legal framework:
  - Approved new anti-corruption strategy policy (extension of National Anti-Corruption Strategy Document from 2022–2026).
  - EFCC achievements: secured over 3,000 convictions and recovered over $1 billion in 2022.
  - Enacted laws strengthening AML/CFT and related frameworks: Money Laundering (Prevention and Prohibition) Act (MLA), 2022; Terrorism (Prevention and Prohibition) Act (TPPA), 2022; Proceeds of Crime (Recovery and Management) Act, 2022.
- AML/CFT actions: response to the 2021 GIABA Mutual Evaluation Report to address deficiencies and lessen risk of grey listing by the Financial Action Task Force (FAFT).
- AfCFTA implementation: authorities dedicated to ensuring AfCFTA comes into effect by 2023 to boost non-oil exports and global competitiveness; plan to remove impediments per agreed protocols to facilitate free trade.

### Conclusion and Policy Commitments
- Authorities committed to maintaining macroeconomic stability and addressing structural impediments for durable and inclusive growth.
- Plan to implement a coordinated mix of macroeconomic policies to foster resilience while ensuring transparency and accountability.
- Authorities appreciate Fund advice and technical support and seek Executive Directors’ support in concluding the 2022 Article IV Consultation.

*Source: 1ngaea2023001*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1ngaea2023001.pdf_