## 1ngaea2023002

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---

### Definitions of Food Security Benchmarks — background and key findings
- Food security definition and caloric benchmarks:
  - Calorie requirement cited: "2200-2300 calories per day for adult females and 2900-3000 calories per day for adult males."
  - IMF/Nigeria benchmark: "2251 calories per day" (age-weighted caloric need).
  - FAO benchmark example: "2329 calories per day" for a "30-year-old woman."
- Recent price shocks and inflation:
  - Staple food prices in SSA surged by "23.9 percent" in 2020-22 (Okou, Spray, and Unsal, 2022).
  - Food inflation in Nigeria rose to "23 percent" in September 2022.
  - Global shocks (war in Ukraine, supply shortages, high fuel and transportation costs) exacerbated food insecurity in import-dependent countries.
- Cost-based food insecurity estimates (September 2018 to October 2019 household survey):
  - Cost of achieving "2251 calories per day" ≈ "82,000 naira per person per year."
  - Survey-based food insecure population: about "40 percent" of Nigeria.
  - Mekonnen et al. (2021) estimate: about "28 percent" food insecure using localized cost-of-diet achieving food-based dietary guidelines.
- Acute food insecurity and WFP data:
  - WFP (November 2022) for 26 states and FCT: "34 percent" of the population in stressed food security situations (levels 2 and above).
  - Acute food insecure population rose by "5.4 million people to 17 million" over the past year (almost "9 percent" of the respective population).
- Household production and urban-rural differentials:
  - Median rural family produces "35 percent" of its food consumption at home; rises to "39 percent" for families below the food security threshold ("82,000 naira per day").
  - Median urban families produce "5 percent" of their food needs at home.

### Food security benchmarks — basic food security vs nutrient-adequate diet
- Basic food security benchmark:
  - Cost of an energy sufficient diet based on one basic starch staple (maize, wheat or rice).
  - Nigeria estimate: "2251 calories per day" (weighted average: women "2117", men "2900", children "783-2958", depending on age).
- Nutrient adequate diet:
  - Provides adequate levels of all essential nutrients using a balanced mix and calculated via food-based dietary guidelines (FBDG).
  - In absence of recent Nigeria FBDG, Benin’s FBDG used as reference in studies.
  - Foods categorized: starchy staples, protein-rich foods, dairy, vegetables, fruits and fat; least-cost bundle derived by linear programming.

### Comparative indices and Nigeria’s position
- Indices used:
  - Economist Intelligence Unit (EIU) Food Insecurity Index — affordability, availability, quality & safety.
  - IFPRI Global Hunger Index — undernourished share and child wasting, stunting, mortality under age 5.
- Cross-country comparison findings:
  - High positive correlation between IFPRI Global Hunger Index and EIU Food Insecurity Index for comparator set.
  - Nigeria ranks near the top (worse) on both indices relative to chosen comparators.
  - In 2019 Nigeria ranked "97" out of "113" countries on the EIU ranking; only Angola, Burundi, Ethiopia and Sierra Leone worse among SSA countries in that sample.
  - Since 2019 Nigeria maintained its EIU food security score but due to improvements elsewhere (Ethiopia and Angola) is now the worst ranked among the comparator sample.

### Agricultural share and structural context
- Agriculture’s contribution and employment:
  - Agriculture ≈ "23 percent" of real GDP and remained at this level over the past decade.
  - Share in employment: "51 percent" (2018/19 household survey); ratio estimated to have risen subsequently.
- Structural implication:
  - High employment share with stable GDP share indicates absence of notable structural transformation.
  - Median household production and urban dependence on market purchases highlight vulnerability of urban poor to price shocks.

---

### Most staple foods produced domestically, but food import ratio elevated — overview and production/import dependence
- Consumption and import-dependence key statistics:
  - Food consumption share of total consumption basket: over "50 percent".
  - Roots and tubers weight: "20 percent".
  - Maize weight: "6 percent".
  - Dependence on imported food: "14 percent" in 2020.
  - Food import share in consumption has fallen slightly over time for rice due to CBN policies restricting FX access for importing rice.
- Production vs import patterns:
  - Roots and tubers and maize: almost fully supplied domestically.
  - Rice and vegetable oils: both produced domestically and imported.
  - Wheat and sugar: completely imported.
  - Aggregate dependence on imported food rose over the past decade and at "14 percent" in 2020 surpasses the median country in the comparator sample.
- Per capita consumption patterns:
  - Per capita consumption of roots and tubers and pulses much higher in Nigeria than the median sample country.
  - Per capita consumption of rice and wheat is considerably lower in Nigeria than other sample countries.
  - Aggregating carbohydrate-dense foods (maize, rice, roots and tubers, wheat) Nigeria converges toward the sample median.
  - Consumption premium for families with unemployed and college educated individuals and wage workers: up to over "50 percent" relative to families with agricultural workers.
- Cross-sectional and regional disparities referenced (SM/21/210).

### Drivers of food security — demand, supply, price and empirical determinants
- Demand-side:
  - Per capita consumption (consumption/GDP per capita in PPP terms) has a tight positive relationship with the EIU food security index.
- Supply-side:
  - Crop yields (maize, rice, roots and tubers, wheat) show strong positive relationship with food security; FAO/OECD yield data used.
- Price-side:
  - Higher food inflation rates associated with lower food security.
- Empirical regression excerpts (random effects model):
  - Per capita consumption (real 2015 US$): 0.15***0.15***0.08***0.07***0.07***
  - Cereal, rice and roots yield (average): 0.2***0.21***0.13***0. 11***0.06*
  - Food price inflation: -0.42***-0.41***-0.003-0.01-0.36*
  - Food price inflation interacted with dummy for high yields: 0.49**
  - Share of food imports in total imports (percent): 0.08-0.4*-0.4**
  - Chi squared test for corr(u_i, Xb): 0.14.054.451.981
  - Nobs: 107107174173173
- Interpretation:
  - Per capita consumption and crop yields significantly improve food security.
  - Reducing food price inflation improves food security; inflation adverse effects on absence of hunger appear only for countries with low yields (interaction).
  - Share of food imports not significant in food security regression but significant in explaining high levels of hunger; may reflect high imported-food prices making imports unaffordable.

### Nigeria-specific yield and input constraints
- Yields and inputs:
  - Nigeria yields are low for maize and rice relative to sample; roots and tubers yield is strong and provides most carbohydrates.
  - Milk return per cow is very low.
  - Vegetable oil production below sample median.
  - Fertilizer application correlates positively with yields; relationship levels out ~ "200-250 kg per hectare".
  - Fertilizer application in Nigeria is extremely low compared with other countries.
  - Irrigation positively related to yields (Figure 9, 2018 datapoints).
  - Rainfall correlates with production; strong seasonality with production surges in Q3 each year.
  - Mechanization (farm machinery per unit land) is almost absent.
  - Brazil offered to supply "10,000 tractors" to Nigeria over the next "5 years" as part of a "$1.2 billion" agricultural sector contract (includes technical knowledge).

### Policy experience, implications and scenario to reach comparator levels
- Comparator lessons (selected):
  - South Africa: lowered food trade tariffs in the mid-1990s, loosened marketing regulation, increased input usage over time.
  - Paraguay: strong input use, low land costs, wide availability of credit.
  - Ukraine: increased fertilizer and improved seed use, seed production development, increased free trade linkages.
- Policy levers for Nigeria:
  - Increase use of agricultural inputs (fertilizer, improved seeds).
  - Expand irrigation and productivity-enhancing infrastructure.
  - Improve access to agricultural credit.
  - Increase mechanization and provide farm machinery and technical assistance.
  - Address post-harvest food losses (not included in regression due to lack of data; noted as particularly high).
- Scenario to approach comparator indices (about "50" on EIU and "80" on absence from hunger):
  - Required parameters: food inflation rate of "5 percent"; crop yield of "6.5 tons per hectare"; food import share of about "10 percent".
  - Caveat: significant country-specific component to Nigeria’s low index not affected by these parameter changes.
  - Missing indicator: post-harvest losses absent and could partly explain Nigeria’s poor ranking.

---

### Successive governments’ efforts to reduce import dependency — trade policy, credit, and input subsidies
- Trade policy history and import restrictions:
  - Early 1980s: imports curtailed, licenses required, borders closed.
  - 1985 Babangida regime: imposed "30 percent" levy on all imports; tariffs increased up to "100 percent" for some products.
  - Obasanjo era used import bans extensively to protect local industries.
  - Since 2016, CBN banned access to FX market for importers of "41 foreign products" (most consumer or intermediate, including key staples) to change economic structure and conserve reserves (Central Bank of Nigeria 2015).
- Agricultural credit programs and CBN involvement:
  - Agricultural Credit Guarantee Scheme Fund established in 1978.
  - Anchor Borrowers Program (2016) initially set aside "40 billion naira"; since inception over "1 trillion naira" disbursed through mid-2022.
  - Repayment rates (November 2020):
    - Commercial Agricultural Credit (CAC) Scheme: almost "66 percent".
    - Anchor Borrowers Program: "24 percent" (repayment can be in kind, limiting tenor to one year).
- E-voucher input subsidy program (2011-15):
  - Provided electronic vouchers for subsidized NPK or urea fertilizer and improved seeds.
  - Between "12-14 million" farmers received e-vouchers in total.
  - Initiative withdrawn in 2015 as macro conditions worsened after oil price fall.
  - New program with agricultural special processing zones (AfDB, IFAD financed) is reintroducing input subsidy mechanisms.

### Evaluation of policy effectiveness — prices, imports, fertilizer and credit impacts
- Import dependence:
  - Dependence on food imports remained elevated relative to comparator group over past two decades.
  - Notable reductions for rice and fertilizer imports; little change for wheat and sugar.
- Price pass-through and import bans:
  - Domestic prices of internationally traded staples co-move with international prices converted at parallel market exchange rate.
  - Kano state regressions (maize and rice prices): lagged domestic and international prices significant; sum of coefficients on international price over four quarters insignificantly different from unity (suggesting full pass through).
  - Dummy for post-import-ban period insignificant; import bans did not diminish staple price sensitivity to international prices.
- Fertilizer pricing:
  - Little change in sensitivity of domestic price to international urea price despite increased production; explanations include transportation costs and new supply being exported rather than supplied domestically.
- Agricultural credit empirical assessment:
  - Supply function (real agricultural output growth): food price positive and significant; changes in banking credit and CBN component insignificant except for lagged agricultural growth.
  - Weak credit effects could reflect short estimation period and dominant rainfall effects.
  - Typical repayment challenges: empirical papers report "50-60 percent" repayment rates; late administration and diversion cited.
- E-voucher outcomes (microdata studies):
  - Wossen et al. (2017): participating farmers increased maize yield by over "26 percent" and per-capita consumption expenditure grew by almost "31 percent"; netting out subsidy cost produced net benefit of "11 percent" (excluding economy-wide effects).
  - Adetomiwa and Kolapo (2021): adoption of biofortified cassava seed increased cassava yields by over "28 percent" and higher per-capita consumption ("39 percent").
  - Benjamin (2020): substantial increase in fertilizer expenditure after e-voucher introduction; Kujima (2021) finds no such increase in regions already using fertilizer extensively.

### Policy recommendations for reintroducing input subsidy/e-voucher schemes
- Ex ante measures for effective reintroduction:
  - Provide subsidies on time.
  - Conduct scheme over long period (over "5 years") to demonstrate persistence.
  - Avoid elite capture: make scheme available to anyone, not self-selected groups.
  - Allow flexibility in purchase so vouchers usable for various seed types.
  - Source fertilizer locally to reduce travel distances for recipients.
  - Provide vouchers in tandem with extension services for proper input application.
  - Avoid areas where crowding out fertilizer demand likely.
- Financing note: large expenditures needed; size of fuel subsidy provides some potential financing.

### Conclusions on import dependency efforts
- Despite vast agricultural resources ("over 81 million arable and largely fertile hectares") food insecurity is increasing.
- Four cross-country levers to raise food security: raise per capita consumption, raise yields, limit food price inflation, reduce reliance on food imports.
- Nigeria’s achievements:
  - Substantial increase in agricultural production associated with policies, but import dependency for key staples has not fallen and domestic prices remain driven by international prices.
  - Central bank credit to agriculture has not succeeded in increasing production beyond rainfall and high food price stimuli.
  - E-voucher schemes proven effective at boosting yields and are being reintroduced alongside special processing zones; prospects good if managed efficiently.

---

### Fiscal position — low revenue-to-GDP and revenue mobilization priorities
- Key fiscal facts:
  - General government revenue: "7.3 percent" of GDP for 2021; ranked "191st out of 193 countries."
  - Tax revenue: "4.5 percent" of GDP (2021).
  - Non-oil revenue stagnated at around "4-5 percent" of GDP in the past decade.
  - Tax expenditures estimated revenue foregone: around "4 percent" of GDP (N6.8 trillion) in 2021.
  - VAT C-efficiency ratio is the lowest among peer African countries.
- Drivers of low tax revenue:
  - Narrow indirect tax bases, low compliance, large tax exemptions, low rates, and low tax morale (survey: almost half agreed "I would not pay my taxes if I would not be caught").
- Strategic Revenue Growth Initiative (SRGI):
  - Authorities’ plan: raise revenue-to-GDP ratio to "15 percent" by 2025.
  - SRGI objectives: (i) raise revenue-to-GDP to "15 percent" by 2025; (ii) expand tax base; (iii) counter evasion and encourage payment; (iv) enhance transparency.
  - Assessment: administration measures alone insufficient; bolder tax policy (raising indirect tax rates to ECOWAS levels and rationalizing incentives) needed.
- Tax capacity and tipping point:
  - Growth-relevant tipping point in revenue-to-GDP: "12½ to 13 percent."
  - Nigeria’s tax frontier estimated: about "8-11 percent" of GDP.
  - Nigeria’s current revenue ("4.5 percent") well below tipping point and tax frontier, indicating substantial potential to increase revenue.
- Successful SSA reform episodes and lessons:
  - Successful episodes defined: minimum increase "2.5 percentage point" of GDP over five years.
  - Four relevant examples: Mauritania (2010-2014), Rwanda (2010-2015), The Gambia (2010-2015), Uganda (2013-2017).
  - Common lessons: combine tax policy and administration reforms; focus on indirect taxes (VAT, excises), reduce exemptions; improve compliance via segmentation and automation; pair reforms with compensatory redistributive measures; high-level political commitment and IMF/TA support.

---

### Financial inclusion — progress, gaps, digital finance and policy priorities
- Current status and numeric benchmarks:
  - Share of adult population with a bank account: "has consistently increased" and "now accounts for more than two-thirds of financially-included individuals."
  - Share of financially-excluded population: "only slightly lower than in 2012."
  - Rural inclusion: "only 56 percent are included in rural areas."
  - Mobile phone availability: "about 80 percent of adults."
  - Fintech investment: "over US$1 billion since 2018."
  - Agent network target and coverage:
    - Goal: "500,000 agents by 2020" (target exceeded).
    - Actual: "1,375,000 as of September 2022."
    - Northern agent spread: "34 percent compared to the expectation of 60 percent."
  - Digital payments: "only about one-third of the adult population has ever made a digital payment."
  - Mobile transfers: "the volume of mobile transfers more than doubled year-to-date through August 2022 relative to the same period the previous year."
  - Digital-financial-literacy usage link: "only one in ten of those with low capability using such services."
- Distributional gaps and drivers:
  - Large gaps by youth, low education, low income, urban-rural; gender gap "relatively low" but present.
  - Reasons for not having an account: lack of resources/steady income, cost, lack of documentation, lack of trust, distance to access points.
  - Financial literacy: EFInA (2021a) found "more than half of adults have limited financial literacy and capability."
- Digital financial services and fintech:
  - Nigeria lags peers in mobile money ownership and transaction intensity; trails several low-income SSA countries on mobile money prevalence index (GSM Association, 2021).
  - Fintech sector offers broad services; regulatory gaps in consumer protection for digital consumer lending.
  - CBN actions: PSB licenses (granted in 2022), regulatory sandbox framework (CBN, 2021a), open banking framework (CBN, 2021b and 2022) in consultation phase.
  - Barriers to mobile money uptake: preference for cash, alternative transfer methods, affordability and trust; technical/network issues minor.
- Gender-focused initiatives and evidence:
  - Inter-agency financial inclusion working group (2015); Denarau Accord (2016); Framework for advancing women’s financial inclusion (2020).
  - CBN development fund (launched 2012) shows "65 percent share of female beneficiaries."
  - World Bank Nigeria for Women Project: "21,600 'women affinity groups' (WAG) benefiting more than 300,000 women."
  - Evidence: studies find female savings group membership associated with higher savings, loan access, food security and business continuity.
- Policy recommendations (consolidated priority options):
  - Increase financial access points: deepen last-mile distribution, increase agents in underserved areas, promote mobile money products through agents.
  - Promote digital financial services: push ID onboarding, leverage digital ID, run media campaigns on mobile money benefits.
  - Improve financial literacy: targeted capacity-building (including digital), provide interfaces and documentation in local languages.
  - Upgrade fintech framework: operationalize CBN sandbox, prioritize inclusion projects, pass national digital lending regulation, integrate digital lenders into credit reporting.
  - Enhance CBDC (eNaira) features and use: integrate eNaira with mobile payment system and MMOs, consider eNaira for social assistance and remittances.

---

### Sub-national experience and eNaira — Kaduna State case and CBDC rollout outcomes
- Kaduna State digitization case study:
  - Digitize payments, issue digital IDs, narrow gender gap, establish access points in all 23 LGAs, map telecom gaps.
  - Outcomes:
    - Decision to digitize G2P payments began in 2015; feasibility study in 2020.
    - "5.2 million" of "9 million" residents (~"60 percent") enrolled in digital ID database.
    - Close to half of enrolled residents now financially included.
    - Gender gap in Kaduna: "13 percent" (EFInA study).
    - Women empowerment fund (2019): two-thirds new to banking services.
    - Network blind spots: about "90 percent" of identified blind spots now on air.
    - Partnership to establish access points in all LGAs partially achieved; two-thirds did not have a bank branch previously.
  - Assessment: Kaduna’s multi-pronged approach presented as a potential national blueprint.
- eNaira (CBDC) rollout findings (launch October 2021):
  - Anticipated benefits: increase financial inclusion (if non-banked with mobile phones allowed), facilitate remittances, lower transfer costs.
  - Remittance cost context: average cost of sending $200 to Nigeria was "10.4 percent" in 2020Q2; "47 percent" of that (4.8 percentage points) attributed to exchange rate spread.
  - Post-launch adoption outcomes:
    - Retail wallet downloads: "0.8 percent" of bank accounts.
    - Merchant wallet downloads: about "10 percent" of merchants with point-of-sale terminals.
    - Most wallets inactive; weekly eNaira transactions since launch amount to only "8 percent" of wallets.
    - Average transaction value: "N53,000" (about "US$120").
  - Initial technical glitches occurred; no major cybersecurity event materialized.
- Policy options to maximize eNaira’s inclusion impact:
  - Integrate eNaira into existing mobile payment system by allowing MMOs to onboard clients and integrating eNaira wallet into mobile money apps.
  - Consider eNaira for delivery of social assistance and for remittances to generate cost savings and incentives for wallet uptake.

---

*International Monetary Fund — Nigeria country chapter content unit 1ngaea2023002 (sections cited).*

### 1. Definitions of Food Security Benchmarks  ___________________________________________ 5

### 1. Definitions of Food Security Benchmarks

### Background
- Food security defined as having sufficient food to generate a calorie requirement of about "2200-2300 calories per day for adult females and 2900-3000 calories per day for adult males."
- IMF/Nigeria benchmark used: "2251 calories per day" as the age-weighted caloric need for food security.
- In 2022, staple food prices in sub-Saharan Africa (SSA) surged by "23.9 percent" in 2020-22 (Okou, Spray, and Unsal, 2022).
- Global shocks: the war in Ukraine and associated supply shortages caused sharp price hikes for wheat and other staples on top of high fuel and transportation costs, deteriorating food security in import-dependent countries.

### Key Findings on Nigeria’s Food Insecurity
- Cost-based food insecurity estimate (September 2018 to October 2019 household survey):
  - Cost of achieving "2251 calories per day" ≈ "82,000 naira per person per year."
  - Based on this survey, about "40 percent" of the Nigerian population is identified as food insecure.
  - Mekonnen et al. (2021) using same survey find about "28 percent" food insecure based on a localized cost-of-diet achieving food-based dietary guidelines.
- Recent developments and acute food insecurity:
  - Food inflation in Nigeria rose to "23 percent" in September 2022.
  - World Food Program (WFP) data (November 2022) for 26 states and the Federal Capital Territory show share of those in stressed food security situations (levels 2 and above) at "34 percent" of the population.
  - Acute food insecure population has risen by "5.4 million people to 17 million" over the past year (almost "9 percent" of the respective population).
- Household food production and urban-rural differentials:
  - Median rural family produces "35 percent" of its food consumption at home; rises to "39 percent" for families below the food security threshold ("82,000 naira per day").
  - Median urban families produce "5 percent" of their food needs at home, indicating greater sensitivity of poor urban families to food price shocks.

### Box 1 — Definitions of Food Security Benchmarks
- Basic food security benchmark:
  - Cost of an energy sufficient diet based on one basic starch staple (maize, wheat or rice).
  - FAO analysis benchmark: a "30-year-old woman" with energy intake "2329 calories per day."
  - Nigeria estimate: "2251 calories per day" (weighted average of women "2117", men "2900" and children "783-2958", depending on age).
- Nutrient adequate diet:
  - Provides adequate levels of all essential nutrients through a balanced mix of carbohydrates, protein, fat, vitamins and minerals.
  - Calculated using food-based dietary guidelines (FBDG); in absence of recent Nigeria FBDG, studies have used Benin’s FBDG as reference.
  - Foods categorized into starchy staples, protein-rich foods, dairy, vegetables, fruits and fat; least-cost bundle derived by linear programming.

### Comparative Position and Indices
- Two indices used to compare Nigeria with comparators:
  - Economist Intelligence Unit (EIU) Food Insecurity Index — ranks countries on affordability, availability, and quality & safety of food.
  - IFPRI Global Hunger Index — based on proportion of undernourished and child wasting, stunting, and mortality for children under 5 years.
- Cross-country comparison findings:
  - High positive correlation between IFPRI Global Hunger Index and EIU Food Insecurity Index for the comparator set.
  - Nigeria ranks near the top (worse) on both indices relative to chosen comparator countries.
  - Nigeria’s global hunger estimate improved in absolute terms over time but little improvement visible on the EIU food insecurity scale.
  - In 2019 Nigeria was ranked "97" out of "113" countries on the EIU ranking; only Angola, Burundi, Ethiopia and Sierra Leone worse among SSA countries in that sample.
  - Since 2019, Nigeria has maintained its EIU food security score but due to improvements elsewhere (Ethiopia and Angola) is now the worst ranked among the comparator sample.

### Choice of Comparators and Selected Indicators (summary of table)
- Comparator country groups selected based on: (i) real per capita incomes in 2000 at PPP exchange rates; (ii) other SSA countries; (iii) non-SSA countries with large populations and sizable commodity exports.
- Selected sample (inverse order of Real GDP per Capita in 2000, with listed indicators from table):
  - Ethiopia — Real GDP per Capita in 2000: "618"; Agricultural Growth Rate (2000-19, Average): "6.1"; Global Food Security Index in 2022: "44.5".
  - Ghana — Real GDP per Capita in 2000: "2259"; Agricultural Growth Rate: "3.7"; Global Food Security Index in 2022: "52.6".
  - Nigeria — Real GDP per Capita in 2000: "2848"; Agricultural Growth Rate: "5"; Global Food Security Index in 2022: "42".
  - Angola — Real GDP per Capita in 2000: "2873"; Agricultural Growth Rate: "5.8"; Global Food Security Index in 2022: "43.7".
  - Cote d'Ivoire — Real GDP per Capita in 2000: "2948"; Agricultural Growth Rate: "n.a."; Global Food Security Index in 2022: "46.5".
  - Pakistan — Real GDP per Capita in 2000: "3495"; Agricultural Growth Rate: "2.5"; Global Food Security Index in 2022: "52.2".
  - China — Real GDP per Capita in 2000: "3701"; Agricultural Growth Rate: "3.9"; Global Food Security Index in 2022: "74.2".
  - Philippines — Real GDP per Capita in 2000: "4224"; Agricultural Growth Rate: "2.8"; Global Food Security Index in 2022: "59.3".
  - Ukraine — Real GDP per Capita in 2000: "4797"; Agricultural Growth Rate: "4"; Global Food Security Index in 2022: "57.9".
  - Indonesia — Real GDP per Capita in 2000: "5806"; Agricultural Growth Rate: "3.6"; Global Food Security Index in 2022: "60.2".
  - Paraguay — Real GDP per Capita in 2000: "6085"; Agricultural Growth Rate: "5.9"; Global Food Security Index in 2022: "58.6".
  - Upper middle income (aggregate reference) — Real GDP per Capita in 2000: "7226"; Agricultural Growth Rate: "3.4".
  - Egypt, Arab Rep. — Real GDP per Capita in 2000: "7388"; Agricultural Growth Rate: "3.3"; Global Food Security Index in 2022: "56".
  - South Africa — Real GDP per Capita in 2000: "9539"; Agricultural Growth Rate: "2.5"; Global Food Security Index in 2022: "61.7".
  - Malaysia — Real GDP per Capita in 2000: "16310"; Agricultural Growth Rate: "2.7"; Global Food Security Index in 2022: "69.9".

### Agricultural Production and Consumption (overview)
- Agriculture’s share of GDP and employment:
  - Agriculture represents about "23 percent" of real GDP and has remained at this level over the past decade.
  - Share in employment is "51 percent" (2018/19 household survey); this ratio is estimated to have risen subsequently.
- Structural context:
  - High employment share with stable GDP share indicates an absence of notable structural transformation.
  - Median household production and urban dependence on market purchases underscore vulnerability of urban poor to price shocks.

*Source: 1. Definitions of Food Security Benchmarks, Nigeria — International Monetary Fund, January 12, 2023.*

### 8.      Most staple foods in Nigeria are produced domestically, but the food import ratio

### 1ngaea2023002 - 8.      Most staple foods in Nigeria are produced domestically, but the food import ratio

### Overview and key statistics
- Food consumption makes up over 50 percent of the total consumption basket.
- Roots and tubers weight in Nigeria’s food basket: 20 percent.
- Maize weight in Nigeria’s food basket: 6 percent.
- Dependence on imported food: 14 percent in 2020.
- Food import share in consumption has fallen slightly over time for rice due to CBN policies restricting access to FX for importing rice.

### Production and import dependence of major staples
- Roots and tubers and maize are almost fully supplied domestically.
- Rice and vegetable oils: both produced domestically and imported.
- Wheat and sugar: completely imported despite recent impetus to start domestic production.
- Aggregate dependence on imported food has risen over the past decade and at 14 percent in 2020 surpasses the median country in the comparator sample.
- Time series production vs imports (figures presented as thousands of tonnes for each staple across 2010–2020):
  - Roots and Tubers: Production and Imports shown across 2010–2020.
  - Maize: Production and Imports shown across 2010–2020.
  - Rice: Production and Imports shown across 2010–2020.
  - Vegetable Oils: Production and Imports shown across 2010–2020.
  - Wheat: Production and Imports shown across 2010–2020.
  - Sugar: Production and Imports shown across 2010–2015 (figure extends to 2020 but plot details in source).

### Consumption per capita patterns
- Per capita consumption:
  - Roots and tubers and pulses (basic staples) per capita consumption is much higher in Nigeria than in the median sample country.
  - Per capita consumption of rice and wheat is considerably lower in Nigeria than in other sample countries.
  - When aggregating carbohydrate-dense foods (maize, rice, roots and tubers, wheat), Nigeria converges toward the sample median.
- Cross-sectional variation within Nigeria:
  - Consumption premium of families with unemployed and college educated individuals and wage workers is up to over 50 percent compared with families with agricultural workers.
  - Regional disparities further accentuate consumption differences (reference SM/21/210).

### Drivers of food security: demand, supply, and price
- Demand-side:
  - Per capita consumption (consumption/GDP per capita in PPP terms) has a tight positive relationship with the EIU food security index.
- Supply-side:
  - Crop yields (maize, rice, roots and tubers, wheat) show a strong positive relationship with food security.
  - FAO/OECD yield data used to derive average yield estimates; data limitations preclude weighted averages by consumption shares.
- Price-side:
  - Higher food inflation rates are associated with lower food security.
  - Stylized charts show food price inflation negatively correlated with food security index scores.

### Empirical determinants (regression results excerpted from Table 2)
- Regression specification: random effects model with country-level random effects; Chi squared test for corr(u_i, Xb) reported.
- Coefficient lines (as presented in source):
  - Per capita consumption (real 2015 US$): 0.15***0.15***0.08***0.07***0.07***
  - Cereal, rice and roots yield (average): 0.2***0.21***0.13***0. 11***0.06*
  - Food price inflation: -0.42***-0.41***-0.003-0.01-0.36*
  - Food price inflation interacted with dummy for high yields: 0.49**
  - Share of food imports in total imports (percent): 0.08-0.4*-0.4**
- Model diagnostics and sample sizes (as shown):
  - Chi squared test for corr(u_i, Xb): 0.14.054.451.981
  - Nobs: 107107174173173
- Interpretation of results in text:
  - Per capita consumption and crop yields play significant positive roles in improving food security and eliminating hunger.
  - Reducing food price inflation improves food security; adverse effect of food inflation on absence of hunger appears only for countries with low yields (interaction term).
  - Share of food imports not significant in food security regression, but significant in explaining high levels of hunger; may be associated with high imported food prices making imports unaffordable.

### Nigeria-specific yield and input constraints
- Nigeria yields:
  - High yields are a major determinant of food security, and yields are currently low in Nigeria for maize and rice relative to sample.
  - Yield of roots and tubers is strong and provides most of Nigeria’s carbohydrates.
  - Milk return per cow is very low in Nigeria.
  - Vegetable oil production is below the sample median.
- Agricultural inputs and their relationships with yields:
  - Fertilizer application correlates positively with crop yields across sample countries (2000–2019), with a non-linear relationship that levels out at about 200-250 kg per hectare.
  - Application of fertilizers in Nigeria is extremely low compared with other countries, though observed yields are stronger than trend possibly due to elevated rainfall levels.
  - Positive relationship observed between irrigation levels and yields (Figure 9, 2018 datapoints).
  - Rainfall correlates with agricultural production in Nigeria; strong seasonality with production surges in Q3 each year.
  - Mechanization (proxied by farm machinery per unit of land) is almost absent in Nigeria.
  - Brazil offered to supply 10,000 tractors to Nigeria over the next 5 years as part of a $1.2 billion agricultural sector contract that also offers technical knowledge to farmers.

### Policy experience and implications
- Comparator country lessons (selected):
  - South Africa: lowered food trade tariffs in the mid-1990s, free trade agreement with EU, loosened marketing regulation, increased input usage over time; focus on efficiency gains and reduced subsidies.
  - Paraguay: strong use of inputs such as fertilizer and improved seeds, low land costs, benefited from proximity to Argentina/Brazil, wide availability of credit to finance agricultural investments.
  - Ukraine: increased fertilizer and improved seed use, development of seed production and hybrid varieties, increased free trade linkages with Europe and surrounding countries (except Russia).
- Policy levers implied for Nigeria:
  - Increase use of agricultural inputs (fertilizer, improved seeds).
  - Expand irrigation and other productivity-enhancing infrastructure.
  - Improve access to agricultural credit to finance investments.
  - Increase mechanization and provision of farm machinery and technical assistance.
  - Address post-harvest food losses (not included in regression due to lack of data, but noted as particularly high in Nigeria).

### Government efforts and programs in Nigeria
- Historical and recent policies/programs:
  - National Special Program on Food Security (2002).
  - National Economic Empowerment and Development Strategy (2004).
  - Root and Tuber Expansion Program (RTEP) launched in 2008: empowered small-scale farmers with less than two hectares; raised productivity of cassava, garri, yam, potato.
  - Agriculture Transformation Approach (2011-15).
  - Agricultural Promotion Policy (2016-20).
  - Economic Recovery and Growth Plan (2017-20).
  - National Agricultural Technology and Innovation Policy (2022-27): objective to promote digital and climate-smart agriculture to reduce imports of rice, dairy products, and fish, increase resilience, and boost high potential value chains.
  - New program of special agro-industrial processing zones projected to run through 2027: aims to establish rural economic zones fully supported by infrastructure (power, water, roads, digital infrastructure, logistics) to facilitate food and agribusiness companies locating there.
- Program targets and outcomes referenced:
  - Agriculture Transformation Approach goal: ensure domestic food production increased by 20 million metric tons (MTs) within four years and create 3.5 million new jobs in the agricultural value chain (Adesina 2013).
  - Agricultural Promotion Policy aims: create employment, ensure food security, eliminate poverty, reposition economy (Olomola and Nwafor 2018).
  - Economic Recovery and Growth Plan acknowledges need to leverage science, technology and innovation to eliminate bottlenecks and promote market-based solutions (Williams and Francis, 2021).

### Scenario for improving Nigeria’s food security indices
- To approach food security levels of comparator countries (about 50 on the EIU food security index and 80 on the absence from hunger index), Nigeria would need:
  - Food inflation rate of 5 percent.
  - Crop yield of 6.5 tons per hectare.
  - Food import share of about 10 percent.
- Caveat: achieving these parameter values would not fully close the gap because a significant country-specific component contributes to Nigeria’s low index value and is not affected by policy changes.
- Missing indicator: share of food lost after harvest is absent from the analysis due to lack of data and could partly explain Nigeria’s poor ranking (post-harvest losses particularly high in Nigeria).

_International Monetary Fund: Nigeria country chapter content unit 1ngaea2023002 (section 8)._

### 20.      Successive Nigerian governments have endeavored to reduce import dependency.

### 20.      Successive Nigerian governments have endeavored to reduce import dependency.

### Import restrictions and trade policy history
- After the first oil era economic crisis in the early 1980s, the Nigerian government curtailed imports, required licenses for their usage, and closed Nigeria’s borders.
- In 1985, the Babangida regime:
  - imposed a 30 percent levy on all imports;
  - introduced a tariff system with tariffs increasing up to 100 percent for some products.
- Obasanjo’s government used import bans extensively to protect local industries and boost manufacturing capability.
- Since 2016, the Central Bank of Nigeria (CBN) has banned importers from accessing the foreign exchange market for 41 foreign products, most of which are consumer or intermediate products including key staples, with objectives of “changing the economy’s structure” and “resuscitating local manufacturing” to reduce forex demand and conserve international reserves (Central Bank of Nigeria 2015).

### Agricultural credit programs and CBN involvement
- CBN has been an active lender to the agriculture sector due to private sector reluctance to extend credit to agriculture.
- Agricultural Credit Guarantee Scheme Fund established in 1978 to provide agricultural loan guarantees for commercial banks.
- Anchor Borrowers Program established in 2016 initially set aside 40 billion naira to support farmers with single digit interest rate loans.
- Since inception, over 1 trillion naira has been disbursed through mid-2022 from the Anchor Borrowers Program, with the CBN providing a rising share of banking system agricultural financing.
- Recent central bank data (November 2020) report repayment rates:
  - Commercial Agricultural Credit (CAC) Scheme: almost 66 percent;
  - Anchor Borrowers Program: 24 percent (repayment can be made in kind, limiting tenor to one year).

### Input subsidies and the e-voucher program
- E-voucher subsidy scheme (2011-15) provided electronic vouchers enabling farmers to obtain subsidized NPK or urea fertilizer and improved seeds from private retailers.
- Internal estimates: between 12-14 million farmers received e-vouchers in total.
- The initiative was withdrawn in 2015 as macroeconomic conditions worsened and government revenues declined following the dramatic fall in oil prices.
- A new program centered on agricultural special processing zones financed by the African Development Bank (AfDB) and International Fund for Agricultural Development (IFAD) is reintroducing input subsidy mechanisms.

### Evaluation of policy effectiveness — import dependence and prices
- Over the past two decades, dependence on food imports has remained elevated in Nigeria relative to the comparator sample group.
- Notable reductions have been visible for rice and fertilizer imports in Nigeria, while little change is observed for wheat and sugar imports.
- Prices of domestic staples that are internationally traded have co-moved with international prices expressed in local currency (converted at the parallel market exchange rate).
- Regression analysis for Kano state (maize and rice prices) shows:
  - Lagged domestic prices and international prices are significant determinants of current maize and rice prices.
  - The sum of coefficients on the international price over four quarters is insignificantly different from unity, suggesting full pass through to domestic prices.
  - A dummy variable for the period following the imposition of the import ban is insignificant in both price equations; sensitivity of staple prices to international prices is not diminished following import bans.
- For fertilizer, little change is observed in the sensitivity of domestic price to the international urea price in recent years despite a significant increase in production; explanations include transportation costs and new supply being exported rather than supplied domestically.

### Empirical assessment of agricultural credit impact
- An agricultural supply function estimated with real agricultural output growth as the dependent variable (instruments: lagged food prices and contemporaneous rainfall) finds:
  - Food price has a significant positive effect on food supply.
  - Other variables, including changes in banking credit and the component provided via the central bank, are insignificant except for lagged agricultural growth.
  - Weak effects of credit could reflect the short estimation period and dominant effect from rainfall.
- Typical repayment challenges documented:
  - Empirical papers report a 50-60 percent repayment rate over the course of an agricultural loan, with late administration and diversion into other uses cited as typical explanations.
  - Incentive structure for repayment is weak; loans are not always well targeted and funding can be used for other purchases (e.g., new agricultural input trading companies).

### Evidence on input subsidy outcomes
- Micro data studies indicate significant improvements from the e-voucher program:
  - Wossen et al. (2017): participating farmers increased maize yield by over 26 percent and per-capita consumption expenditure grew by almost 31 percent; netting out subsidy cost produced a net benefit of 11 percent (excluding economy-wide effects).
  - Adetomiwa and Kolapo (2021): adoption of biofortified cassava seed with vitamin A supplements led to increased cassava yields (over 28 percent) and higher per-capita consumption (39 percent).
  - Benjamin (2020) documents a substantial increase in fertilizer expenditure by farmers after e-voucher introduction; Kujima (2021) finds this was not the case in a region already using fertilizer extensively.

### Policy recommendations for reintroducing e-voucher/input subsidy schemes
- For effective reintroduction, studies suggest ex ante measures:
  - Provide the subsidy on time.
  - Conduct the scheme over a long period (over 5 years) to demonstrate persistence.
  - Avoid elite capture by making the scheme available to anyone and not self-selected groups.
  - Allow flexibility in purchase so vouchers can be used for various types of seed.
  - Source fertilizer locally to reduce travel distances for recipients.
  - Provide vouchers in tandem with extension services so inputs are properly applied.
  - Avoid areas where crowding out of fertilizer demand is likely to happen.
- Note: Large expenditures are needed for these conditions to hold, but the size of the fuel subsidy provides some potential financing.

### Conclusions and key contextual facts
- Food insecurity is an increasing policy concern in Nigeria despite vast agricultural resources and over 81 million arable and largely fertile hectares.
- Cross-country analysis identifies four levers for raising food security: raising per capita consumption, raising production yields, limiting food price inflation, and reducing reliance on food imports.
- Nigeria’s achievements:
  - Substantial increase in agricultural production associated with policies, but import dependency for key staples has not fallen and domestic prices remain driven by international prices.
  - Central bank credit to agriculture has not succeeded in increasing production beyond the stimulus of high rainfall and high food prices.
  - The government’s e-voucher schemes have proven effective at boosting yields and are being reintroduced alongside special processing zones; these offer good prospects if managed efficiently.

*International Monetary Fund — Nigeria: Selected Issues (excerpts).*

### 1.      Nigeria has one of the lowest revenue-to-GDP ratios in the world, which makes its

### Nigeria has one of the lowest revenue-to-GDP ratios in the world, which makes its fiscal position vulnerable to shocks

### Fiscal position and revenue trends
- General government revenue in Nigeria was 7.3 percent of GDP for 2021 and ranked as 191st out of 193 countries.
- Nigeria’s fiscal revenue shows a declining trend, mainly due to declining oil revenue over the past decade.
- Non-oil revenue has stagnated at around 4-5 percent of GDP in the past decade.
- Nigeria’s oil revenue remains very low despite recent international oil price rebound, due to: huge amount of implicit fuel subsidies (i.e., deductions by NNPC from gross oil revenue), continued contraction in oil production, and oil theft.
- VAT C-efficiency ratio (VAT revenue divided by the product of VAT rate and private consumption) is the lowest among peer African countries.

### Key drivers of low tax revenue
- Narrow bases of indirect taxes, low tax compliance, large amount of tax exemptions, and low rates.
- Low tax morale: recent surveys show almost half of respondents agreed with “I would not pay my taxes if I would not be caught.”
- Tax expenditures (tax incentives, tax holidays, generous allowances, exemptions) eroded the revenue base; the 2021 Tax Expenditure Statement (TES) estimated revenue foregone by tax expenditures at around 4 percent of GDP (N6.8 trillion) in 2021.
- Nigeria’s indirect tax rates (VAT and excise) are around half of the average of ECOWAS countries, with narrow bases.

### Strategic Revenue Growth Initiative (SRGI) and assessment of measures
- Authorities’ national plan: raise the revenue-to-GDP ratio to 15 percent by 2025. SRGI four main objectives:
  - (i) raising revenue-to -GDP ratio to 15 percent by 2025;
  - (ii) expanding the tax base;
  - (iii) countering tax evasion and encouraging the payment of taxes by citizens;
  - (iv) enhancing transparency in the tax system.
- SRGI includes several important tax and customs administration measures but does not include any specific plan for raising tax rates.
- Assessment: Given Nigeria’s very low level of tax revenues, administration measures alone will not be sufficient; bolder tax policy measures—raising indirect tax rates to levels comparable to ECOWAS countries and rationalizing numerous tax incentives—will need to be adopted.

### Tax potential, capacity, and gaps
- Empirical literature indicates a tipping point between tax capacity and growth: the minimum revenue-to-GDP ratio associated with significant acceleration in growth/development is 12½ to 13 percent.
- Nigeria’s tax capacity (tax frontier) is estimated to be about 8-11 percent of GDP (IMF, 2018a; Fenochietto and Pessino, 2013).
- Nigeria’s tax revenue was 4.5 percent of GDP in 2021, well below both the tipping point and the estimated tax frontier, implying substantial potential to increase revenue.
- Nigeria’s current revenue is well below the tipping point and tax frontier, indicating an urgent need for an effective strategy leveraging SRGI and IMF TA findings to fill the tax gap.

### Definition and identification of successful revenue reform episodes in SSA
- Successful episode defined as a minimum increase in tax revenue of 2.5 percentage point of GDP over a five-year period (i.e., average 0.5 percentage point increase per year over five years).
- For the post-GFC period (2010-2021), only 12 episodes in 40 SSA countries met the basic criterion; further narrowed by (i) sustained increase with no substantial decline for five years after the episode and (ii) exclusion of fragile states.
- Four episodes identified as relevant roadmaps for Nigeria: Mauritania (2010-2014), Rwanda (2010-2015), The Gambia (2010-2015), and Uganda (2013-2017).

### Common lessons from the four successful SSA episodes (Mauritania, Rwanda, The Gambia, Uganda)
- Reforms combined tax administration and tax policy measures as a package; package reforms tended to be more successful in revenue mobilization.
- Focus on indirect tax reforms (VAT and excise) and reduction of tax exemptions as effective revenue boosters:
  - Mauritania: raised excise on tobacco from 10 to 30 percent and extended VAT to mining.
  - Rwanda: raised excise on mobile airtime from 5 to 10 percent and removed VAT exemptions on imports for investment certificate holders.
  - The Gambia: introduced VAT to replace a sales tax in 2013 and introduced specific excise on tobacco.
  - Uganda: increased excise rates on spirits from 45 to 60 percent and on cigarettes by almost 60 percent; reduced many VAT exemptions.
- Tax administration reforms emphasized improving compliance through taxpayer segmentation and automation:
  - Uganda: created MTO and “e-tax services” for registration, filing, and payments.
  - The Gambia: implemented a detailed “Compliance Improvement Plan (CIP)” for large taxpayers.
  - Rwanda: introduced electronic filing and payment systems and electronic tax registration.
- Some countries paired indirect tax reforms with redistributive measures and fuel subsidy reform to offset regressive impacts (e.g., targeted cash transfers in Mauritania; fuel subsidy reform in The Gambia with monthly price adjustments and elimination of subsidies in July 2014).
- High-level political commitment and stakeholder buy-in were critical for reform success (e.g., Uganda’s national revenue plans; Mauritania’s social dialogues).
- Successful episodes often coincided with robust growth and IMF programs or strong TA support.

### Selected quantitative outcomes from identified cases
- Defined successful episode threshold: at least 2.5 percentage point increase in tax revenue-to-GDP ratio over 5 years (average 0.5 percentage point per year).
- Examples of sustained increases in tax-to-GDP ratios during episode periods:
  - Mauritania: increase of 4.1 percentage points of GDP during 2010–2014.
  - Rwanda: increase of 3.5 percentage points of GDP during 2010–2015.
  - The Gambia: increase of 3.5 percentage points of GDP during 2010–2015.
  - Uganda: increase of 3.1 percentage points of GDP during 2012–2017.
- Nigeria specific figures:
  - General government revenue: 7.3 percent of GDP (2021).
  - Tax revenue: 4.5 percent of GDP (2021).
  - Tax expenditures (revenue foregone): around 4 percent of GDP (N6.8 trillion) in 2021.
  - SRGI target: 15 percent of GDP by 2025.
  - Estimated tax frontier/tax capacity for Nigeria: about 8-11 percent of GDP.
  - Growth-relevant tipping point in revenue-to-GDP: 12½ to 13 percent.

*International Monetary Fund — Nigeria revenue mobilization analysis (prepared by Il Jung, FAD).*

### Box 4. Uganda Case (2013-17):   Reforms on Indirect Taxes and PIT Based on

### Box 4. Uganda Case (2013-17):   Reforms on Indirect Taxes and PIT Based on Comprehensive National Revenue Plans Supported by Strong Political Will

### Summary of outcomes
- Uganda’s tax-to-GDP ratio significantly increased by 3.1 percentage points of GDP during 2012–2017.
- Reforms combined tax policy changes (VAT, excises, PIT) with tax administration improvements (taxpayer segmentation, e-services, cargo tracking) and were implemented as part of comprehensive national revenue plans backed by political commitment.

### VAT reforms
- Focus: eliminating numerous exemptions via a new tax code to reduce many VAT exemptions.
- Specific measures implemented:
  - Eliminating VAT exemptions on sales of motor vehicles and trailers.
  - Extending VAT to computers.
  - Terminating VAT exemptions on hotels.
  - Increasing the VAT threshold.

### Excise and PIT reforms
- Excise measures:
  - Increased excise duty on locally produced spirits from 45 percent to 60 percent.
  - Increased excise duty on cigarettes by almost 60 percent in 2014.
  - Imposed excise duty on imported fresh juices.
  - Increased excise taxes on a variety of products including fuel, sugar, mobile money transfers, and international calls.
- PIT measure:
  - Increased the PIT rate (i.e., the marginal rate in its top bracket) from 30 to 40 percent, which significantly increased revenue.

### Tax administration reforms and taxpayer segmentation
- Established a high net-worth individuals (HNWI) unit as part of the Large Taxpayer Office (LTO):
  - Created a list of potential HNWI taxpayers and conducted outreach on rights and obligations.
  - After establishment of the unit, the number of taxpayers and tax collection in this segment increased substantially.
- Expanded taxpayer segmentation to the medium taxpayer segment with creation of the Medium Taxpayer Office (MTO), which accounts 20-25 percent of tax collection.
- Improved taxpayer services and enforcement:
  - Implemented “e-tax services” to facilitate registration, filing and payments.
  - Implemented the Regional Electronic Cargo Tracking System (RECTS), a web-based system to monitor transit cargo in the EAC in 2017, which improved tax collection.

### Comprehensive national revenue plans and political will
- Political commitment driven reforms:
  - Announced and initiated the “National Development Plan (NDP) 2011-2015” targeting to raise the revenue-to-GDP ratio by about 0.5 percent per year over the medium term.
  - Adopted a “Medium-Term Revenue Strategy (MTRS)” in 2017.
- The reforms are noted as being based on comprehensive national revenue plans supported by strong political will.

### Key statistics and dates
- Tax-to-GDP ratio increased by 3.1 percentage points of GDP during 2012–2017.
- Excise duty on locally produced spirits: increased from 45 percent to 60 percent.
- Cigarette excise duty: increased by almost 60 percent in 2014.
- PIT top-bracket marginal rate: increased from 30 to 40 percent.
- MTO accounts for 20-25 percent of tax collection.
- RECTS implemented in 2017.
- NDP timeframe: 2011-2015.
- NDP revenue target: raise revenue-to-GDP ratio by about 0.5 percent per year.
- MTRS adopted in 2017.

*This box is based on Akitoby et al. (2019, IMF) and IMF’s country staff report.*

### 1.      Financial inclusion rates have gradually improved but still fall short of the targets

### 1.      Financial inclusion rates have gradually improved but still fall short of the targets

### Current status and trends
- The share of the adult population with a bank account "has consistently increased" and "now accounts for more than two-thirds of financially-included individuals."
- Overall, "the share of the financially-excluded population is only slightly lower than in 2012."
- Nigeria is "falling short in access to credit and particularly non-bank financial services (insurance, and pensions)."
- Many East African countries have lower shares of adults with bank accounts but "boast substantially higher inclusion rates—beyond 80 percent—through proliferation of non-bank accounts, particularly mobile money," which "is still relatively scant in Nigeria."
- According to the World Bank Findex survey, "only about one-third of the adult population has ever made a digital payment."

### Distributional gaps and drivers of exclusion
- Inclusion is uneven:
  - Gender gap: "relatively low" but present.
  - Youth, low educational attainment, low income, and urban-rural divide are larger gaps; "only 56 percent are included in rural areas."
  - The largest gap is in educational attainment, "likely owed to financial illiteracy."
- Reasons for not having an account:
  - "Lack of resources or steady income" (frequently cited).
  - "Cost of financial services."
  - "Lack of required documentation (such as identification)."
  - "Lack of trust in financial service providers."
  - "Onerous distance to financial access points" is "a critical obstacle relatively more pronounced in Nigeria."
- Financial literacy and awareness:
  - EFInA (2021a) found "more than half of adults have limited financial literacy and capability, particularly in financial planning."
  - "About two-thirds of respondents are seen to have a low-to-medium ability to spend, and manage risks prudently."
  - "More than three-fourths are also unaware of specific financial services, including mobile money."
  - Financial illiteracy is "also associated with low educational attainment"; financial topics tend to be taught toward the end of secondary education and thus miss early dropouts.

### Policy measures, private sector, and development partner contributions
- Agent banking and network expansion:
  - CBN created a license for a payment service bank (PSB) in 2018; in 2022 it "granted PSB licenses to two large telecommunication firms functioning as mobile money operators (MMOs)."
  - SANEF (Shared Agent Network Expansion Facilities) created in 2019 to promote access points, enable account opening at any agent, propel BVN enrollment, and deepen financial literacy.
  - The goal of having 500,000 agents by 2020 "has been exceeded by far (1,375,000 as of September 2022)."
  - Northern Nigeria agent spread is "only 34 percent compared to the expectation of 60 percent."
- Private sector and development partners:
  - Banks have sponsored agents and opened virtual bank subsidiaries in individual cases.
  - IFC partnered in 2017 with Lift Above Poverty Organization to establish an agent-banking network (IFC, 2019).
  - EFInA organized a "fintech challenge fund" in 2018 to develop innovative low-income financial products (examples: low-income investment vehicle, social-media based algorithm for lending, point-of-sale credit by merchants).
- Financial literacy promotion:
  - National peer group program for youth financial inclusion and initiatives to enhance financial capabilities of consumers and civil servants.
  - SANEF uses agent network to educate communities and operates an e-learning portal (SabiMoni) promoting digital financial literacy.
  - CBN has "worked on curriculum development and deployed trainers to all localities."
  - GIZ focused on training entrepreneurs; joint literacy modules developed covering loan conditions, agriculture-specific considerations, payments, fraud protection, consumer rights, and financial decision-making.
  - Emphasis on developing inclusive products adapted to borrowers' circumstances (e.g., less rigid loan conditions) and educating lenders on clients’ value chains (e.g., seasonality in cashflows).

### Gender-focused initiatives
- Authorities and partners have launched multiple initiatives to increase women’s financial inclusion, addressing constraints of "lower income, education, and trust in financial service providers."
- Notable measures and results:
  - Inter-agency financial inclusion working group established in 2015; Denarau Accord for Women’s Financial Inclusion in 2016.
  - Framework for advancing women’s financial inclusion (2020); "community of practice" knowledge hub; "digital financial inclusion drive for account opening by women (2021)."
  - CBN development fund for micro, small and medium enterprises (launched in 2012) shows a "65 percent share of female beneficiaries."
  - World Bank "Nigeria for Women Project" (World Bank, 2018): a five-year pilot in six states seeking to establish "21,600 'women affinity groups' (WAG) benefiting more than 300,000 women."
  - Alliance for Financial Inclusion (AFI) in 2021 helped develop a targeted strategy to leverage agent networks for scaling up female agents in underserved areas of Northern Nigeria.
  - Private sector (banks, fintechs) launched tailor-made products and training for women (examples: goal saving, loans for personal development, support for female smallholder farmers).
- Evidence:
  - Recent empirical studies (de Hoop et al., 2022, Adegbite et al., 2022, and Meysonnat et al., 2022) find households with a female savings group member were more likely to have savings and to have obtained a loan during the pandemic; savings group membership associated with food security and business continuity.

### Evolution and constraints of digital financial services
- Potential benefits:
  - Digital technology "fosters the provision of financial services to rural communities and underserved segments," leveraging "high mobile phone availability in Nigeria (about 80 percent of adults)."
  - Enables lower-cost solutions (e.g., mobile transfers are less costly than traditional forms of money transfer) and fosters economic growth via new business models, investment in digital infrastructure, and e-commerce.
- Fintech sector:
  - Early 2000s: focus on B2B then B2C, including mobile money in line with CBN’s Payment System Vision 2020.
  - Today offers a full array of services, including digital consumer lending with consumer protection concerns (predatory pricing) absent stringent centralized regulation.
  - "The fintech sector has benefitted from ample investment, including by external investors, amounting to over US$1 billion since 2018."
- Usage and adoption gaps:
  - Only "about one-third of the adult population has ever made a digital payment."
  - Mobile money ownership and transaction intensity are "less common in Nigeria than in peer countries"; Nigeria trails several low-income SSA countries on a mobile money prevalence index (GSM Association, 2021).
  - "The volume of mobile transfers more than doubled year-to-date through August 2022 relative to the same period the previous year (NIBBS, 2022)."
  - Gaps in mobile money account ownership by income, education, and urban-rural status; widening gaps driven by "stagnating account ownership among women, citizens with basic education, and low-income earners."
- Barriers to mobile money uptake:
  - Primary reason: "preference for cash."
  - Other important reasons: availability of alternative money transfer methods and use of agents for cash transfers; "lack of affordability and trust" (two-thirds of Nigerians still trust banks more than fintech operators).
  - Technical and network issues are "a minor factor" relative to comparator countries.
  - Digital financial literacy is sub-par: Nigeria "lags peers, SSA and non-SSA" in overall and digital financial literacy (Kass-Hanna et al., 2022); only "one in ten of those with low capability" use digital services.
- Policy actions to spur digital finance:
  - 2021: CBN published a framework for a regulatory sandbox (CBN, 2021a) to reduce time-to-market for inclusive innovations and reportedly selected the first cohort focused on inclusive products.
  - 2021–2022: CBN issued a regulatory framework and operational guidelines for an open banking framework (CBN, 2021b and 2022) to promote API-based services, mobile money accounts, payment card use, and data exchange among banks and non-bank providers; the framework is "presently still in the consultation phase and therefore not operational yet."
  - Introduction of simple access technologies (QR codes, USSD strings, near-field communication) to onboard citizens without smartphones.
- Peer lessons:
  - Kenya and Tanzania applied a "test and learn" regulatory approach in the late 2000s, issuing non-objection letters to enable mobile money (e.g., M-PESA) while safeguarding customer funds and KYC procedures; they emphasized rapid development of agent networks and achieved ubiquitous agent distribution and higher mobile-money-driven inclusion.
  - By contrast, Nigeria took time to develop a regulatory framework for payment service banks before issuing PSB licenses in 2022.

### Key numeric facts and benchmarks (verbatim)
- "More than two-thirds" of financially-included individuals now have a bank account.
- "Only slightly lower than in 2012" — share of financially-excluded population relative to 2012.
- Rural inclusion: "only 56 percent are included in rural areas."
- Mobile phone availability: "about 80 percent of adults."
- Fintech investment: "over US$1 billion since 2018."
- Agent targets and coverage:
  - Goal: "500,000 agents by 2020" (target exceeded).
  - Actual: "1,375,000 as of September 2022."
  - Northern agent spread: "34 percent compared to the expectation of 60 percent."
- CBN development fund: "65 percent share of female beneficiaries."
- World Bank Nigeria for Women Project: "21,600 'women affinity groups' (WAG) benefiting more than 300,000 women."
- Digital payments: "only about one-third of the adult population has ever made a digital payment."
- Mobile transfers: "the volume of mobile transfers more than doubled year-to-date through August 2022 relative to the same period the previous year."
- Digital-financial-literacy usage link: "only one in ten of those with low capability using such services."

*Source: 1ngaea2023002 - 1.      Financial inclusion rates have gradually improved but still fall short of the targets (IMF PDF chapter).*

### 17.      At the sub-national level, individual states have pursed their own sets of policies. For

### 1ngaea2023002 - 17. At the sub-national level, individual states have pursed their own sets of policies. For

### Kaduna State case study: design and outcomes
- Kaduna State implemented a multi-facetted strategy to digitize payments, issue digital IDs, narrow the gender gap in financial inclusion, establish access points in all 23 local Government Area Councils, and identify and remove gaps in the telecommunications network.
- Timeline and key outcomes:
  - State decision to digitize all government-to-person payments began in 2015.
  - A feasibility study on a state-wide digital payments system was commissioned in 2020.
  - Enabled by an MoU with the National Identity Management Commission, 5.2 million of the 9 million residents of the state (about 60 percent) are now enrolled in the digital ID database.
  - The state commenced issuance of a readable multi-functional digital residency card usable for CICO transactions.
  - Close to half of the enrolled residents are now financially included.
  - An EFInA study conducted specifically for Kaduna State found the gender gap to be 13 percent.
  - A women empowerment fund created in 2019 has two-thirds being new to banking services.
  - Mapping of network blind spots resulted in about 90 percent of the identified blind spots now being on air.
  - Partnership with a large private bank to establish access points in all local government council areas was partially achieved; two-thirds did not have a bank branch previously.
- Other institutional measures:
  - Creation, in 2021, of a community-of-practice platform for discussion of financial inclusion ideas among banks, fintechs, CBN, government officials, academia, and civil society.
  - A pilot to promote sound spending decisions among female vendors for the school feeding program is being planned.
- Assessment:
  - Kaduna State’s multi-pronged approach, addressing physical access gaps and leveraging digital ID, is presented as a potential blueprint for national replication.

### eNaira (Nigeria’s CBDC): potential benefits and observed rollout outcomes
- Anticipated key benefits of eNaira:
  - Increase in financial inclusion, conditional on allowing those without bank accounts but with mobile phones to access eNaira.
  - Facilitation of remittances and expected lowering of transfer costs relative to IMTOs.
- Remittance context and costs:
  - Remittance fees through international money transfer operators (IMTOs) typically range from 1 to 5 percent of the transaction value.
  - According to World Bank’s Remittance Prices Worldwide database, the average cost of sending 200 dollars’ worth of cash from various surveyed countries to Nigeria was 10.4 percent in 2020Q2, of which 47 percent (4.8 percentage points) was attributed to the exchange rate spread.
- Post-launch developments (launch: October 2021):
  - Initial technical glitches occurred but no major risk factors (e.g., a large-scale cybersecurity event) materialized.
  - Adoption has been slow after initial uptake:
    - Retail wallet downloads reached 0.8 percent of bank accounts.
    - Merchant wallet downloads amount to about 10 percent of merchants with point-of-sale terminals.
    - Most wallets appear inactive; the number of weekly eNaira transactions since launch amounts to only 8 percent of wallets.
    - Average transaction value: N53,000 (about US$120).

### Major findings on Nigeria’s financial inclusion landscape
- Overall progress and gaps:
  - Onboarding of residents to the banking sector has progressed consistently, but overall exclusion rates and use of specific financial products remain well above official targets.
  - Inclusion gaps are significant across age, education, income, geography, and gender.
  - Contributing barriers include long distances to financial access points, limited financial literacy, and relatively low use of mobile money and digital payments.
- Digital financial services:
  - Uptake of mobile money and other digital financial services is low relative to peers, due to preference for cash operations, cost issues, and trust concerns.
  - The fintech ecosystem is active, but digital adoption lags.

### Policy options and priority measures to foster financial inclusion
- Overarching guidance:
  - Refocus policies on realistic intermediate inclusion targets, particularly for use of specific financial products.
  - Explicitly address age, education, income, and geographical inclusion gaps.
  - Emphasize operational, capacity-building, and regulatory measures: remedy physical barriers to access, improve financial literacy, promote digital and data infrastructure, devise balanced fintech frameworks, and enhance eNaira technology.
- Supply-side measures:
  - Deepen efforts to establish a “last mile” distribution network to reach remote and vulnerable populations dependent on CICO operations.
  - Further increase the number of agents in underserved areas and promote supply of basic mobile money products through agents.
  - Intensify ID onboarding and allow digital ID for client verification in opening basic (Tier 1) bank accounts.
  - Encourage digital ID registration for receiving social transfers from government, especially for those without an ID.
- Demand-side measures:
  - Make capacity building in financial literacy, including digital literacy, more attuned to underserved populations—emphasize use cases for little-used products like credit, insurance, and pensions.
  - Provide practical instruction in applying financial instruments and make operating interfaces and documentation available in major local languages (e.g., Hausa, Kanuri).
  - Run targeted education campaigns to promote mobile money as safe and cost-efficient relative to cash.
- Fintech regulation and promotion:
  - Operationalize the CBN regulatory sandbox and consider collaborating with existing industry sandboxes to reap synergies.
  - Prioritize sandbox projects aimed at financial inclusion of underserved populations.
  - Pass regulation for digital lending at the national level to establish uniform oversight, safeguard cybersecurity and consumer protection, and inhibit abusive practices reportedly occurring under state licensing.
  - Integrate digital lenders into the credit reporting system for a consolidated view of client indebtedness.
- Enhancements to CBDC to maximize inclusion impact:
  - Integrate eNaira into the existing mobile payment system by allowing MMOs to onboard their clients to the eNaira system and integrating the eNaira wallet into existing mobile money apps.
  - Consider eNaira for delivery of social assistance.
  - Enable use of eNaira for remittances to generate cost savings and provide incentives for population segments to obtain an eNaira wallet.

### Consolidated priority policy options (as presented)
- Further Increase Financial Access Points:
  - Deepen ongoing efforts to establish a “last mile” distribution network.
  - Further increase the number of agents in underserved areas and promote supply of mobile money products.
- Promote Digital Financial Services:
  - Push ahead with ID onboarding and leverage digital ID for inclusion.
  - Run media campaigns underscoring the benefits of mobile money.
- Improve Financial Literacy:
  - Provide targeted capacity building in financial literacy, including on use cases of financial products.
  - Supply operating interfaces and documentation of financial products also in local languages.
- Upgrade Framework for Fintech Operations:
  - Upon operationalization of CBN sandbox, prioritize projects benefitting financial inclusion and consider cooperation with existing industry sandbox.
  - Pass regulation for digital lending at the national level to establish uniform oversight and integrate digital lenders into the credit reporting system.
- Enhance CBDC Features and Use:
  - Integrate eNaira into the existing mobile payment system.
  - Consider eNaira for delivery of social assistance.
  - Enable use of eNaira for remittances.

### Conclusions
- Financial inclusion in Nigeria exhibits undeniable successes in onboarding but substantial remaining challenges in use of specific financial products and in closing gender, education, income, and geographic gaps.
- Digital financial services adoption is slow and requires intensified promotion, digital literacy, infrastructure upgrades, and strengthened fintech incubation and regulation, especially for digital lending.
- Nigeria’s CBDC has potential to boost financial inclusion if accompanied by a comprehensive package of supportive policies that maximize synergies with mobile money, digitize government finance (e.g., social cash transfers), and lower remittance costs.

*Source: IMF chapter content (1ngaea2023002).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1ngaea2023002.pdf_