## 1ngaea2024002

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### Executive Board assessment and priorities
- Directors welcomed bold reforms by the new administration and the authorities’ focus on revenue mobilization, governance, social safety nets, and upgrading policy frameworks.
- Key guidance:
  - Monetary/FX: keep a tight monetary policy stance to put inflation on a downward path; maintain exchange rate flexibility and build reserves; improve FX market functioning; adopt a well‑designed FX intervention framework; phase out capital flow management measures carefully and sequentially; support shift to an inflation targeting regime; strengthen central bank independence and communication; exercise caution on amendments to the CBN Act that might weaken autonomy.
  - Fiscal/social: scale up the restarted cash transfer program urgently; continue comprehensive revenue mobilization; mobilize revenue and reprioritize expenditure, including phasing out costly and regressive energy subsidies; discontinue deficit monetization.
  - Financial sector/governance: monitor financial sector risks closely; increase minimum capital for banks; unwind pandemic-era regulatory forbearance; sustain action to exit the FATF “grey list”; prioritize reforms to enhance the business environment, security, governance, human capital, agricultural productivity, and climate resilience.

### Key issues, context, and risks
- Social and growth context:
  - Over the last decade, growth roughly matched population dynamics; per‑capita income has stagnated.
  - Non-oil growth averaged 4 percent in 2021/23 while the hydrocarbon economy declined by 14 percent.
  - Poverty rate was 46 percent in 2023.
  - Estimates show 19 million Nigerians (8 percent of the population) as food insecure.
- External and near‑term risks:
  - Global financial conditions tight; market access expensive.
  - Elevated oil prices support growth, FX inflows, and government revenue.
  - Risks tilted to the downside: worsening food insecurity, adverse shocks to oil production/prices, external spillovers from regional conflicts.
- Governance/AML/CFT risk:
  - Nigeria listed by FATF in 2023 for increased monitoring (“grey listing”); lack of sustained action could affect correspondent banking and flows.

### Policy recommendations (summarized)
- Fiscal:
  - Immediate priority: roll out social transfers to alleviate food insecurity.
  - Continue domestic revenue mobilization to create space for social and development spending.
  - Meet government financing needs from the market or official support; discontinue deficit monetization.
- Monetary and exchange rate:
  - Continue calibrated, data‑dependent monetary tightening to bring down inflation and break the inflation‑depreciation loop.
  - Seize opportunities to build reserves.
  - Conduct FX interventions that are symmetric, transparent, temporary, and aimed at smoothing excess volatility; develop explicit FXI strategy with a volatility metric and auction-based interventions.
- Financial sector:
  - Strengthen bank capitalization; fully adopt the Basel 3 capital framework.
  - Phase out regulatory forbearance; tighten supervision.
  - Improve functioning of securities and FX markets; broaden access to financial services.
- Governance/structural:
  - Address AML/CFT deficiencies to exit the FATF “grey list.”
  - Prioritize anti-corruption, beneficial ownership transparency, strengthen asset declaration access, and pass the Whistleblower and Witness Protection Bills.

### Growth outlook and composition
- Recent performance:
  - Growth slowed to 2.5 percent in 2023H1 and improved to 3.2 percent in 2023H2.
  - Real GDP (at 2010 market prices): 3.3 (2022), 2.9 (2023), 3.3 (2024), 3.0 (2025).
  - Non‑oil GDP: 5.0 (2022), 3.2 (2023), 3.2 (2024), 3.1 (2025).
  - Oil and Gas GDP: -19.2 (2022), -2.2 (2023), 5.6 (2024), 0.0 (2025).
- Projections and drivers:
  - 2024 growth projected at 3.3 percent due to increased oil production and improved agriculture with better security.
  - Medium‑term growth projected at 3.3 percent with improvements in agriculture (dry season farming) and steady non‑oil sector gains.
  - Production of crude oil (million barrels per day): 1.38 (2022), 1.50 (2023), 1.65 (2024), 1.65 (2025).

### Inflation, monetary policy, and liquidity
- Inflation and composition:
  - Headline inflation reached 32 percent year‑on‑year in February 2024; food inflation 38 percent; core inflation 25 percent (February 2024).
  - Drivers: poor agricultural production, higher energy and transport costs after fuel subsidy reform, and pass through from naira depreciation.
  - With continued monetary tightening, inflation projected to gradually decline to 24 percent year‑on‑year at end‑2024.
- Monetary tightening and instruments:
  - MPC raised policy rate by 400 basis points in February 2024 and 200 basis points in March 2024—cumulative tightening of 1,325 bps since May 2022—to 24.75 percent.
  - Policy rate of 24.75 percent is positive in real terms on an ex‑ante basis.
  - CRR hiked to 45 percent in February from 32.5 percent.
  - Recommendations: adopt meeting‑by‑meeting, data‑dependent tightening; rely increasingly on the policy rate and OMOs rather than CRR; continue mopping up liquidity via OMOs and short‑term instruments; remove LDR floor of 65 percent (staff recommended).
- Transition to inflation targeting:
  - CBN developed a preliminary roadmap to guide transition to an inflation targeting framework; Fund to provide CD on institutional framework and tools.

### Exchange rate, FX market, and reserves
- Exchange rate developments:
  - Naira depreciated from 461 naira/US$ in May 2023 to 900 naira/US$ at end‑2023 after FX window unification; depreciated a further 40 percent in January/February 2024; nominal exchange rate at 1544 naira/US$ as of end‑February 2024 in one note.
  - Parallel market premium narrowed to -5 percent at end‑February 2024.
  - In March 2024 the naira strengthened after February MPC decision and CBN FX sales.
- Reserves and flows:
  - Gross international reserves (CBN definition): 36.6 (2022), 32.9 (2023), 33.3 (2024 proj.), 34.2 (2025 proj.) — US$ billions.
  - CBN‑reported 30‑day average GIR declined by $3.6 billion in 2023 to $33 billion at end‑December 2023.
  - Under IMF definition, GIR were $8 billion lower at end‑October 2023 based on authorities’ information.
  - Errors and omissions estimated at –$7½ billion at end‑2023.
  - With the US$3.3 billion Afrexim Bank loan, GIR projected to stabilize around $33 billion end‑2024 and recover to $38 billion by 2029.

### Fiscal outcomes, revenue mobilization, and public debt
- Fiscal performance:
  - Total revenues and grants (Percent of GDP): 9.0 (2022), 9.4 (2023), 12.4 (2024), 12.8 (2025).
  - Total expenditure and net lending (Percent of GDP): 14.4 (2022), 13.6 (2023), 17.1 (2024), 17.1 (2025).
  - Overall balance (Percent of GDP): -5.4 (2022), -4.2 (2023), -4.7 (2024), -4.2 (2025).
  - Monetization of the fiscal deficit continued through May 2023 to 2.6 percent of GDP and was reduced to 2.2 percent of GDP for 2023 as a whole.
- Revenue mobilization measures (2024–29 projections):
  - Projected revenue measures total "0.3–2.1" (presented as "0.32.1" in source table).
    - CIT - compliance improvement: 0.0–0.2
    - VAT - rate increase and base broadening: 0.1–1.2
    - Customs revenue - efficiency improvement: 0.0–0.3
    - FGN independent revenues/others: 0.2–0.3
  - Possible additional measures total 0.5 (percent of GDP):
    - Excise base broadening: 0.2
    - Excise rate increases: 0.3
  - Authorities’ planned 2025 reforms include raising the VAT rate while introducing input credits for services and assets, increased excises on tobacco and alcohol, and rationalization of tax incentives with a reduced CIT rate.
- Debt dynamics:
  - Public gross debt (Percent of GDP): 39.4 (2022), 46.4 (2023), 46.7 (2024), 47.0 (2025).
    - Of which FX denominated debt: 9.2 (2022), 16.3 (2023), 19.0 (2024), 20.3 (2025).
  - Staff projects FGN deficit of 4.5 percent of GDP in 2024 (budget target 3.4 percent of GDP) and consolidated government deficit of 4.7 percent of GDP in 2024 (compared to 4.8 percent in 2023 measured from financing side).
  - DSA highlights: public debt rose by 17 percent of GDP since 2019 to 46 percent in 2023; staff view risk of sovereign stress as "moderate"; baseline shows debt stabilization.

### Afrexim Bank loan (key contractual and macro implications)
- Syndicated crude oil prepayment facility arranged by Afrexim Bank: "US$3.3 billion".
  - Initial disbursement: "US$2.25 billion" (late December 2023) deposited at the CBN on behalf of the Federal Government.
  - Second tranche: "US$1.05 billion" expected in "2024Q1".
  - Transaction objective: increase dollar liquidity through forward sale of "90,000 barrels of crude per day" to an offshore SPV.
  - Loan maturity: "5 years"; interest: "6 percent per annum above the 3‑month secured overnight financing rate".
  - Embedded price balance mechanism: "90 percent" of excess cash from committed barrels (after debt service) will be released; "10 percent" used to prepay facility.
  - Macroeconomic implication: debt service repaid from sales proceeds reduces future government oil revenue; staff projections incorporate this repayment modality.

### Financial sector stability and inclusion
- Banking and NPLs:
  - Banks’ CAR improved to 13.3 percent (2023Q4).
  - Nonperforming loans (NPLs): Commercial banks 4 percent; Microfinance banks 14 percent; Development finance institutions 19 percent; Mortgage banks 20 percent.
  - Some commercial banks reported profits in 2023 due to FX valuation gains; three commercial banks placed under special supervisory regime.
  - January 2024 stress tests: a 50 percent further currency depreciation and sharp interest rate increase could cause capital shortfalls in four commercial banks; authorities asked those banks to build buffers including from FX gains.
- Market structure and inclusion:
  - Banks hold about "20 percent" of their assets in government securities.
  - Pension funds required to invest only in naira securities and hold up to "70 percent" of their portfolio in government securities.
  - Share of adult population with a bank account reached 52 percent in December 2023.
  - Recommendations: increase banks’ minimum capital, phase out forbearance, improve government securities market functioning, deepen capital markets, promote digital financial services, scale up micro‑pensions, and revise e‑naira features with AML/CFT safeguards.
- CBN development finance phase‑out:
  - CBN development finance activities totaling "5.5 trillion naira" to be transferred to DFIs (owned jointly by MOF and CBN) and private financial institutions; undercapitalized institutions should not absorb the portfolio; staff suggest limiting concessionality to clear market failures.

### Governance, AML/CFT, and rule‑of‑law priorities
- Progress and outstanding actions:
  - Legislative reforms and risk assessments advanced; priority preventive AML/CFT measures include beneficial ownership identification/verification, PEP risk mitigation, and suspicious transaction reporting.
  - Continue to exit the FATF “grey list” to avoid repercussions on cross‑border payments and borrowing costs.
- Anti‑corruption and institutions:
  - Passage of the Petroleum Industry Act, AML Act, Proceeds of Crime and Management of Assets Act, NFIU Act, amendments to Companies and Allied Matters Act; establishment of beneficial ownership register.
  - Staff recommended accelerating mineral law reforms, reforming NEITI law, removing legislative barriers to public access to asset declarations, and passing the Federal Audit Service and Whistleblower/Witness Protection Bills.
- Justice system and rule of law:
  - National Policy on Justice (2017) to be revised for 2024–2028.
  - Prioritized recommendations: strengthen National Judicial Council, review judges’ terms and conditions, digitalize registries, and improve enforcement agencies’ capacities.

### Break‑even prices and external vulnerabilities
- Staff estimates:
  - Fiscal break‑even price: $156 per barrel.
  - Current account break‑even price: $80 per barrel.
- IMF medium‑term oil price projection: $79 per barrel in 2024 declining to $67 per barrel in 2028.
- Implication: fiscal break‑even ($156) well above projected prices; current account break‑even ($80) close to 2024 projection but above 2028 projection, implying external and fiscal vulnerabilities if prices decline.

### Debt sustainability and risk assessment (DSA highlights)
- Public debt (Percent of GDP): 46.4 (2023); projected 46.7 (2024), 47.0 (2025), 46.8 (2026), 46.7 (2027), 47.5 (2028), 47.6 (2029).
- Share of foreign debt expected to rise from 34 percent (2023) to over 50 percent in 2028.
- Gross financing needs (GFN, percent of GDP): 7.2 (2023), 4.7 (2024), 6.1 (2025), 5.0 (2026), 5.9 (2027), 6.3 (2028), 6.4 (2029).
- Staff assessment of sovereign stress risk: "moderate"; debt stabilization in baseline: Yes.
- Medium‑term risk signal: Moderate overall; debt fanchart module indicates High risk due to uncertainty and terminal debt‑to‑GDP.

### Capacity development (CD) strategy FY 2023
- CD priorities aligned with policy recommendations:
  - Revenue‑based fiscal consolidation, debt management, financial stability, transition to inflation targeting, and strengthening FX market functioning.
- Delivery modalities: mix of HQ/RTAC missions (~1:2), expanded training, and resident advisor program on revenue administration.
- Main risk to CD uptake: political commitment and absorptive capacity; mitigation via alignment with authorities’ priorities and hands‑on support from AFRITAC West/resident advisor.

### Staff appraisal and overall priorities
- Support for authorities’ measures: fuel subsidy reform, FX window unification, phasing out monetary financing, and tightening monetary policy.
- Emphasis on coordinated whole‑of‑government action to achieve higher, sustainable, and inclusive growth and reduce poverty.
- Immediate priorities: rapid rollout of targeted social protection for vulnerable households; robust revenue mobilization; preserve central bank independence while transitioning to inflation targeting; strengthen financial sector resilience and governance; sustain AML/CFT action to exit the FATF grey list.

*Source: Excerpt from content unit 1ngaea2024002.*

### 2023. Following monetary policy tightening in February and March 2024 and a resumption of

### NIGERIA: STAFF REPORT FOR THE 2024 ARTICLE IV CONSULTATION

### Executive Board Assessment
- Executive Directors welcomed the bold reforms by the new administration and the authorities’ focus on revenue mobilization, governance, social safety nets, and upgrading policy frameworks.
- Directors stressed the importance of steadfast, well-sequenced, and well-communicated reforms to:
  - restore macroeconomic stability,
  - reduce poverty,
  - support social cohesion,
  - pave the way for faster, inclusive, and resilient growth.
- Monetary and FX guidance:
  - Keep a tight monetary policy stance to put inflation on a downward path.
  - Maintain exchange rate flexibility and build reserves.
  - Improve functioning of the FX market and adopt a well-designed FX intervention framework; phase out capital flow management measures carefully and sequentially when warranted.
  - Support shift to an inflation targeting regime; strengthen central bank independence and communication; exercise caution on amendments to the CBN Act that might weaken autonomy.
  - Encourage progress on outstanding recommendations from the 2021 safeguards assessment.
- Fiscal and social guidance:
  - Scale up the restarted cash transfer program urgently to mitigate acute food insecurity.
  - Continue comprehensive revenue mobilization including boosting tax enforcement and broadening the tax base.
  - Mobilize revenue and reprioritize expenditure, including phasing out costly and regressive energy subsidies to create fiscal space for development spending and social protection while maintaining debt sustainability.
  - Discontinue deficit monetization; continue progress in macroeconomic policy coordination.
- Financial sector and governance:
  - Monitor financial sector risks closely; increase minimum capital for banks and unwind pandemic-era regulatory forbearance.
  - Sustain action to exit the FATF “grey list” following AML/CFT improvements.
  - Foster financial inclusion and deepen the capital market.
  - Prioritize reforms to enhance the business environment, improve security, implement governance measures, develop human capital, boost agricultural productivity, and build climate resilience.

### Key Issues, Context, and Risks
- Context and social outcomes:
  - Over the last decade, growth roughly matched population dynamics; per-capita income has stagnated.
  - Non-oil growth averaged 4 percent in 2021/23 while the hydrocarbon economy declined by 14 percent.
  - Poverty rate was 46 percent in 2023.
  - Estimates show 19 million Nigerians (8 percent of the population) as food insecure.
  - Social tensions are elevated; incidents include looting of food warehouses and rising kidnapping for ransom.
- External environment:
  - Global financial conditions are tight; market access is expensive.
  - Global commodity prices have declined but remain high, contributing to food insecurity and inflation.
  - Elevated oil prices continue to support growth, FX inflows, and government revenue.
- Near-term risk profile:
  - Risks are tilted to the downside.
  - Food insecurity could worsen with adverse shocks to agriculture or global food prices.
  - Adverse shocks to oil production or prices would hit growth, the fiscal and external position, and exacerbate inflationary and exchange rate pressures.

### Policy Recommendations (summarized)
- Fiscal policy:
  - Immediate priority: roll out social transfers to alleviate food insecurity.
  - Continue domestic revenue mobilization to generate space for social and development spending.
  - Meet government financing needs from the market or through official support.
- Monetary and exchange rate:
  - Continue calibrated, data-dependent monetary policy tightening to bring down inflation and break the adverse inflation-depreciation loop.
  - Seize opportunities to build reserves.
  - FX interventions (FXIs) should be symmetric, transparent, and only to smooth excess volatility.
- Financial sector:
  - Strengthen bank capitalization and tighten supervision to mitigate emerging financial sector stability risks.
  - Improve functioning of domestic securities and FX markets to enhance the monetary transition mechanism and attract capital inflows.
  - Broaden access to financial services and foster financial inclusion.
- Governance and structural reforms:
  - Address remaining AML/CFT deficiencies to exit the FATF “grey list.”
  - Continue broader governance reforms to support inclusive growth.
  - Support agricultural productivity, reduce oil theft, simplify border procedures, and accelerate climate adaptation measures.

### Selected Economic and Financial Indicators (2022–25)
- Real GDP (at 2010 market prices): 3.3 (2022), 2.9 (2023), 3.3 (2024), 3.0 (2025)
- Oil and Gas GDP: -19.2 (2022), -2.2 (2023), 5.6 (2024), 0.0 (2025)
- Non-oil GDP: 5.0 (2022), 3.2 (2023), 3.2 (2024), 3.1 (2025)
- Production of crude oil (million barrels per day): 1.38 (2022), 1.50 (2023), 1.65 (2024), 1.65 (2025)
- Nominal GDP at market prices (trillions of naira): 202.4 (2022), 234.4 (2023), 296.4 (2024), 344.6 (2025)
- Nominal GDP per capita (US$): 2,202 (2022), 1,688 (2023), 1,110 (2024), 1,077 (2025)
- GDP deflator: 11.3 (2022), 12.6 (2023), 22.4 (2024), 12.9 (2025)
- Consumer price index (annual average): 18.8 (2022), 24.7 (2023), 26.3 (2024), 23.0 (2025)
- Consumer price index (end of period): 21.3 (2022), 28.9 (2023), 24.0 (2024), 19.0 (2025)
- Gross national savings (Percent of GDP): 20.2 (2022), 24.1 (2023), 25.8 (2024), 26.0 (2025)
- Investment (Percent of GDP): 20.0 (2022), 23.8 (2023), 25.2 (2024), 26.1 (2025)
- Total revenues and grants (Percent of GDP): 9.0 (2022), 9.4 (2023), 12.4 (2024), 12.8 (2025)
  - Of which: oil and gas revenue: 3.6 (2022), 2.9 (2023), 6.0 (2024), 5.8 (2025)
  - Of which: non-oil revenue: 4.8 (2022), 5.8 (2023), 6.5 (2024), 7.0 (2025)
- Total expenditure and net lending (Percent of GDP): 14.4 (2022), 13.6 (2023), 17.1 (2024), 17.1 (2025)
  - Of which: implicit fuel subsidies: 2.2 (2022), 0.8 (2023), 2.8 (2024), 1.5 (2025)
- Overall balance (Percent of GDP): -5.4 (2022), -4.2 (2023), -4.7 (2024), -4.2 (2025)
- Non-oil primary balance (Percent of GDP): -6.8 (2022), -4.5 (2023), -7.1 (2024), -6.2 (2025)
- Public gross debt (Percent of GDP): 39.4 (2022), 46.4 (2023), 46.7 (2024), 47.0 (2025)
  - Of which: FX denominated debt: 9.2 (2022), 16.3 (2023), 19.0 (2024), 20.3 (2025)
- FGN interest payments (percent of FGN revenue): 87.6 (2022), 76.8 (2023), 77.5 (2024), 74.7 (2025)
- Broad money (percent change): 13.0 (2022), 57.8 (2023), 13.5 (2024), 16.9 (2025)
- Net foreign assets (contribution): -11.5 (2022), 10.2 (2023), 4.4 (2024), 5.6 (2025)
- Credit to the private sector (y-o-y, percent): 19.9 (2022), 42.1 (2023), 16.3 (2024), 22.7 (2025)
- Current account balance (percent of GDP): 0.2 (2022), 0.3 (2023), 0.5 (2024), -0.1 (2025)
- Exports of goods and services (annual percent change): 35.9 (2022), -11.3 (2023), 0.9 (2024), -7.7 (2025)
- Imports of goods and services (annual percent change): 14.2 (2022), -4.4 (2023), -0.8 (2024), -4.8 (2025)
- Terms of trade (annual percent change): 11.3 (2022), -6.6 (2023), -0.4 (2024), -3.5 (2025)
- Price of Nigerian oil (US$ per barrel): 99.0 (2022), 82.3 (2023), 80.6 (2024), 75.6 (2025)
- External debt outstanding (US$ billions): 119.9 (2022), 113.6 (2023), 111.1 (2024), 116.8 (2025)
- Gross international reserves (US$ billions, CBN definition): 36.6 (2022), 32.9 (2023), 33.3 (2024), 34.2 (2025)
  - (Equivalent months of prospective imports of G&S): 6.0 (2022), 5.4 (2023), 5.7 (2024), 6.1 (2025)

### Recent Policy Actions and Implementation Status (selected)
- FX windows were unified in June 2023; the CBN stopped FX interventions to support the exchange rate in late 2023 and limited interventions to excess volatility episodes.
- The CBN committed to price stability and developed a preliminary roadmap to guide a transition to an inflation targeting framework.
- The new government discontinued monetary financing in H2-2023 and the CBN has stopped developmental lending, transferring portfolios to development finance institutions and private banks.
- A comprehensive revenue agenda is under preparation; a planned VAT increase was postponed given high inflation.
- Fuel subsidy reforms occurred in June 2023, but compensatory measures for the poor were not scaled up in a timely manner and implicit subsidies were reintroduced by end-2023 through capped pump prices.
- NNPCL has resumed publication of audited financial reports (most recent is the 2022 report) though monthly reports date to July 2021; some governance and procurement transparency actions have been taken with mixed completeness.
- AMCON remains open due to a large portfolio of impaired loans.

*Source: IMF staff report for the 2024 Article IV consultation with Nigeria (April 9, 2024).*

### 4.      Growth slowed to 2.9 percent in 2023. Growth slowed to 2.5 percent in 2023H1, reflecting

### 4. Growth slowed to 2.9 percent in 2023.

### Growth outlook and composition
- Growth slowed to 2.5 percent in 2023H1, reflecting weakness in agriculture, hydrocarbon, and trade.
- Growth improved to 3.2 percent in 2023H2, driven by the financial sector, mining and quarrying, and information technology.
- 2024 growth is projected at 3.3 percent, reflecting increased oil production and improved agriculture with better security.
- Medium-term growth is projected at 3.3 percent, with improvements in agriculture from the introduction of dry season farming and continued steady gains in the non-oil sector.

### Inflation and financial conditions
- Headline inflation reached 32 percent year-on-year in February 2024.
- Food inflation was 38 percent year-on-year in February 2024.
- Core inflation was 25 percent in February 2024.
- Drivers: poor agricultural production, higher energy and transportation costs following the fuel subsidy reform, and pass through from naira depreciation.
- Authorities’ policy response: enforcement of a food (grains) export ban.
- Financial conditions remained loose in 2023, contributing to naira weaknesses and accelerating inflation.
- With continued monetary tightening, inflation is projected to gradually decline to 24 percent year-on-year at end-2024, helped by base effects.

### Fiscal developments and public debt
- Fiscal deficit fell to 4.8 percent of GDP in 2023 from 6.7 percent of GDP in 2022 when measured from the financing side.
- Hydrocarbon revenue was largely driven by the depreciation effect.
- Enhanced revenue administration and naira depreciation yielded a 0.8 percent of GDP increase in non-oil revenues.
- Monetization of the fiscal deficit continued through May 2023 to the tune of 2.6 percent of GDP—before the new government took over—and was reduced by the new economic team to 2.2 percent of GDP for the year as a whole.
- Government debt rose by 7 percentage points to 46 percent of GDP at end-2023, driven by naira depreciation.
- Staff projects an FGN deficit of 4.5 percent of GDP in 2024 (relative to the 2024 budget target of 3.4 percent of GDP) and a consolidated government deficit of 4.7 percent of GDP in 2024—compared to 4.8 percent of GDP in 2023 measured from the financing side.
- Staff projects the FGN interest-to-revenue ratio declines from 88 percent in 2022 to 67 percent in 2026 before increasing again in staff’s projection.

### Revenue mobilization and expenditure policy
- Nigeria’s revenue take was 9.4 percent of GDP in 2023.
- Revenue measures included in projections for 2024–29 total 0.3–2.1 (presented as "0.32.1" in source table).
  - CIT - compliance improvement: 0.0–0.2
  - VAT - rate increase and base broadening: 0.1–1.2
  - Customs revenue - efficiency improvement: 0.0–0.3
  - FGN independent revenues/others: 0.2–0.3
- Possible additional measures total 0.5 (in percent of GDP):
  - Excise base broadening: 0.2
  - Excise rate increases: 0.3
- Authorities’ planned reforms in 2025 include raising the VAT rate—while introducing input credits for services and assets—increased excises on tobacco and alcohol, and rationalization of tax incentives accompanied by a reduction of the corporate income tax (CIT) rate.
- Implicit subsidy costs could increase to 3 percent of GDP in 2024 from 1 percent of GDP in 2023, driven by pump prices and tariffs below cost-recovery.
- The authorities have approved an enhanced social transfer mechanism targeting some 15 million households or 60 million Nigerians potentially benefiting from the scheme.

### External sector and gross international reserves (GIR)
- GIR: CBN-reported 30-day average of GIR declined by $3.6 billion in 2023 to $33 billion at end-December 2023.
- At end-December 2023, GIR covered around 5 months of imports and 81 percent of the IMF’s ARA metric (61 percent of the ARA metric with oil buffer).
- Under the IMF’s definition, GIR were $8 billion lower at end-October 2023 based on information shared by the authorities at the time.
- Errors and omissions are estimated at –$7½ billion at end-2023.
- With the $3.3 billion Afrexim Bank loan, GIR are projected to stabilize around $33 billion at end-2024 and recover to $38 billion by 2029, with portfolio inflows and FDI gradually improving.
- The current account balance is estimated to have improved marginally in 2023 relative to 2022, with oil production recovering towards year-end and import compression in the non-oil and gas sector.
- The financial account worsened due to persistent capital outflow pressures, while FDI remained subdued.

### Exchange rate and FX market developments
- Naira depreciated by around 100 percent against the U.S. dollar from 461 naira/US dollar in May 2023 to 900 naira/US dollar at end-2023 after the unification of the official foreign exchange windows in June 2023.
- The exchange rate depreciated by another 40 percent in January/February 2024.
- The parallel market premium narrowed to -5 percent at end-February 2024, following regulatory changes to improve transparency in pricing.
- In March 2024, the naira strengthened further following the February MPC decision and CBN fx sales to Bureaux de Change operators and banks.

### Financial sector stability and risks
- At end-2023, most commercial banks reported profits thanks to FX valuation gains.
- Banks’ capital adequacy ratio (CAR) improved to 13.3 percent.
- Three commercial banks that were unable to meet capital requirements have been placed under a special supervisory regime.
- Two development finance institutions are severely undercapitalized.
- The CBN revoked licenses of 132 insolvent microfinance banks, four mortgage banks, and three finance companies in the prior year.
- Nonperforming loans (NPLs):
  - Commercial banks: 4 percent
  - Microfinance banks: 14 percent
  - Development finance institutions: 19 percent
  - Mortgage banks: 20 percent
- Fund CD revealed some commercial banks have delayed NPL recognition by granting bullet loans.
- Pension fund administrators realized negative real rates of return due to high inflation and naira depreciation.

### Risks
- Near-term risks are to the downside; the RAM (Annex V) illustrates the challenging environment.
- Key downside risks identified:
  - Worsening food insecurity from continued naira depreciation and food price inflation, agricultural sector weaknesses (including deteriorating security or weather shocks), or renewed spikes in global commodity prices.
  - Reform pauses or policy reversals if food insecurity worsens or growth declines sharply.
  - Oil production shocks (e.g., onshore security deterioration) or oil price shocks affecting fiscal revenue, inflation, and the exchange rate.
  - External risks from intensification of regional conflicts disrupting trade flows and financial flows.
- Governance challenges and AML/CFT deficiencies:
  - Nigeria was listed by the FATF in 2023 for increased monitoring due to strategic AML/CFT deficiencies (“grey listing”).
  - Lack of sustained action could impact correspondent banking relationships and financial flows.
- Long-term risks:
  - Climate change adversely affecting agriculture and coastal areas.
  - Need to diversify away from the hydrocarbon sector if the global energy transition gathers momentum.
- Upside scenario:
  - Determined and well-sequenced implementation of authorities’ policy intentions could restore macroeconomic stability, boost confidence, increase investment, incentivize job creation, and improve fiscal and external balances.

### Authorities’ views and policy priorities
- Authorities aim for higher medium-term growth via reforms to increase dry-season agriculture and increase hectares under cultivation, which they expect will significantly improve output and food security.
- Authorities expect further gains in oil production once new investment projects commence.
- Authorities target a faster pace of disinflation, expecting swift improvements in monetary transmission.
- Authorities broadly agreed with the risk assessment and emphasized urgency in responding to food insecurity.
- Authorities emphasized risks to external stability from illicit flows, including through crypto asset platforms, which they are addressing.

*Source: IMF country chapter content as provided.*

### 23.      The debt-to-GDP ratio increased in 2023 but is expected to stabilize in the medium

### 23.      The debt-to-GDP ratio increased in 2023 but is expected to stabilize in the medium term

### Debt dynamics and debt management
- The debt-to-GDP ratio increased in 2023 but is expected to stabilize in the medium term (Annex VI).
- Authorities’ debt management strategy:
  - Maintained an average debt maturity of about 13 years.
  - Maintained low gross financing needs, which reduces risks.
  - Updating the Medium-Term Debt Strategy with IMF/WB CD to increase issuance of medium-term securities and Eurobonds and to maximize multilateral and bilateral support.
- Planned issuance of domestic FX securities to bring onshore dollar liquidity to the official market — possible risks:
  - Could lead to market fragmentation.
  - Could increase the cost of naira securities.
  - Could add to pressures on the naira.
- Near-term risks: amplified by global uncertainty and exchange rate depreciation.
- With monetary tightening and elevated external financing costs, interest expenditures will go up.

*Authorities’ Views (on debt):*
- Agreed on the importance of sequencing reforms in a pro-poor manner and stressed that strong governance is crucial for spending efficiency.
- Confident that revenue mobilization agenda will lead to significant gains based on achievements since taking office.
- Asserted there is sufficient scope for market financing and exploring a Eurobond issuance.
- Reiterated commitment to phasing out deficit monetization, recognized as an inflation driver.

### Reducing inflation and monetary policy framework
- Monetary policy actions and instruments:
  - Since late 2023, the CBN has mopped up liquidity through open market operations (OMOs).
  - The new Monetary Policy Committee (MPC) increased the policy rate at its first meeting in February 2024 by 400 basis points and in March by another 200 basis points—a cumulative tightening of 1,325 bps since May 2022—to 24.75 percent.
  - The policy rate of 24.75 percent is still lower than the February inflation print but is now positive in real terms on an ex-ante basis.
  - In February, the MPC widened the interest rate corridor from +100/-300 to +100/-700 (keeping the standing deposit facility rate constant); this was seen by staff as increasing interbank market volatility and running counter to overall tightening.
  - The March MPC returned the corridor to +100/-300 bps, supporting policy tightening.
- Recommendations and operational guidance:
  - MPC should adopt a meeting-by-meeting and data-dependent approach to review and calibrate the pace and extent of further monetary tightening to ensure inflation is put on a firm downward path.
  - CBN should continue to monitor and manage liquidity to contain excess reserves using short-term OMO instruments.
  - Going forward, monetary policy can rely increasingly on the policy rate and OMOs rather than CRR.
- Cash reserve requirement (CRR) and prudential measures:
  - The MPC hiked the CRR to 45 percent in February from an already high level of 32.5 percent.
  - Staff welcomed removal of the daily CCR debits which facilitates banks’ liquidity management.
  - Staff recommended removal of the loan to deposit ratio (LDR) floor of 65 percent—now inconsistent with the CRR—as it pushes banks into fixed income instruments over asset quality concerns and exerts downward pressure on yields.
- Inflation targeting roadmap:
  - CBN has developed a preliminary roadmap for moving to an inflation targeting framework.
  - Inflation targeting requires fundamental changes at the CBN and would have implications for fiscal policy (Annex VII).
  - These reforms can be implemented independently and concurrently to deliver immediate benefits, particularly bolstering central bank credibility.
  - The Fund will provide CD on developing the relevant institutional framework and tools and has supported development of an empirical model to guide forward-looking policy setting.

*Authorities’ Views (on monetary policy):*
- Agreed with the need to tighten monetary policy and make the policy rate positive in real terms while staying data dependent.
- See the CRR and OMO issuances as the main instruments to manage liquidity.

### Safeguarding external stability
- External position and exchange rate assessment:
  - External position assessed as moderately weaker than warranted by fundamentals and desired policy settings (Annex VIII).
  - Model-based estimates indicate the real effective exchange rate (REER) was overvalued by 6 percent at end-2023 (compared with 23 percent in 2022).
  - Nominal depreciation in second half of 2023 and further nominal depreciation in early 2024 reduced REER overvaluation.
  - Pressures on the naira amidst low foreign exchange market turnover point to continued shortages of dollars.
  - Large and persistent net errors and omissions suggest uncertainty over the assessment.
- Measures to rebuild confidence and strengthen FX liquidity:
  - Meeting pent-up FX demand to repatriate profits, dividends, management fees or to unwind positions would strengthen investor confidence; anecdotal indications that this demand is now being met.
  - Authorities plan to adopt the FX Global Code for wholesale FX market best practices.
  - Nigeria’s de facto exchange rate arrangement reclassified to “other managed” from “crawl-like”, effective February 1, 2023.
- Changes to FX access and capital flow measures:
  - CBN lifted exchange restrictions on 43 import items to source FX in the official market in October 2023; this list also included Eurobonds and foreign currency bonds/shares.
  - Some CFM elements remain, including payment limits on naira-denominated credit and debit cards for overseas transactions and the requirement for International Oil Companies (IOCs) to hold a portion of repatriated export proceeds in Nigeria for 90 days before transferring offshore.
  - On February 14, 2024, authorities tightened the IOC rule to allow only 50 percent of export proceeds to be repatriated immediately (previously 80 percent).
  - Updated limits on banks’ net open positions (introduced in January) are assessed to be a CFM.
  - Staff recommend phasing out CFMs in a properly timed and sequenced manner in line with the IMF’s Institutional View on Liberalization and Management of Capital Flows.
- Article VIII and FX system findings:
  - Staff concluded two of the three longstanding exchange restrictions have been eliminated:
    - CBN no longer rations or prioritizes access to FX or provides guidance to banks on allocation of FX on a priority basis.
    - The previous list of items for which FX could not be purchased to pay for imports has been abolished.
  - Remaining exchange restrictions include absolute limits on FX for travel allowances and several new findings under Article VIII, Section 2(a) arising from limitations/prohibitions on availability of FX for certain current international transactions.
  - All multiple currency practices (MCPs) that existed at the time of the 2022 Article IV consultation have been eliminated.
  - Staff recommend eliminating remaining legacy exchange restrictions on payments and transfers for current international transactions as conditions permit.
- FX market integrity and crypto platforms:
  - Rapid growth of transactions on FX trading platforms poses new challenges.
  - At end-February, authorities closed operations of Binance and other crypto-asset trading platforms used to facilitate capital flight; licenses of 4,173 BDCs that failed to comply with CBN accounting and reporting requirements were revoked.
  - Staff recommends global crypto trading platforms be registered or licensed in Nigeria and subject to same regulatory requirements as financial intermediaries, and that AML/CFT preventive controls be applied through effective AML/CFT risk-based supervision.
- FX intervention guidance:
  - CBN has recently conducted one-sided interventions to provide liquidity after a prolonged absence.
  - Staff encourage development of an explicit and transparent FXI strategy with a volatility metric and threshold to trigger interventions.
  - FXIs should be conducted through an auction mechanism at market-based rates, with ex-post announcement of intervention amounts and rates; interventions should be symmetrical and temporary and not substitute for required macroeconomic adjustment.
- Risks to CBN governance:
  - Ongoing legislative work to amend the CBN Act could weaken central bank governance and autonomy; elements disclosed in the public domain could undermine autonomy of the CBN and its MPC.
- Safeguards Assessment progress:
  - Progress on implementing recommendations from the 2021 Safeguards Assessment of the CBN has been limited.
  - CBN has published recent annual financial statements and announced plans to phase out development lending and monetary financing, but other recommendations remain outstanding.
  - Further adoption of International Financial Reporting Standards is recommended to enhance transparency.
  - Staff continue engagement with authorities on outstanding recommendations, including on the CBN Act.

*Authorities’ Views (on external stability):*
- Agreed on importance of maintaining external stability and emphasized reforms and efforts to bring in FX liquidity (including IOCs holding 50 percent of repatriated oil receipts in Nigeria for 90 days).
- See pressure on the exchange rate coming from illicit flows, including through crypto asset platforms, and not driven by fundamentals.
- Disagreed with the proposed reclassification of the de facto exchange rate, viewing it as backward looking and asserting the exchange rate is entirely market determined and should be classified as a floating regime.

### Enhancing financial stability and inclusion
- System-wide monitoring and stress testing:
  - Ministry of Finance, CBN, Securities Commission of Nigeria, Insurance Commission of Nigeria, Pension Commission of Nigeria, and Nigeria Deposit Insurance Corporation meet monthly to examine and mitigate risks across the financial system.
  - Banks’ lending portfolio accounts for only 30 percent of their assets and is concentrated on large corporate clients and public sector entities.
  - January 2024 monthly CBN stress tests showed that in the event of a sharp increase in interest rates and further currency depreciation of 50 percent, four commercial banks would face a capital shortfall. These banks have been asked to build additional capital buffers, including from FX gains.
  - Regulatory forbearance introduced during COVID-19, such as light loan classification rules, remain in place and should be phased out.
  - With developments in February similar to January stress testing parameters, the next exercise is likely to identify further weaknesses.
  - Authorities should continue monitoring banks’ ability to manage interest rate exposure in lending and investment portfolios.
- Capital and deposit insurance:
  - Staff welcomed authorities’ intentions to increase banks’ minimum capital.
  - Nigeria is working towards implementation of the CBN’s Basel 3 capital framework which will require banks to build additional capital buffers.
  - Authorities plan to increase deposit insurance coverage—currently at a maximum of N500,000 per deposit—to strengthen confidence.
  - Nigeria’s goal of reaching a US$ 1 trillion economy by 2030 requires a banking system with higher levels of capital.
- Financial depth and government securities market:
  - Financial depth and intermediation remain low with bank assets at 20 percent of GDP.
  - Improving functioning of the government securities market will enhance monetary transmission and attract foreign investors.
  - Authorities have allowed yields to rise in January and February and should ensure the monetary policy rate anchors the yield curve.
  - Liquidity in the government securities market is limited, with domestic institutional investors—banks and pension funds—typically holding to maturity.
  - Foreign participation in the domestic bond market has been marginal due to problems faced by investors repatriating capital; enhanced liquidity, competitive yields, and naira stability would make the market attractive to foreign investors and mitigate sovereign-bank nexus risks.
- Financial inclusion and innovation:
  - Financial innovation is a core pillar of authorities’ strategy to increase financial inclusion.
  - Share of adult population with a bank account reached 52 percent in December 2023.
  - Large parts of the population lack access to credit and insurance products.
  - Following the 2004 pension reform, nine million formal sector workers (13 percent of the labor force) have enrolled in the pension system.
  - CBN is promoting digital financial services and preparing a financial inclusion strategy focusing on increasing credit use and adoption of non-bank products, such as life and non-life insurance, and scaling up the micro-pension scheme for self-employed and informal sector workers.
  - Revision of the e-naira’s features should help increase its use in retail and wholesale payments (Annex IX), with appropriate AML/CFT safeguards remaining key.

*Source: IMF country report chapter text.*

### 42.      The CBN’s decision to phase out its development finance activities is welcome. These

### 1ngaea2024002 - 42.      The CBN’s decision to phase out its development finance activities is welcome.

### CBN development finance phase-out: transfer and risks
- CBN development finance activities totaling "5.5 trillion naira" will be transferred to development finance institutions (owned jointly by MOF and CBN) and private financial institutions.
- Orderly transfer of the portfolio is key to avoiding interruption of credit flows to agriculture and small and medium enterprises.
- Undercapitalized financial institutions should not be eligible to absorb CBN’s portfolio.
- CBN’s lending programs have been traditionally done on concessional terms; authorities must decide whether new lending will continue to be concessional and how costs would be accommodated.
- Staff suggestion: limit concessionality to clear areas of market failure.

### Governance, AML/CFT, and institutional reforms
- Progress made on AML/CFT framework through legislative reform, a money laundering and terrorism financing risk assessment, awareness building, and increased investigation and prosecution.
- Continued action needed to exit FATF “grey list” and avoid negative repercussions on cross-border payments and costs of borrowing.
- Priority preventive measures to strengthen AML/CFT: identification/verification of beneficial ownership information; measures to mitigate risks related to politically exposed persons; reporting of suspicious transactions.
- Need for effective AML/CFT risk-based supervision and sustained increase in investigations and prosecutions; these can also help improve tax compliance and anti-corruption efforts.
- Progress on legislation: Petroleum Industry Act, AML Act, Proceeds of Crime and Management of Assets Act, NFIU Act, amendments to Companies and Allied Matters Act, establishment of beneficial ownership register.
- Recommended accelerations and outstanding reforms:
  - Accelerate reforms to mineral mining laws to modernize the industry and introduce stronger governance controls.
  - Reform the 2007 NEITI law to include stronger enforcement powers and monitoring compliance; ensure transparency measures align with international best practice.
  - Remove legislative barriers to public access to asset declarations of public officers.
  - Advance passage of the Federal Audit Service and the Whistleblower and Witness Protection Bills.
  - Enshrine independence of the Economics and Financial Crimes Commission.
- Structural constraints: underfunding of agencies due to constrained fiscal space; judicial independence weakened by terms of appointment and dismissal, poor compensation, and unmanageable caseloads.
- Authorities’ views: recognize importance of strong governance, highlight legislative agenda and progress on AML/CFT, and point to automation and digitalization initiatives to reduce corruption opportunities.

### Revitalizing growth and climate actions
- Positive developments:
  - Dangote refinery has commenced operations; at full capacity it is expected to meet Nigeria’s domestic fuel demand and strengthen the current account.
  - A second refinery in Port Harcourt is restarting production.
  - Nigeria’s startup ecosystem is one of Africa’s largest funding destinations; two of four African fintech companies on CNBC’s top-200 global list are Nigerian.
- Nigeria’s Agenda 2050 goal: raise growth to "7 percent", reduce poverty and inequality, become an upper-middle income country by 2050; emphasizes enhancing human capital.
- Policy areas to support higher, sustainable growth (as listed by staff):
  - Improved investment environment in the hydrocarbon sector through greater transparency, continued security improvements, and clarity on the fiscal regime for gas and deep-water projects.
  - Increasing investments in irrigation, reducing high transport losses, and improving supply of inputs to the largely rain-fed agricultural sector.
  - Facilitating investment and activity in the non-oil, non-agriculture economy, including in the dynamic services sector, to promote diversification.
  - Increased investments to support higher electricity production and distribution.
  - Increased financial inclusion and access to credit.
  - Improving trading infrastructure and reducing the excessive regulatory burden.
- Climate actions:
  - National Adaptation Plan to build resilience against rising temperatures and more volatile precipitation.
  - Climate Change Act (approved two years ago) promotes a wholistic approach to mainstreaming climate actions in economic development.
  - Implementation of mitigation policies to reduce emissions to achieve net zero by "2060" would spur growth in green technology, increase employment opportunities and boost economic growth.
- Authorities’ views: raising growth is central; ongoing efforts in oil and agriculture, enhancing financial inclusion, streamlining import/export processes, and advancing climate resilience.

### Box: Afrexim Bank loan (key contractual and macro implications)
- Syndicated crude oil prepayment facility arranged by African Export-Import Bank (Afrexim Bank): "US$3.3 billion".
- Initial disbursement: "US$2.25 billion" concluded in late December 2023 with funds deposited at the CBN on behalf of the Federal Government.
- Second tranche: "US$1.05 billion" expected to be raised and disbursed in "2024Q1".
- Transaction objective: bring in dollar liquidity and increase foreign exchange reserves through forward sale of "90,000 barrels of crude per day" to an offshore SPV.
- Loan maturity: "5 years" with a quarterly debt service for principal and interest repayments.
- Interest rate: "6 percent per annum above the 3-month secured overnight financing rate".
- Distribution and repayment mechanics:
  - Distribution of net proceeds (after deducting debt service) from sale of royalty and tax crude oil barrels accruing to NUPRC and FIRS are paid into the Federation Account as prescribed by the Petroleum Industry Act 2021.
  - Embedded price balance mechanism: "90 percent" of all excess cash from sale of committed barrels (after debt service) will be released; "10 percent" will be used to prepay the facility, helping to shorten the final maturity.
- Macroeconomic implication: debt service repaid from sales proceeds of crude oil accruing to the Federation reduces government’s future oil revenue; staff’s macroeconomic projections incorporate this contractual repayment modality.

### Financial sector stability and policy recommendations
- Banks hold about "20 percent" of their assets in government securities.
- Pension funds are required to only invest in naira securities and hold up to "70 percent" of their portfolio in government securities.
- Staff assessment: Nigeria’s financial system remains vulnerable to credit and market risks but can become an engine of growth.
- Key recommendations:
  - Increase banks' minimum capital and fully adopt the Basel 3 capital framework.
  - Phase out regulatory forbearance and maintain tight supervision to mitigate emerging risks.
  - Well-capitalized and regulated financial system needed to facilitate sustained growth acceleration.
  - Increase the use of credit, adoption of insurance products, and rollout of the pension scheme for self-employed and informal sector workers.
- FX and reserves:
  - Staff assesses the external position as moderately weaker than warranted; tightening macroeconomic policies and building reserves urgently needed.
  - Steps welcomed: removal of foreign exchange market distortions, multiple currency practices, and two exchange restrictions.
  - Recommendation: eliminate remaining legacy exchange restrictions and increase dollar liquidity to stabilize the exchange rate.
  - Caution: domestic issuance of FX denominated government securities is likely to lead to market fragmentation and weaken the transmission mechanism.
  - Recommendation: CBN should develop an FXI framework to smooth excess naira volatility given the shallow FX market.
- Monetary policy and social protection:
  - Monetary policy has mopped up excess liquidity and raised the policy rate to help lower inflation and improve confidence in the naira; CBN should stand ready to tighten further as needed.
  - Liquidity management should mainly rely on short-term instruments; use of the CRR can be redirected towards financial stability objectives.
  - Staff supports adoption of an inflation targeting regime; any amendments to the CBN Act should preserve central bank independence.
  - Rolling out improved social protection (developed with World Bank support) is a key near-term priority to mitigate acute food insecurity; swift implementation is crucial.
  - As inflation subsides and support for the vulnerable is ramped up, staff recommends removing costly and untargeted fuel and electricity subsidies while retaining a lifeline tariff.

### Staff appraisal: overall priorities
- Support for authorities’ determination to address distortions and bottlenecks; recognize the government’s initial reform of the fuel subsidy and unification of foreign exchange windows.
- Emphasis on coordinated, whole-of-government action to achieve higher, sustainable, and inclusive growth and reduce poverty.
- Revenue mobilization reforms are essential to create fiscal space; authorities committed to meeting financing needs from the market or official support and discontinuing deficit monetization.
- Strengthening resources for anti-corruption bodies and agencies should follow as fiscal space becomes available.
- Sustain improvements in security, boost agricultural productivity, improve the business environment including increased access to credit, and focus on building climate resilience.

*Source: Excerpt from content unit 1ngaea2024002.*

### 58.      Staff recommend the standard 12-month cycle for the next Article IV Consultations.

### 58.      Staff recommend the standard 12-month cycle for the next Article IV Consultations.

### Real sector and growth outlook
- Real GDP (at 2010 market prices):
  - 2020: -1.8
  - 2021: 3.6
  - 2022: 3.3
  - 2023: 2.9 (Est.)
  - 2024: 3.3 (Proj.)
  - 2025: 3.0 (Proj.)
  - 2026: 3.0 (Proj.)
  - 2027: 3.3 (Proj.)
  - 2028: 3.3 (Proj.)
  - 2029: 3.3 (Proj.)
- Oil and Gas GDP:
  - 2023: -2.2 (Est.)
  - 2024: 5.6 (Proj.)
  - 2025–2029: 0.0 (Proj. each year)
- Non-oil GDP:
  - 2023: 3.2 (Est.)
  - 2024: 3.2 (Proj.)
  - 2025: 3.1 (Proj.)
  - 2026–2029: 3.1–3.5 (Proj.; 2027–2029 at 3.5)
- Production of crude oil (million barrels per day):
  - 2020: 1.77
  - 2021: 1.51
  - 2022: 1.38
  - 2023: 1.50 (Est.)
  - 2024: 1.65 (Proj.)
  - 2025–2029: 1.65 (Proj. each year)
- Nominal GDP at market prices (trillions of naira):
  - 2020: 154.3
  - 2021: 176.1
  - 2022: 202.4
  - 2023: 234.4 (Est.)
  - 2024: 296.4 (Proj.)
  - 2025: 344.6 (Proj.)
  - 2026: 395.1 (Proj.)
  - 2027: 449.1 (Proj.)
  - 2028: 507.0 (Proj.)
  - 2029: 571.7 (Proj.)
- Nominal GDP per capita (US$):
  - 2020: 2,083
  - 2021: 2,088
  - 2022: 2,202
  - 2023: 1,688 (Est.)
  - 2024: 1,110 (Proj.)
  - 2025: 1,077 (Proj.)
  - 2026: 1,066 (Proj.)
  - 2027: 1,085 (Proj.)
  - 2028: 1,196 (Proj.)
  - 2029: 1,317 (Proj.)
- GDP deflator (annual):
  - 2020: 7.8
  - 2021: 10.1
  - 2022: 11.3
  - 2023: 12.6 (Est.)
  - 2024: 2.4 (Proj.)
  - 2025: 12.9 (Proj.)
  - 2026: 11.3 (Proj.)
  - 2027: 10.0 (Proj.)
  - 2028: 9.2 (Proj.)
  - 2029: 9.1 (Proj.)

### Inflation and prices
- Consumer price index (annual average):
  - 2020: 13.2
  - 2021: 17.0
  - 2022: 18.8
  - 2023: 24.7 (Est.)
  - 2024–2029: 26.3; 23.0; 18.0; 14.0; 14.0; 14.0 (Proj. 2024–2029 respectively)
- Consumer price index (end of period):
  - 2020: 15.8
  - 2021: 15.6
  - 2022: 21.3
  - 2023: 28.9 (Est.)
  - 2024–2029: 24.0; 19.0; 17.0; 14.0; 14.0; 14.0 (Proj. 2024–2029 respectively)
- Price of Nigerian oil (US$ per barrel):
  - 2020: 43.3
  - 2021: 70.8
  - 2022: 99.0
  - 2023: 82.3 (Est.)
  - 2024: 80.6 (Proj.)
  - 2025: 75.6 (Proj.)
  - 2026: 72.6 (Proj.)
  - 2027: 70.8 (Proj.)
  - 2028: 69.9 (Proj.)
  - 2029: 69.7 (Proj.)

### External sector and reserves
- Current account balance (percent of GDP):
  - 2020: -3.7
  - 2021: -0.7
  - 2022: 0.2
  - 2023: 0.3 (Est.)
  - 2024: 0.5 (Proj.)
  - 2025: -0.1 (Proj.)
  - 2026: -0.1 (Proj.)
  - 2027: -0.3 (Proj.)
  - 2028: -0.4 (Proj.)
  - 2029: -0.8 (Proj.)
- Current account balance (US$ billions):
  - 2020: -16.0
  - 2021: -3.3
  - 2022: 1.0
  - 2023: 1.2 (Est.)
  - 2024: 1.4 (Proj.)
  - 2025: -0.2 (Proj.)
  - 2026: -0.4 (Proj.)
  - 2027: -0.8 (Proj.)
  - 2028: -1.2 (Proj.)
  - 2029: -2.6 (Proj.)
- Exports of goods and services (US$ billions):
  - 2020: 35.9
  - 2021: 46.9
  - 2022: 64.2
  - 2023: 55.4 (Est.)
  - 2024: 55.6 (Proj.)
  - 2025: 50.6 (Proj.)
  - 2026: 48.3 (Proj.)
  - 2027: 47.8 (Proj.)
  - 2028: 46.3 (Proj.)
  - 2029: 45.1 (Proj.)
- Imports of goods and services (US$ billions):
  - 2020: -52.3
  - 2021: -51.4
  - 2022: -58.2
  - 2023: -57.8 (Est.)
  - 2024: -57.1 (Proj.)
  - 2025: -53.6 (Proj.)
  - 2026: -51.9 (Proj.)
  - 2027: -53.1 (Proj.)
  - 2028: -52.8 (Proj.)
  - 2029: -53.7 (Proj.)
- Gross international reserves (US$ billions, CBN definition), end-of-period:
  - 2020: 36.5
  - 2021: 40.2
  - 2022: 36.6
  - 2023: 32.9 (Est.)
  - 2024: 33.3 (Proj.)
  - 2025: 34.2 (Proj.)
  - 2026: 35.2 (Proj.)
  - 2027: 36.6 (Proj.)
  - 2028: 37.9 (Proj.)
  - 2029: 38.2 (Proj.)
- Memorandum note:
  - "Based on the IMF definition, the gross international reserves were US$8 billion lower in October 2023."

### Fiscal sector and government operations
- Consolidated government: total revenues and grants (percent of GDP):
  - 2020: 6.5
  - 2021: 7.1
  - 2022: 9.0
  - 2023: 9.4 (Est.)
  - 2024: 12.4 (Proj.)
  - 2025: 12.8 (Proj.)
  - 2026: 13.3 (Proj.)
  - 2027: 13.2 (Proj.)
  - 2028: 12.7 (Proj.)
  - 2029: 13.1 (Proj.)
- Consolidated government: total expenditure and net lending (percent of GDP):
  - 2020: 12.1
  - 2021: 12.6
  - 2022: 14.4
  - 2023: 13.6 (Est.)
  - 2024: 17.1 (Proj.)
  - 2025: 17.1 (Proj.)
  - 2026: 17.0 (Proj.)
  - 2027: 17.1 (Proj.)
  - 2028: 17.1 (Proj.)
  - 2029: 17.5 (Proj.)
- Overall balance (percent of GDP), consolidated government:
  - 2020: -5.6
  - 2021: -5.5
  - 2022: -5.4
  - 2023: -4.2 (Est.)
  - 2024: -4.7 (Proj.)
  - 2025: -4.2 (Proj.)
  - 2026: -3.7 (Proj.)
  - 2027: -3.9 (Proj.)
  - 2028: -4.4 (Proj.)
  - 2029: -4.4 (Proj.)
- Non-oil primary balance (percent of GDP):
  - 2020: -5.9
  - 2021: -5.4
  - 2022: -6.8
  - 2023: -4.5 (Est.)
  - 2024: -7.1 (Proj.)
  - 2025: -6.2 (Proj.)
  - 2026: -5.3 (Proj.)
  - 2027: -5.1 (Proj.)
  - 2028: -4.9 (Proj.)
  - 2029: -4.8 (Proj.)
- Public gross debt (percent of GDP):
  - 2020: 34.5
  - 2021: 35.7
  - 2022: 39.4
  - 2023: 46.4 (Est.)
  - 2024: 46.4 (Proj.)
  - 2025: 46.7 (Proj.)
  - 2026: 47.0 (Proj.)
  - 2027: 46.8 (Proj.)
  - 2028: 46.7 (Proj.)
  - 2029: 47.5 (Proj.)
- Of which: FX denominated debt (percent of GDP):
  - 2020: 8.2
  - 2021: 9.0
  - 2022: 9.2
  - 2023: 16.3 (Est.)
  - 2024: 19.0 (Proj.)
  - 2025: 20.3 (Proj.)
  - 2026: 21.4 (Proj.)
  - 2027: 22.6 (Proj.)
  - 2028: 24.1 (Proj.)
  - 2029: 24.5 (Proj.)
- FGN interest payments (percent of FGN revenue):
  - 2020: 77.3
  - 2021: 87.0
  - 2022: 87.6
  - 2023: 76.8 (Est.)
  - 2024: 77.5 (Proj.)
  - 2025: 74.7 (Proj.)
  - 2026: 67.4 (Proj.)
  - 2027: 69.4 (Proj.)
  - 2028: 74.0 (Proj.)
  - 2029: 72.8 (Proj.)
- Federal government (billions of naira) — selected items (2023 Est., 2024 Budget/Proj):
  - Total revenue and Grants:
    - 2020: 4,221
    - 2021: 4,853
    - 2022: 6,454
    - 2023 Est.: 8,626
    - 2024 Budget: 9,981
  - Total expenditure:
    - 2020: 11,496
    - 2021: 13,970
    - 2022: 14,986
    - 2023 Est.: 22,404
    - 2024 Budget: 19,301
  - Overall balance (billions of naira):
    - 2020: -7,275
    - 2021: -9,117
    - 2022: -8,532
    - 2023 Est.: -13,778
    - 2024 Budget: -9,320
  - FGN Total Debt (memorandum):
    - 2020: 47,859
    - 2021: 57,364
    - 2022: 72,160
    - 2023 Est.: ... (document shows later projections: 100,686; 129,812; 152,543; 174,599; 198,766; 228,876; 258,801 in subsequent years)

### Monetary, liquidity and banking sector
- Broad money (y-o-y, percent; end of period):
  - 2020: 11.6
  - 2021: 14.2
  - 2022: 13.0
  - 2023: 57.8 (Est.)
  - 2024: 13.5 (Proj.)
  - 2025: 16.9 (Proj.)
  - 2026: 15.4 (Proj.)
  - 2027: 18.1 (Proj.)
  - 2028: 18.1 (Proj.)
  - 2029: 19.7 (Proj.)
- Reserve money (billions of naira; CBN analytical balance sheet, end-period):
  - 2020: 13,108
  - 2021: 13,295
  - 2022: 16,032
  - 2023: 24,736 (Est.)
  - 2024: 24,755 (Proj.)
  - 2025: 25,150 (Proj.)
  - 2026: 25,489 (Proj.)
  - 2027: 27,775 (Proj.)
  - 2028: 29,114 (Proj.)
  - 2029: 30,623 (Proj.)
- CBN net foreign assets (billions of naira):
  - 2020: 10,177
  - 2021: 8,990
  - 2022: 5,373
  - 2023: 9,255 (Est.)
  - 2024: 12,724 (Proj.)
  - 2025: 17,789 (Proj.)
  - 2026: 21,354 (Proj.)
  - 2027: 25,540 (Proj.)
  - 2028: 29,069 (Proj.)
  - 2029: 32,447 (Proj.)
- Monetary Survey (broad money level, billions of naira):
  - 2020: 38,905
  - 2021: 44,444
  - 2022: 50,208
  - 2023: 79,252 (Est.)
  - 2024: 89,942 (Proj.)
  - 2025: 105,116 (Proj.)
  - 2026: 121,352 (Proj.)
  - 2027: 143,359 (Proj.)
  - 2028: 169,343 (Proj.)
  - 2029: 202,677 (Proj.)
- Financial soundness indicators (selected, percent; latest quarterly observations):
  - Regulatory Capital to Risk-Weighted Assets: 2023Q4 = 13.3
  - Non-Performing Loans to Total Gross Loans: 2023Q4 = 4.0
  - Return on Assets: 2023Q4 = 2.0
  - Return on Equity: 2023Q4 = 28.5
  - Liquid Assets to Total Assets (Liquid Asset Ratio): 2023Q4 = 14.4
  - Liquid Assets to Short Term Liabilities: 2023Q4 = 23.4

### Balance of payments and financial flows
- Financial Account (net, US$ billions):
  - 2020: -2.6
  - 2021: 6.7
  - 2022: 3.4
  - 2023: 2.6 (Est.)
  - 2024: -1.0 (Proj.)
  - 2025: 1.1 (Proj.)
  - 2026: 1.4 (Proj.)
  - 2027: 2.2 (Proj.)
  - 2028: 2.5 (Proj.)
  - 2029: 2.9 (Proj.)
- Errors and omissions:
  - 2022: -7.6 (Act.)
  - 2023: -7.5 (Est.)
  - 2024–2029: 0.0 (Proj. each year)
- Overall balance (US$ billions):
  - 2020: -5.0
  - 2021: 3.6
  - 2022: -3.2
  - 2023: -3.7 (Est.)
  - 2024: 0.4 (Proj.)
  - 2025: 0.9 (Proj.)
  - 2026: 1.1 (Proj.)
  - 2027: 1.4 (Proj.)
  - 2028: 1.3 (Proj.)
  - 2029: 0.3 (Proj.)

### Fund credit, obligations and indicators
- Existing and prospective Fund credit (SDR million):
  - Stock of existing and prospective Fund credit:
    - 2023 Est.: 1,840.96
    - 2024 Proj.: 13.60
    - 2025–2029 Proj.: 0.0 each year
  - Obligations:
    - 2023 Est.: 736.79
    - 2024 Proj.: 991.26
    - 2025 Proj.: 657.53
    - 2026–2029 Proj.: 2.3 (each year)
  - Principal (repayments/repurchases):
    - 2023 Est.: 613.69
    - 2024 Proj.: 920.46
    - 2025 Proj.: 613.60
    - 2026–2029 Proj.: 0.0 (each year)
  - Charges and interest:
    - 2023 Est.: 123.17
    - 2024 Proj.: 70.74
    - 2025 Proj.: 43.83
    - 2026–2029 Proj.: 2.3 (each year)
- Ratios (Fund obligations as percent of key aggregates):
  - Fund obligations (repurchases and charges) in percent of Quota:
    - 2023: 30.04
    - 2024: 40.42
    - 2025: 6.8
    - 2026–2029: 1.3 (each year)
  - Fund credit outstanding in percent of Quota:
    - 2023: 75.02
    - 2024: 25.00
    - 2025–2029: 0.00 (each year)

### Key analytical observations and staff findings (drawn from charts and tables)
- Real GDP expanded by 3.2 percent y/y in Q4-2023, driven by higher oil production as security improved.
- Industry growth rebounded in 2023, driven by manufacturing and construction.
- Oil production declined for 2023 as a whole but picked up in H2-2023, reaching 1.65 mb/d in January 2024.
- The PMI moved back into expansionary territory in the last quarter of 2023.
- The current account strengthened in Q3-2023 due to lower imports and higher oil exports, though foreign reserves declined from US$36.6 at end-2022 to US$33.0bn at end-2023 (CBN definition).
- The financial account turned negative in Q3-2023 due to limited inflows with FDI almost entirely drying up and large portfolio investment outflows.
- Non-oil revenues are estimated to have increased in 2023, benefiting from exchange rate depreciation and improved tax administration.
- Expenditures increased in 2023 due to higher interest and capital spending.
- Fuel subsidy reforms contained fiscal costs in 2023, but with pump prices capped below cost, subsidies could peak in 2024.
- Policy rate and other key interest rates remain lower than inflation, leaving them negative in real terms.
- Dollarization of deposits and credit increased in 2023 reflecting sharp depreciation of the Naira and deteriorating market confidence.
- Labor market: higher labor participation for men than women; majority of employed women are self-employed; underemployment and informal employment disproportionately affect women.

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

### Annex I. Capacity Development Strategy FY 2023

### Annex I. Capacity Development Strategy FY 2023

### Context
- President Tinubu assumed office in May 2023 and campaigned on a platform of reforms which his government has started to implement.
- The macroeconomic environment remains challenging with high inflation, steep currency depreciation following the exchange rate reforms and continued FX supply shortages.
- Need for short-term policies to stabilize the economy accompanied by a comprehensive macroeconomic reform program to boost fiscal revenues, improve growth prospects, and reduce poverty.
- The financial sector appears stable but faces rising risks associated with high inflation and depreciation which reduces real incomes and borrowers’ ability to service their debt.
- The CD strategy is intended to be consistent with Nigeria’s needs and support key macroeconomic objectives. The Fund will be nimble in prioritizing and sequencing CD to support the authorities’ reform momentum.

### CD Strategy and Priorities
- IMF surveillance calls for a comprehensive package of policy reforms. CD will be closely aligned with staff’s policy recommendations and the authorities’ macroeconomic objectives.
- Core CD focus areas:
  - Revenue-based fiscal consolidation.
  - Improving debt management.
  - Sustaining financial stability.
  - Transitioning to inflation targeting as the monetary policy framework.
  - Strengthening the functioning of the foreign exchange market.
- Political commitment and absorptive capacity have in the past limited CD uptake; recent measures (elimination of fuel subsidies and multiple FX windows) signal greater traction.
- Staff will assess the government’s appetite for further reforms and tailor CD provision accordingly.
- Proposed CD will support reforms in revenue mobilization, public financial management, inflation targeting, banking supervision, financial stability, debt management, and macroeconomic statistics.
- Note: Nigeria’s interest in Fund TA on CBDC has not yet led to a concrete request.
- Delivery modalities:
  - Current mix of HQ/RTAC missions (about 1:2) is appropriate.
  - Training activities should gradually expand—both standalone and as part of TA missions.
  - Maintain the ongoing resident advisor program on revenue administration given its criticality for Nigeria.

### Key Overall CD Priorities Going Forward
- Tax Policy and Revenue Administration
  - Traction: TA advice on tax policy were partially incorporated in past Finance Bills. New excises on telecom service, plastics, and fuel vehicles included in the 2023 Finance Bill were recently suspended. Progress in tax automation system (TaxPro Max) with Fund advice. Strategic Revenue and Growth Initiative and future Finance Bills expected to benefit from recent TA.
  - Going forward: Revenue mobilization through comprehensive tax policy reforms, including review/rationalization of tax expenditures, a comprehensive review of tax system, and the introduction of new excises. Authorities emphasize strengthening tax and customs administrations through automation as near-term approach. Expect increased traction from the long term resident advisor.
- Monetary and Exchange Rate Policies
  - Traction: Significant improvement with the recent unification of the various FX windows. Authorities have started implementing Fund recommendations to tighten monetary policy and strengthen the policy framework.
  - Going forward: Focus on transitioning to an inflation targeting framework and enhancing FX market functioning. Specific support areas:
    - Amend the central bank law to make price stability the primary objective of monetary policy.
    - Revamp the monetary policy toolkit to use a range of instruments to manage liquidity and achieve monetary policy goals.
    - Adopt a more market determined exchange rate regime and establish a liquid and transparent FX market.
    - Develop a communication strategy articulating monetary policy objectives, nominal anchor, and targets.
    - Provide training on monetary and exchange rate analysis.
- Public Financial Management
  - Traction: A Treasury Single Account has been put in place, and good progress on the Medium-Term Debt Strategy, cash management, and budget planning. Little uptake so far on TA advice on proper monitoring and classification of Government-Owned Enterprises.
  - Going forward: TA to focus more on debt management, PPP fiscal risks management, and fiscal reporting.
- Enhance Financial Stability
  - Traction: Good uptake of policy advice on bank regulation and supervision, including towards Pillar II implementation, risk-based supervision, and regulation of emerging risks in Cyber/Fintech.
  - Going forward: Undertake a Financial Sector Stability Review (FSSR) and formulate and execute an action plan to mitigate vulnerabilities from depreciation, high inflation, and low economic growth, while continuing to strengthen financial sector regulation and supervision.
- Strengthen Macroeconomic and Financial Statistics Compilation
  - Traction: Progress on GDP, CPI, and BOP statistics but little interest on GFS statistics from the budget office.
  - Going forward: Maintain support for compilation of national accounts and price measurement with emphasis on training modules.

### Main Risks and Mitigation
- Historical constraints on CD uptake: political commitment and absorptive capacity have been key risk factors; new government expected to strengthen political commitment.
- Mitigation approach:
  - Engage authorities to align CD with their reform priorities and calibrate delivery.
  - Rely on hands-on and regular support from AFRITAC West and the resident advisor to address limited absorptive capacity.

### Annex II — 2013 Financial Sector Assessment Follow-Up (selected recommendations and status)
- Cross sector:
  - Further enhance supervisory oversight over banks with international presence. — Implemented
  - Strengthen macroprudential oversight and crisis preparedness by enhancing the functioning of the FSRCC. — Partially implemented
  - Strengthen capacity of supervisors and establish clarity regarding regulatory authority; improve availability and quality of data for macroprudential analysis. — Implemented
- Banking sector:
  - Review and update the BOFIA. — Implemented
  - Implement HRD plan for a new category of BSD specialists with a separate career path. — Implemented
  - Withdraw the CBN circular restricting recapitalization of foreign subsidiaries by Nigerian parent banks. — Implemented
- Insurance:
  - Upgrade solvency regime, valuation, and reserve requirements. — Implemented
  - Put high priority on enforcement of mandatory insurance. — Implemented
- Pensions:
  - Establish a database of employers required to comply with the Pension Reform Act, 2004. — Implemented
  - Develop Nigerian specific mortality tables for pricing annuities and programmed withdrawals. — Partially implemented
- Securities market:
  - Expeditiously nominate new Board members of the SEC. — Implemented
  - Ensure broker-dealers are subject to higher risk-based capital and prudential requirements and sufficient entity-level supervision. — Implemented
- Safety nets and crisis management:
  - Unwind crisis response measures and revert to conventional financial safety nets incl. DIS. — Implemented
  - Establish end–2017 as the sunset for AMCON and disallow further acquisition of assets; use surplus funds to buy back bonds. — Partially implemented
- Development finance and other areas: mixed progress (Partially implemented / Not implemented across recommendations such as divestment of CBN’s interest in DFIs, review of Development Finance Schemes, central unit for contingent fiscal commitments, and mobile payment regulatory framework).

### Annex III — Financial Conditions, Inflation, Exchange Rate: Key Findings and Quantified Effects
- Financial conditions index (FCI) constructed by principal component analysis using: broad money, private credit, the 3-month real t-bill rate, the stock market index, and the sovereign spread (weights derived from the principal component analysis).
  - Result: Financial conditions have been loose since end-2020 and driven by almost all components except sovereign spread for part of the period.
- Econometric model of inflation (y-o-y CPI changes regressed on parallel and official exchange rates, international oil prices, and FCI):
  - Model accounts for 60 percent of the variation in the inflation rate (Adj.R2 = 0.61).
  - A two standard deviation increase in the financial condition index (tightening) is associated with a 3-percentage points reduction in inflation in the same quarter, after controlling for exchange rates.
  - Decomposition shows increased contribution from loose financial conditions and exchange rates to current inflationary pressures.
- Local projection framework (impact of FCI on quarterly inflation over next 4 quarters):
  - A two-standard deviation tightening of the FCI is associated with nearly a 6 percentage points decline in the inflation rate after two quarters.
- Exchange rate effects:
  - Simple exchange rate model (controls: lagged parallel exchange rate, oil and gas export revenues proxy, and June 2023 FX reform dummy) finds loosening financial conditions significantly increase Naira/$ depreciation even after controlling for the June reform.
  - Decomposition of Naira/$ volatility shows sizable contributions from loose financial conditions, FX shortages (FX turnover size), and parallel market rate volatility (Adj.R2 = 0.88 for excess volatility model).
  - Local projection results: a two-standard-deviation tightening of financial conditions is associated with a 10-percentage points appreciation in the Naira/$ rate on impact.
- Combined policy action:
  - The FX premium (difference between parallel and official Naira/$ rate) responds to a combined policy action of (i) tighter financial conditions and (ii) a 10 percentage points increase in oil & gas export growth (model allows for non-linearities and controls for June 2023 policy regime shift).

### Annex IV — Risk Assessment Matrix: High-level vulnerabilities and policy responses
- External risks (likelihood / time horizon / impact / policy responses):
  - Intensification of regional conflicts — High / Short Term / High
    - Responses: Prioritize fiscal intervention to relieve food insecurity; tighten monetary policy further; allow exchange rate flexibility.
  - Commodity price volatility — High / Short Term / High
    - Responses: Prioritize fiscal intervention to relieve food insecurity; build fiscal buffers; tighten monetary policy; allow exchange rate flexibility; seize oil/gas windfall gains to build reserves.
  - Sovereign debt distress — Medium / Short to Medium Term / Medium
    - Responses: Tighten monetary policy; allow exchange rate flexibility while deploying Integrated Policy Framework tools; identify alternative external financing sources if Eurobond market closed.
  - Extreme climate events — Medium / Medium to Long Term / High
    - Responses: Fast-track social protection; strengthen fiscal buffers and ex-ante risk financing instruments; integrate climate resilience into public investment management.
- Nigeria-specific risks:
  - Worsening food insecurity — High / Short to Medium Term / High
    - Responses: Increased support to the vulnerable; fast-track social protection; strengthen agricultural sector (inputs, fertilizer, roads).
  - Continued high inflation leading to exchange rate–inflation spiral — High / Short to Medium Term / High
    - Responses: Decisively tighten monetary policy further (including mopping up excess liquidity); maintain exchange rate flexibility; ensure social safety net is first line of defense while tightening fiscal policy to support monetary policy.
  - Renewed weakness in oil production due to theft/security deterioration — Medium / Medium Term / High
    - Responses: Strengthen security and investment environment in oil and gas sector; coordinated military and developmental efforts.
  - Slow progress on corruption, tax evasion, and AML/CFT deficiencies — Medium / Short Term / Medium
    - Responses: Strengthen AML/CFT regime and implement past Fund recommendations and 2021 Mutual Evaluation Report recommendations; step up anti-corruption and governance efforts (asset declaration, manage PEP risks, beneficial ownership transparency, corporate governance).

*Source: Annex I. Capacity Development Strategy FY 2023.*

### Annex V. Sovereign Risk and Debt Sustainability Assessment

### Annex V. Sovereign Risk and Debt Sustainability Assessment

### DSA Summary Assessment: key findings
- Public debt rose by 17 percent of GDP since 2019 to 46 percent in 2023.
- Main drivers of the 2019–2023 debt increase: fiscal deficits and, in 2023, exchange rate depreciation.
- Staff view: the authorities' planned fiscal consolidation efforts, reflected in the baseline, are necessary to limit debt accumulation in the medium term and put debt on a declining path.
- Staff assessment of Nigeria's risk of sovereign stress: "moderate", reflecting:
  - long maturity structure of debt, which mitigates short-term risks;
  - moderate gross financing needs;
  - flagged sources of risk: global uncertainty, exchange rate depreciation, and still weak revenue mobilization.
- Warning: "Absent policies to safeguard macroeconomic stability and improvements in the fiscal position, risks would be increasing."
- Debt stabilization in the baseline: Yes.

*Source: Fund staff.*

### Debt coverage and disclosures (coverage, inclusions, recording)
- Debt coverage in the DSA: includes general government debt (central government, state and local government debt), as well as CBN overdraft.
- Subsectors captured in the baseline (Inclusion = Yes/No):
  - Budgetary central government: Yes
  - Extra budgetary funds (EBFs): Yes
  - Social security funds (SSFs): Yes
  - State governments: Yes
  - Local governments: Yes
  - Public nonfinancial corporations: No
  - Central bank: No
  - Other public financial corporations: No
- Basis of recording / Valuation of debt stock: Not applicable (as indicated in the disclosures).
- Reporting on intra-government debt holdings: GG: expected; State govt. / Local govt. / CG / CPS indicated in reporting matrix.
- Note: Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. Insurance, Pension, and Standardized Guarantee Schemes referenced as IPSGSs.

### Public debt structure and projections (selected indicators and projections)
- Share of foreign debt in total debt: expected to increase from 34 percent in 2023 to over 50 percent in 2028, leading to a higher share of marketable and long-term debt.
- Residual maturity: 6. years (as shown in public debt by maturity).
- Projection chart highlights (Percent of GDP unless indicated otherwise):
  - Public debt (actual and projection): 2023 = 46.4; 2024 = 46.7; 2025 = 47.0; 2026 = 46.8; 2027 = 46.7; 2028 = 47.5; 2029 = 47.6; 2030 = 46.6; 2031 = 45.4; 2032 = 45.2; 2033 = 45.0.
  - Change in public debt (percent of GDP): 2023 = 7.0; 2024 = 0.3; 2025 = 0.3; 2026 = -0.2; 2027 = 0.0; 2028 = 0.8; 2029 = 0.1; 2030 = -1.0; 2031 = -1.2; 2032 = -0.2; 2033 = -0.2.
  - Contribution of identified flows (percent of GDP): 2023 = 2.3; 2024 = -3.7; 2025 = -1.3; 2026 = -1.2; 2027 = -0.6; 2028 = 0.2; 2029 = 0.4; 2030 = 0.5; 2031 = 0.3; 2032 = -0.2; 2033 = -1.0.
  - Primary deficit (percent of GDP): 2023 = 0.9; 2024 = 1.2; 2025 = 0.4; 2026 = -0.2; 2027 = -0.1; 2028 = 0.2; 2029 = 0.1; 2030 = 0.1; 2031 = 0.3; 2032 = 0.2; 2033 = -0.1.
  - Noninterest revenues (percent of GDP): 2023 = 9.4; 2024 = 12.4; 2025 = 12.8; 2026 = 13.3; 2027 = 13.2; 2028 = 12.7; 2029 = 13.1; 2030 = 13.2; 2031 = 13.1; 2032 = 13.1; 2033 = 14.0.
  - Noninterest expenditures (percent of GDP): 2023 = 10.3; 2024 = 13.6; 2025 = 13.2; 2026 = 13.0; 2027 = 13.1; 2028 = 13.0; 2029 = 13.2; 2030 = 13.2; 2031 = 13.3; 2032 = 13.4; 2033 = 13.9.
  - Automatic debt dynamics contribution (percent of GDP): 2023 = 1.4; 2024 = -4.8; 2025 = -1.7; 2026 = -0.9; 2027 = -0.4; 2028 = 0.0; 2029 = 0.3; 2030 = 0.5; 2031 = 0.0; 2032 = -0.4; 2033 = -0.9.
  - Real interest rate and relative inflation (percent): 2023 = -0.6; 2024 = -3.3; 2025 = -0.4; 2026 = 0.4; 2027 = 1.1; 2028 = 1.5; 2029 = 1.8; 2030 = 2.0; 2031 = 1.5; 2032 = 1.0; 2033 = 0.5.
  - Real interest rate (percent): 2023 = -1.3; 2024 = -5.9; 2025 = -2.0; 2026 = -1.1; 2027 = -0.4; 2028 = 0.1; 2029 = 0.4; 2030 = 0.5; 2031 = 0.1; 2032 = -0.2; 2033 = -0.6.
  - Relative inflation (percent): 2023 = 0.7; 2024 = 2.5; 2025 = 1.6; 2026 = 1.6; 2027 = 1.4; 2028 = 1.4; 2029 = 1.5; 2030 = 1.5; 2031 = 1.4; 2032 = 1.2; 2033 = 1.1.
  - Real GDP growth rate (percent): 2024–2028 shown as 3.3 (memo: Real GDP growth (percent): 2023 = 2.9; 2024 = 3.3; 2025 = 3.0; 2026 = 3.0; 2027 = 3.3; 2028 = 3.3; 2029 = 3.3; 2030 = 3.3; 2031 = 3.3; 2032 = 3.3; 2033 = 3.3).
  - Gross financing needs (GFN, percent of GDP): 2023 = 7.2; 2024 = 4.7; 2025 = 6.1; 2026 = 5.0; 2027 = 5.9; 2028 = 6.3; 2029 = 6.4; 2030 = 6.3; 2031 = 5.3; 2032 = 5.3; 2033 = 4.9.
  - Of which: debt service (percent of GDP): 2023 = 6.3; 2024 = 3.6; 2025 = 5.7; 2026 = 5.2; 2027 = 6.0; 2028 = 6.1; 2029 = 6.3; 2030 = 6.2; 2031 = 5.1; 2032 = 5.0; 2033 = 5.0.
  - GFN local currency (percent of GDP): 2023 = 4.8; 2024 = 1.8; 2025 = 3.6; 2026 = 3.8; 2027 = 4.0; 2028 = 4.0; 2029 = 4.3; 2030 = 4.3; 2031 = 3.4; 2032 = 3.4; 2033 = 3.5.
  - GFN foreign currency (percent of GDP): 2023 = 1.5; 2024 = 1.8; 2025 = 2.1; 2026 = 1.4; 2027 = 2.1; 2028 = 2.0; 2029 = 2.0; 2030 = 1.9; 2031 = 1.7; 2032 = 1.6; 2033 = 1.4.
- Memo indicators:
  - Inflation (GDP deflator; percent): 2023 = 12.6; 2024 = 22.4; 2025 = 12.9; 2026 = 11.3; 2027 = 10.0; 2028 = 9.2; 2029 = 9.1; 2030 = 9.1; 2031 = 9.1; 2032 = 9.1; 2033 = 9.1.
  - Nominal GDP growth (percent): 2023 = 15.8; 2024 = 26.4; 2025 = 16.3; 2026 = 14.7; 2027 = 13.7; 2028 = 12.9; 2029 = 12.8; 2030 = 12.9; 2031 = 13.0; 2032 = 12.5; 2033 = 12.8.
  - Effective interest rate (percent): 2023 = 8.9; 2024 = 6.4; 2025 = 7.9; 2026 = 8.6; 2027 = 9.1; 2028 = 9.5; 2029 = 10.0; 2030 = 10.3; 2031 = 9.5; 2032 = 8.6; 2033 = 7.6.
- Extended projection summary: Favorable growth dynamics and declining interest rates are expected to limit debt accumulation in the medium-term. Over the long-term, debt is projected to decline marginally with an improving primary deficit and the exchange rate stabilizing as the inflation differential with the rest of the world is reduced. Residuals reflect revaluations in the stock/flow of foreign currency debt.

### Medium-term risk assessment: modules, indices, and signals
- Staff assesses medium-term risks as moderate in line with the mechanical signal.
- Debt fanchart (Debt fanchart module):
  - Fanchart width (percent of GDP): 74.8 (Contribution 1.1)
  - Probability of debt non-stabilization (percent): 64.9 (Contribution 0.5)
  - Terminal debt-to-GDP x institutions index: 40.9 (Contribution 0.9)
  - Debt fanchart index (DFI): 2.5
  - Debt fanchart module risk signal: High
- Gross financing needs (GFN) module:
  - Average baseline GFN (percent of GDP): 5.7 (Contribution 2.0)
  - Initial banks' claims on the general government (pct bank assets): 11.2 (Contribution 3.6)
  - Change in banks' claims in stress (pct bank assets): 9.6 (Contribution 3.2)
  - GFN financeability index (GFI): 8.8
  - GFN module risk signal: Moderate
- Medium-term index:
  - Value components: Debt fanchart index = 2.5; GFN financeability index = 8.8.
  - Final medium-term risk signal: Moderate (overall).
  - Final assessment probability metrics: Prob. of missed crisis, 2024-2029, if stress not predicted: 27.3 pct. Prob. of false alarms, 2024-2029, if stress predicted: 17.0 pct.
- Interpretation: The debt fanchart module indicates a high level of risk owing to uncertainty around the baseline (width of chart) and high terminal debt-to-GDP (interacted with institutions index) relative to peers and high historical volatility. The GFN module indicates moderate liquidity risks. The overall medium-term risk index points to moderate risk.

### Realism of baseline assumptions and stress testing
- Realism analyses suggest optimism in the projections; the 3-year adjustment in the primary balance falls in the 75th percentile.
- Fiscal projections are based on strong revenue mobilization outturn in 2023, with commensurate expected yields in the medium term in line with announced policies.
- The expected debt reduction in the projection period is within the normal range; the 2023 debt run-up was driven by exchange rate depreciation.
- Realism diagnostics referenced include:
  - Forecast track record (t+1, t+3, t+5) vs comparator group (Emerging Markets, Non-Commodity Exporter, Surveillance).
  - Public Debt to GDP, Primary deficit, r - g comparisons and percentile bands (optimistic/pessimistic).
  - Laubach (2009) rule noted for implied spread: "The Laubach (2009) rule is a linear rule assuming bond spreads increase by about 4 bps in response to a 1 ppt increase in the projected debt-to-GDP ratio."
- Stress tests: triggered stress tests visualized; financing provided by banks under baseline and stress scenarios shown in indices.

### Long-term risk assessment: amortization, climate adaptation, and natural resources scenarios
- Long-term assessment highlights high risks from large amortization.
- Table of long-term variables (selected):
  - Real GDP growth: Baseline = 3.3%; 2029 = 3.3%; 2033 to 2037 average = 3.3%.
  - Primary Balance-to-GDP ratio: Baseline = -0.1%; 2029 = -0.1%; 2033 to 2037 average = 0.0%.
  - Real depreciation: Baseline = -0.1%; 2029 = -8.4%; 2033 to 2037 average = 0.0%.
  - Inflation (GDP deflator): 9.1% across listed horizons.
- Long-run projections include scenarios: Baseline with t+5; Baseline with t+5 and DSPB; Historical 10-year average; Custom.
- Key message: GFN and debt stabilize in the "Baseline with t+5 and DSPB" scenario and "Custom" scenario, which broadly corresponds to staff's assessment of the authorities' intended policy stance. Alternative scenarios underscore the importance of staying the course on the authorities' reform and policy intentions.
- Climate change (adaptation) standardized estimate:
  - Using standardized estimates for adaptation costs, the debt trajectory in the "standardized scenario" follows closely the baseline.
  - A customized climate adaptation scenario that incorporates growth effects from adaptation spending could improve the debt trajectory relative to the baseline.
- Natural resources scenario:
  - Without new discoveries, exhaustion of hydrocarbon production would lead to lower revenues and GDP, potentially yielding increasing GFN and debt paths.
  - Simulations highlight the importance of the authorities' growth agenda to diversify the economy over the medium- to long-term while hydrocarbon exports and revenues remain important for balance of payments and government revenues for the foreseeable future.

*Source: Fund staff.*

### 3. The legal and operating environment of monetary policy in Nigeria requires strengthening. At

### 3. The legal and operating environment of monetary policy in Nigeria requires strengthening. At

### Legal and governance shortcomings
- The CBN lacks full operational independence and primacy of price stability.
- The lack of hierarchy among CBN objectives as well as government representatives on the Board of Directors and possibly the MPC as stated in the 2007 CBN Act hampers the effectiveness of monetary policy operation and makes accountability to the public ambiguous.
- The 2007 CBN Act needs to be modernized as recommended by the 2021 Safeguards Assessment, to enshrine the primacy of price stability, strengthen central bank autonomy and governance arrangements.
- There is heavy reliance on monetary financing of the fiscal deficit.
- Fund diagnostic engagement: "The Fund has started to provide CD with a diagnostics mission in February."

### Transition to inflation targeting (IT) and required reforms
- Nigeria’s transition path to IT requires full commitment from all stakeholders and far‑reaching reforms in different areas.
- IT is no silver bullet but relies on concrete policy actions to restore internal and external balance.
- These reforms can be implemented independently and concurrently to deliver immediate benefits, particularly, bolstering central bank credibility - a resource that requires time to develop.
- Legal amendments recommended to allow independent oversight over the CBN, including by establishing a majority non-executive Board.

### Safeguarding financial autonomy and legal limits
- Financial autonomy should be safeguarded through, among others:
  - clear and enforced statutory limits on, no securitization of, credit to government;
  - enhancement of profit retention rules;
  - prohibition of quasi-fiscal operations;
  - strict compliance by the CBN with laws and regulations.

### Data, models, and capacity building
- The CBN should improve the quality of data and statistics, while enhancing its analytical tools and models.
- Fund CD is already supporting the development of an FPAS model for Nigeria.
- This will require acquiring new skills by key CBN staff.

### Operational framework and market development
- Recommended operational changes:
  - Shift to short-term interest rates as the operational target and the policy rate;
  - Use open market operations and standing facilities as the instruments of monetary policy.
- Further development of the domestic bond market is needed to enhance the transmission of the main monetary policy instruments.
- Strengthening transparency and communication.

### Preconditions and evidence from IT adopters
- Evidence from IT adopters suggests that the following are important for successful adoption of IT:
  - stable macroeconomic fundamentals;
  - effective policy instruments;
  - healthy financial markets and institutions for policy transmission;
  - de-dollarization.

### External sector: overall assessment and near-term policy responses
- Overall Assessment: Nigeria’s external position in 2023 is assessed as moderately weaker than the level implied by fundamentals and desirable policy settings based on end-2023 estimates.
- Key vulnerabilities noted: limited FX liquidity, decline in FX reserves, net capital outflows, elevated borrowing costs in international capital markets.
- Near-term potential policy responses:
  - continued macroeconomic— in particular monetary policy— tightening;
  - settling the remaining CBN’s overdue FX obligations to support investor confidence and improve FX liquidity;
  - continued exchange rate flexibility and strengthening FX market functioning to facilitate price discovery and reduce volatility;
  - structural reforms to increase and diversify exports, improve the business climate to support FDI, develop FX market infrastructure, and deepen capital markets for long-term external sustainability.

### External position and balances (key statistics and trajectories)
- NIIP is estimated to have deteriorated to 22 percent of GDP in 2023.
- Current account balance (CAB) is estimated at around 0.3 percent of GDP in 2023.
- Goods trade balance: from a surplus of 1.3 percent of GDP in 2022 to a deficit of 0.6 percent of GDP in 2023.
- Net secondary income is estimated to have slightly improved to 6 percent of GDP in 2023 (from 5 percent of GDP in 2022).
- Financial account developments:
  - Financial account slightly deteriorated in USD terms in 2023 by around USD 800 million.
  - Estimated net inflows remained close to 0.7 percent of GDP in 2023.
  - Net FDI estimated at about 0.01 percent of GDP in 2023.
  - Net portfolio inflows estimated at around 1.3 percent of GDP in 2023.
  - Net other investments estimated to record an outflow of 0.6 percent of GDP at end-2023.
- Net errors and omissions (NEO) preliminary estimate for 2023: close to $7.5 billion (2 percent of GDP).

### Exchange rate and reserve dynamics (key statistics)
- REER depreciated by 11 percent in 2023; NEER depreciated by 22 percent in 2023.
- Official naira-US dollar exchange rate (annual average): from around 424 naira/US dollar in 2022 to 650 naira/US dollar in 2023.
- Official naira-US dollar exchange rate (end-of-period): from 449 naira/US dollar at end-2022 to 900 naira/US dollar at end-2023.
- As of end‑February 2024:
  - nominal exchange rate depreciated to 1544 naira/US dollar;
  - REER and NEER depreciated by 37 and 40 percent, respectively, relative to December 2023.
- Gross international reserves (GIR) and adequacy:
  - CBN-reported 30-day average of gross international reserves declined to $33 billion at end-2023, equivalent to 61 percent of the ARA metric including the oil buffer.
  - Gross reserves declined from $40.2 billion at end-2021 to $32.9 billion at end-2023.
  - Based on information provided by the authorities for end-October 2023, securities of around $8 billion are considered pledged collateral and not readily available to the CBN, reducing GIR under the IMF’s definition to $25 billion at end-October 2023.
  - Gross reserves are projected to slightly increase in 2024 and 2025 but remain below the ARA metric mainly due to net negative financial flows.
  - In the medium-term, FDI, portfolio flows and borrowing from official and multilateral creditors are projected to gradually raise reserves to around $38.2 billion in 2029.

### eNaira: rollout, uptake, and challenges
- eNaira launch: October 2021 (CBN first in Africa to launch a digital currency).
- Objectives: reduce cash use, encourage digital payments, enhance welfare program targeting, provide secure cost-effective means for remittances and cross-border payments.
- Adoption metrics:
  - 13 million eNaira wallets (with most remaining inactive).
  - 854,512 executed transactions since launch, mostly consumer-to-merchant, with a total value of N29.3 billion.
- Key challenges:
  - data privacy concerns: under current design CBN can see all transactions;
  - access and financial inclusion: eNaira currently accessible only to those with bank accounts; tiered wallet issuance limits balance and transactions, limiting access for those needing financial inclusion most;
  - pilot underway to enable people without a bank account to use eNaira via smartphones.
- CBN has recently acquired technological infrastructure to manage the eNaira and accelerate rollout.

### Anti-corruption and rule of law: findings and potential gains
- Addressing corruption and governance vulnerabilities could yield higher per capita GDP growth, higher revenues, and improved efficiency in public investments.
- Staff analytical estimate: reducing corruption in Nigeria to the level observed in benchmark countries (for example, Malaysia, Mongolia, Morocco, or South Africa) could boost growth by 0.5 to 1.5 percentage points annually.
- Other study: lowering Nigeria’s level of corruption to that of South Africa could increase the amount of infrastructure obtained from each publicly invested dollar by 12 percent.
- Governance indicators and trends:
  - Rule of law percentile rank: from 11.27 in 2012 to 19.81 in 2022.
  - Anti-corruption percentile rank: from 10.90 in 2012 to 14.62 in 2022.
  - Accountability percentile rank: slippage from 35.47 in 2017 to 32.37 in 2022.
- Reform impediments noted: limited fiscal resources, federal nature of legal systems and institutions, and vested interests seeking to maintain the status quo.

*Source: IMF staff analysis and chapter text as provided in the content unit.*

### 4.      The authorities have developed a number of strategies, policies, plans, and initiatives

### 4.      The authorities have developed a number of strategies, policies, plans, and initiatives

### Overview of reforms and initiatives
- National Anti-Corruption Strategy (NACS) and its Action Plan (2017–2021); the initial National Strategy 2017–2021 was recently extended to 2022–2026 by the Federal Executive Council in November 2022.
- NACS Action Plan focuses on prevention, public engagement, ethical re-orientation, enforcement and sanctions, and recovery and management of proceeds of crime.
- National Ethics and Integrity Policy adopted to enhance transparency and accountability in the public and private sectors and improve public understanding of corruption prevention mechanisms.
- Open Government National Action Plan (2022–2025) aims to consolidate anti-corruption measures, improve service delivery, and enhance public participation based on transparency, accountability, participation, and technology and innovation; includes commitments under the Extractive Industries Transparency Initiative.

### Institutional arrangements and coordination
- Numerous agencies established to promote good governance, conduct assessments, develop policy, make recommendations, detect, investigate, and prosecute corruption and related acts.
- Legislative overlap exists between agencies’ jurisdictions, though agencies maintain they can operate in coordination without conflict.
- Federal structure complicates implementation since initiatives often must be replicated and implemented at state level.
- Examples of agencies include Technical Unit for Governance and Anti-Corruption Reform (TUGAR), Nigeria Extractive Industry Transparency Initiative (NEITI), Independent Corrupt Practices and Other Related Offences Commission (ICPC), Code of Conduct Bureau, Bureau of Public Procurement, and the Office of the Auditor General.

### Commitments under the Rapid Finance Instrument and audit reporting
- Nigeria’s commitments to the Fund under the Rapid Finance Instrument issued in 2021 remain partially fulfilled.
- Office of the Auditor General (OAG) carried out an Interim Report on the Special Audit of the Federal Government of Nigeria’s Response to The Covid-19 Pandemic for The Period March 1 to June 30, 2020.
- Authorities published a second interim report in November 2023 and expect to publish a final report in April 2024.
- Beneficial ownership information of companies successful in bidding on covid related contracts has not yet been published.
- Requirement implemented for Nigerian companies to file beneficial ownership information under the Companies and Allied Matters Act; this information should become publicly available on the website of the Corporate Affairs Commission.

### Transparency and access to information (Section B)
- Passage of the Freedom of Information Act and establishment of the beneficial ownership registry are recent improvements.
- Outstanding vulnerabilities and reforms needed include:
  - (i) poor enforcement of public disclosure measures for extractive sector contracts, licenses, permits, payment to government, and revenue streams (per the Open Government Action Plan);
  - (ii) poor enforcement of obligations of ministries departments and agencies (MDAs) to publish their financial information as required by law;
  - (iii) failure to pass laws necessary to facilitate public access to Public Officers’ Declarations (per the NACS as well as legislative requirements under the Petroleum Industry Act (PIA));
  - (v) failure to pass the Witness Protection Act per the NACS.
- Protection of persons with critical information on corruption is important to enhance transparency and aid detection.

### Preventive measures and monitoring agencies (Section C)
- Agencies diagnosing governance issues and engaging the public include TUGAR, ICPC, OAG, and NEITI.
- TUGAR issues periodic reports and assessments (examples include TUGAR’s Scoping Survey and Gap Analysis of the Ethics Framework in Nigeria).
- ICPC issues system studies on corruption-prone processes, helped introduce the national ethics and integrity policy, conducts meetings with traditional leaders, and carries out public outreach.
- OAG audits federal institutions and periodic assessments of statutory corporations, commissions, authorities, agencies, and bodies established by an Act of the National Assembly.
- Monitoring agencies often lack significant powers to enforce breaches; reports are tendered to the Executive or Legislature and criminal matters are reported to law enforcement.

### Identified vulnerabilities in key governance agencies (Box 1 highlights)
- Auditor General’s audits note growing non-compliance by MDAs; Annual Report on the Federal Government of Nigeria Consolidated Financial Statements for the year ending on December 31, 2019 highlighted significant irregularities, including 34.72 percent of entities not being responsive to requests for information from the AG’s office.
- Continuing failure by MDAs to submit annual statutory reports for certification by the AG’s office, including statements of financial performance, statements of financial position, and cash flow statements.
- Since the return to democracy in 1999, no report of the AG has been concluded on by the Public Accounts Committee and presented to the Plenary for adoption with recommendations forwarded to relevant executives for action.
- Underfunding of the OAG and outdated legislation create significant difficulties in carrying out its mandate.
- ICPC system studies indicate systemic dysfunction, inadvertent breaches of regulations, ignorance of proper procedures and willful violation of rules; ICPC lacks means of enforcement and relies on “naming and shaming.”
- NEITI’s 2021 Oil and Gas Industry Report indicates significant crude oil losses due to theft sabotage and measurement errors, unremitted or under remitted federation revenues, and failure to provide beneficial owners for some covered companies; a majority of entities in the industry have complex ownership structures that shield beneficial ownership information.
- NEITI’s governing law requires amendment to align with the 2021 PIA and to strengthen enforcement capabilities.
- Overall compliance of MDAs when assessed is described as not positive; monitoring agencies display competence but lack accountability and enforcement mechanisms to press MDAs toward compliance.
- Proposed Federal Audit Service Bill would modernize legislative framework and provide additional sanctions for non-compliance; OAG must enhance relations with the Public Accounts Committee to ensure punitive sanctions are applied against culpable officers.
- NEITI is proposing amendments to its governing statute to reflect the PIA and to establish enforcement powers.

### Anti-money laundering, gatekeepers, and civil service vulnerabilities
- AML/CFT framework supports preventative anti-corruption aspects: enhanced due diligence for higher-risk customers such as politically exposed persons, use of financial intelligence, financial investigative techniques, asset recovery, and international co-operation.
- Nigeria was placed on the Financial Action Task Force’s (FATF) grey list in February 2023.
- Recent assumption by the legal profession of AML/CFT responsibilities is identified as a significant positive development.
- UNODC 2019 study: 63 percent of Nigerians had contact with the public service in the 12 months leading up to the survey; of these 30 percent paid a bribe.
- Later work highlights gender imbalance between those who will both pay and accept bribes.
- Federal Civil Service Strategy and Implementation Plan 2021–2025 acknowledges lack of political will and political interference in recruitment and employment mobility as foremost threats but does not address corruption vulnerability frontally.
- Measures noted include induction training for political appointees, improved performance management, and use of the Integrated Personnel and Payroll Information System to root out “ghost workers.”
- TUGAR, together with the Bureau on Public Service Reforms, will carry out additional work focused on strengthening governance measures for the civil service.

### Enforcement against corruption offenders (Section D and Box 2)
- Detection and enforcement fall to multiple law enforcement agencies facing challenges: lack of governance and independence, resources and staffing shortages, red tape, and inter-agency coordination problems.
- Key agencies and roles:
  - Nigerian Police Force: prevention and detection of all crime, apprehension of offenders, preservation of law and order; police do not specialize in corruption cases.
  - Code of Conduct Bureau (CCB): receives and analyzes assets declarations by public officers, receives complaints about non-compliance with the CCB Act, and refers complaints to the Code of Conduct Tribunal where necessary.
  - Economic and Financial Crimes Commission (EFCC): lead agency for investigation and prosecution of economic and financial crimes, including money laundering.
  - ICPC: empowered to investigate and in appropriate cases prosecute offences under the enabling legislation of the ICPC or any other law prohibiting corruption.
  - Nigeria Financial Intelligence Unit: national center for receiving, requesting, and analyzing suspicious transaction reports and other information related to ML and associated predicate offences (including corruption).
- CCB verification covers approximately 720,000 federal public servants in mid-2022; CCB is severely underfunded with a flat budget over the past three years and faces bottlenecks due to only one Code of Conduct Tribunal.
- EFCC prosecutes major cases of grand corruption, fraud, and major financial crime but lacks clear statutory independence (leadership may be dismissed directly by the Executive), faces resource pressure from fraud and cyber-crime caseloads, and advocates for early passage of the Whistle Blower law and establishment of specialized courts for financial crimes in all states.
- ICPC capacity deficits: 2019–2022 results show 4,705 investigations concluded, 309 court cases filed, 85 convictions secured, and 387 cases still in the courts; prosecutions tend to be mid to lower-level corruption cases.
- ICPC strategic threats include jurisdictional challenges, Attorney General powers to discontinue prosecutions, inadequate funding, inter-agency rivalry, and potential political interference involving politically exposed persons.
- Legislature considering amendments to ICPC to adjust governance measures at board level and to increase fines for false petitions or complaints; authorities should ensure penalties are effective, dissuasive and proportionate in keeping with international best practices.

### Asset recovery (Section E)
- Recovery of proceeds of crime is a key aspect of NACS and its Action Plan, with focus on proceeds of corruption held abroad.
- Proceeds of Crime (Recovery and Management) Act 2022 (POC Act) promulgated; introduces a decentralized model of asset recovery with multiple agencies exercising asset recovery powers, powerful provisions for non-conviction-based forfeiture (and associated reversal of burdens of proof), and accelerated cash seizure proceedings.
- International experience indicates building an effective asset recovery regime takes years as cases are investigated, litigated, and judicial precedents established; capacity, resources, training, and leadership are essential.
- POC Act does not contain measures relating to cross border asset recovery; mutual legal assistance framework will not operate for non-criminal confiscation cases.
- Recommendations include reviewing mutual legal assistance framework to enable expeditious assistance for non-criminal confiscation cases and adopting operational measures (e.g., nominating liaison officers, establishing memoranda of understandings) to maintain informal cooperation with foreign authorities where proceeds of crime are known to be transferred.

### Rule of law issues – contract enforcement and property rights (Section F)
- Strength of contract enforcement and protection of property rights depends on prompt access to justice through the courts and other legally accepted means, development of necessary laws to protect property rights, and effective operation of governmental bodies (such as registries) supporting these protections.

*International Monetary Fund — Nigeria country report excerpt*

### 20.      The Government developed a National Policy on Justice (2017) which assessed the

### 20.      The Government developed a National Policy on Justice (2017) which assessed the vulnerabilities of the justice system and recommended multiple actions.

### Justice policy and planned revision
- The National Policy on Justice (2017) assessed vulnerabilities of the justice system and recommended actions focused on:
  - expanding access to and ensuring speedy dispensation of justice,
  - protection of human rights,
  - encouraging alternative dispute resolution,
  - ensuring the independence of the judiciary,
  - promoting openness, transparency and accountability of the judicial profession,
  - improving capacity, infrastructure and facilities.
- The Government is planning to develop with stakeholders a revised National Policy on Justice, 2024–2028.

### Key challenges in Nigeria’s justice system
- Independence of the judiciary:
  - Independence is enshrined in the Constitution, but judges are appointed by the President or State Governors upon recommendation of the National Judicial Council.
  - The current framework provides an outsized role for the executive in the appointment of judges and there have been instances of the executive not following the recommendations of the National Judicial Council.
  - There have been cases of perceived improper removal of judicial officers by the Executive.
  - The National Policy on Justice recommended greater transparency and monitoring of appointment and removal processes by the National Judicial Council; the Council has issued guidelines, but consideration should be given to strengthen enforceability.
- Terms and conditions of service:
  - Court system overload results in long times for cases to reach trial particularly in the larger states.
  - Judges are not well paid compared with other arms of government, which can create conditions for rent seeking opportunities.
  - Lack of resources for research and lack of digitalization in court records of proceedings add to the slow pace of justice.
  - Federal level courts and state level courts are funded by the central government and state governments respectively, creating possible variances in terms and conditions of service and differing caseloads between states.

### Actions taken by authorities
- Encouragement of alternative dispute resolution mechanisms and better case management:
  - The Mediation and Arbitration Act 2023 has been passed into law.
  - Courts are making concerted efforts to incorporate mediation and alternative dispute resolution as part of case management processes.
  - Practice directions by the judiciary have been issued to streamline court proceedings and improve case management.

### Institutional gaps and suggested institutional improvements
- Strengthen institutions that support enforcement of contract and property rights:
  - Real and personal property registries, copyright and probate registries may be under-staffed and under-resourced, contributing to facilitation of corrupt practices.
  - Consider strengthening secured interest registries to support protection of creditors’ rights and development of relevant supporting legislation.
  - Development of a credit rating system could assist in supporting economic activity.
- Digitalization:
  - Consider digitalization of registries for property, copyright and court registries to improve speed and integrity of justice processes.

### Conclusion and prioritized recommendations (short to medium term)
- Rationale:
  - A focused and prioritized reform agenda signals government commitment to strong governance.
  - Authorities have passed several key pieces of legislation and various anti-corruption agencies are actively pursuing mandates.
  - The multitude of agencies, recommendations, policies, and initiatives require rationalization and prioritization given scarce government resources.
  - Enforcement of transparency, governance and anti-corruption measures should be prioritized for deterrent effects, control over scarce resources (including recovering proceeds of crime), leveraging civil society, and promoting stable growth by encouraging investment.
  - Meeting transparency commitments in the petroleum sector and ensuring appropriate legislative powers of enforcement should be pursued as a priority.
- Staff’s specific prioritized items:
  - Transparency:
    - Urgently pass amendments to the NEITI Act to allow for better enforcement measures of the transparency requirements of the PIA.
    - Implement the necessary measures to allow public access to the declarations of public servants.
  - Anti-corruption enforcement:
    - Amend the EFCC law to assure the independence of the agency in a manner similar to the ICPC.
    - Expand the capacity of the Code of Conduct Tribunal to sit in multiple locations, including using technology.
    - Passage of the Whistle-Blower and Witness Protection Bills.
    - Pass the Federal Audit Service Act and improve the funding to the AG’s office.
  - Rule of law:
    - Secure the independence of the Judiciary by strengthening the National Judicial Council and conducting a review of the terms and conditions of employment of judges (including their compensation).
    - Include in the revised National Justice Policy (with time bound commitments) measures to improve institutions and mechanisms that support the justice system, including further use of alternate resolution processes, and digitalization of registries for property, copyright and court registries.

### Annex X — Nigeria’s Hydrocarbon Sector: key facts and medium-term outlook
- Reserves and production:
  - Nigeria’s oil reserves are estimated at about 37 billion barrels.
  - From its 30-year peak of 2.5 million bpd in 2010 oil production has trended downwards.
  - Based on current production of 1.5 million bpd, known reserves would only be depleted in 60 years.
  - Raising production above current levels requires significant new investment; major international oil companies have sold their onshore interests over the last two years.
- Economic importance:
  - Oil currently accounts for 5 percent of real GDP, down from 15 percent in 2010.
  - The oil sector accounts for about 40 percent of government revenues.
  - Oil contributes almost 90 percent of export revenues, but over a third flows out through profit repatriation.
- Dangote refinery and projections:
  - Production has commenced in early 2024 and is expected to reach full capacity of 650,000 bpd over the medium term.
  - Staff’s baseline projections assume a gradual production path: 100,000 bpd in 2024, 200,000 bpd in 2025, rising to 300,000 bpd during 2026-27 and 400000 bpd in 2028.
  - Impact on the current account is through savings on transportation costs: domestic refining lowers crude exports and refined product imports.

*Source: IMF staff report content as provided.*

### 4. Nigeria’s break-even prices are

### 4. Nigeria’s break-even prices are far above projected prices, giving rise to external and fiscal vulnerabilities.

### Key findings
- Staff estimates Nigeria’s fiscal break-even price—the price at which the overall deficit would be zero—is $156 per barrel.
- This estimate is at the upper end for other large oil producers, only exceeded by Iran.
- Nigeria’s current account break-even price—the price at which the current account is in balance—is $80 per barrel.

### Projections and comparison with IMF medium-term oil price outlook
- The IMF’s medium-term oil price projection ranges from $79 per barrel in 2024 declining to $67 per barrel in 2028.
- Comparison of break-even and projected prices:
  - Fiscal break-even: $156 per barrel.
  - Current account break-even: $80 per barrel.
  - Projected oil prices: $79 per barrel in 2024; $67 per barrel in 2028.

### Analysis and implications
- The fiscal break-even price ($156 per barrel) is substantially higher than the IMF’s projected oil prices for 2024–2028, indicating a large fiscal gap if oil prices follow the projected path.
- The current account break-even price ($80 per barrel) is close to the IMF’s 2024 projection ($79 per barrel) but well above the 2028 projection ($67 per barrel), implying rising external vulnerability if prices decline toward the 2028 projection.
- The combination of a very high fiscal break-even price and declining projected oil prices gives rise to both external and fiscal vulnerabilities for Nigeria.

### Definitions (as used in the staff estimates)
- Fiscal break-even price: the price at which the overall deficit would be zero.
- Current account break-even price: the price at which the current account is in balance.

*Source: IMF staff report excerpt: 4. Nigeria’s break-even prices are far above projected prices, giving rise to external and fiscal vulnerabilities.*

### 2003. In   March 2016, Nigeria implemented the

### 1ngaea2024002 - 2003. In   March 2016, Nigeria implemented the 

### Data dissemination and key statistical indicators
- Nigeria published critical data through the National Summary Data Page (NSDP) in line with the Enhanced General Data Dissemination System (e-GDDS).
- No Data ROSC is available.
- Table of Common Indicators Required for Surveillance (As of March 10, 2024) — latest observations and reporting frequencies (examples from table):
  - Exchange Rates: Date of Latest Observation Feb. 2024; Date Received Mar. 2024; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
  - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation Feb. 2024; Date Received Mar. 2024; Frequency M M M.
  - Reserve/Base Money: Date of Latest Observation Jan. 2024; Date Received Mar. 2024; Frequency M M M.
  - Interest Rates: Date of Latest Observation Mar. 2024; Date Received Mar. 2024; Frequency D D D.
  - Consumer Price Index: Date of Latest Observation Feb. 2024; Date Received Mar. 2024; Frequency M M M.
  - Revenue, Expenditure, Balance and Composition of Financing – Central Government: Date of Latest Observation Dec. 2023; Date Received Feb. 2024; Frequency M M M.
  - Stocks of Central Government and Central Government-Guaranteed Debt: Date of Latest Observation Jun. 2023; Date Received Dec. 2023; Frequency Q Q Q.
  - External Current Account Balance: Date of Latest Observation Sep. 2023; Date Received Dec. 2023; Frequency Q Q Q.
  - GDP/GNP: Date of Latest Observation Dec. 2023; Date Received Feb. 2024; Frequency Q Q Q.
  - Gross External Debt: Date of Latest Observation Sep. 2023; Date Received Feb. 2024; Frequency Q Q Q.
  - International Investment Position: Date of Latest Observation Sep. 2023; Date Received Dec. 2023; Frequency Q Q Q.

### Recent developments and staff assessment (Statement by the IMF Staff Representative — April 29, 2024)
- Exchange rate and reserves:
  - The naira depreciated by about 80 percent between January and March but recovered two-thirds of the losses through mid-April.
  - Gross international reserves stood at $32.1 billion (30-day moving average) on April 17, down from $32.9 billion at end-December.
  - Staff’s end-2024 projections remain achievable given expected inflows and improved investor confidence.
- Inflation:
  - March inflation was 33 percent year-on-year; food inflation was 40 percent year-on-year (food accounts for 52 percent of the basket).
  - This was the 15th month of consecutive increases and the highest print in 28 years.
  - Staff projects improved agriculture production and fading base effects in H2 2024; with recent naira recovery staff’s end-2024 inflation projection remains achievable though risks increased.
- Oil production:
  - March production was 143 million barrels per day (bpd), about 20 million bpd below January levels due to pipeline difficulties and maintenance; production expected to recover after maintenance.
- Fiscal performance (preliminary Jan/Feb 2024):
  - Non-oil revenue in percent of GDP somewhat stronger than same period in 2023; oil revenues broadly constant.
  - Current expenditure in percent of GDP slightly lower than same period in 2023, mainly due to lower personnel and debt service cost.
- Domestic financing and debt:
  - Authorities reduced the government’s outstanding overdraft at the CBN by naira 4.8 trillion, financed from treasury bills and bonds issuance.
  - Authorities have raised naira 7 trillion net in domestic securities year-to-date, on pace to meet staff’s financing assumptions.
- Energy and social measures:
  - Electricity prices were increased for some consumers effective April 2024.
  - Electricity price tripled for high use premium consumers (15 percent of 12 million customers) who account for 40 percent of electricity usage; the tariff adjustment will reduce subsidies by 0.1 percent of GDP while continuing relief to the poor, particularly in rural areas.
- Support to small enterprises:
  - Presidential Grant Scheme launched April 2024: grant of naira 50,000 to eligible small business owners (one or two employees, operating income less than naira 3 million).
  - Around 70 percent of grants allocated to women and young people and 10 percent to individuals with disabilities; program aims to reach one million businesses; grants deposited directly into beneficiaries’ accounts.
- Trade facilitation:
  - National Single Window initiative launched April 17, 2024 to simplify trade compliance through a digital platform linking ports of entry, government agencies, and stakeholders.
- Banking sector measures:
  - CBN increased minimum paid-up capital for commercial, merchant, and non-interest banks; banks have two years to raise additional capital.
  - On April 16, 2024, CBN reduced minimum loan to deposit (LDR) ratio from 65 to 50 percent.

### Authorities’ view and outlook (Statement by Willie Nakunyada and Patterson Ekeocha — April 29, 2024)
- Economic recovery and risks:
  - Economy gradually recovering from COVID-19 recession amid volatile oil prices, security concerns, external financing difficulties, high inflation, and food insecurity.
  - New administration since May 2023 undertook reforms: removal of fuel subsidies, exchange rate unification, strengthened social protection, and tighter macroeconomic policies.
- Growth and inflation projections:
  - Growth projected to firm from 2.9 percent in 2023 to 3.2 percent in 2024.
  - Real growth grew by 3.5 percent (year-on-year) in Q4 2023; services sector expanded 3.9 percent in Q4 2023.
  - Growth expected to moderate to 3.0 percent in 2025.
  - Inflation climbed from 31.7 percent in February 2024 to 33.2 percent in March 2024; expected to decline in Q2 2024 due to tight macro policy and improved food supply.
- External sector:
  - Current account balance projected to improve from an estimated 0.3 percent of GDP in 2023 to 0.5 percent of GDP in 2024.
  - Gross official reserves projected to remain stable at 5 months of import cover in 2024.
  - Efforts to ensure FX inflows are remitted to the Central Bank, improve oil production, and prevent oil theft.

### Fiscal policy — measures and targets
- Revenue mobilization and tax policy:
  - Authorities committed to medium-term revenue and expenditure reforms to strengthen public finances and fiscal buffers.
  - Measures include strengthening tax administration, improving tax compliance (particularly corporate income tax), increasing the VAT rate, and broadening the tax base.
  - VAT rate trajectory: progressively increase from 7.5 percent to 10 percent in 2025 and 15 percent in 2026.
  - Expect revenue gains from digitalizing tax identification and rationalizing tax incentives; supported by amendments to the Finance Act.
- Expenditure priorities and social protection:
  - Reprioritizing expenditures towards social protection and priority spending; collaborating with the World Bank to develop a social protection mechanism that could benefit 60 million people.
  - Strengthening irrigation, use of improved seed varieties and fertilizers, and addressing conflict in farming communities to boost food supply.
- Debt sustainability:
  - Operate within Fiscal Responsibility Act 2007, restricting borrowing to capital expenditure and human development.
  - Target to keep total public debt under the debt sustainability threshold of 40 percent of GDP.
  - Aim to align debt service-to-revenue ratio to recommended threshold of 30 percent.
  - Exploring cheaper, more flexible borrowing options and optimal borrowing structure.

### Monetary and exchange rate policy — actions and framework
- Monetary policy stance:
  - CBN pursuing a tight monetary policy to restore price stability and achieve positive real interest rates.
  - Monetary policy rate (MPR) increases: a 400-bp increase to 22.75 percent and a subsequent 200-bp increase to 24.75 percent.
  - Measures include rolling back N10 trillion quasi-fiscal operations and complying with statutory limits on CBN credit to government.
  - CBN commenced aggressive recovery of overdue development finance intervention loans.
- Inflation targeting and operational reforms:
  - CBN developing a roadmap for implementing an inflation-targeting framework to better anchor expectations and increase transparency and credibility.
  - Re-focus on standard monetary policy instruments, reducing rapid credit and money supply growth.
- FX market operations and reforms:
  - Operational changes in the Nigerian Foreign Exchange Market (NFEM), including willing buyer/willing seller model introduced June 14, 2023 to increase transparency and turnover.
  - CBN cleared many outstanding forex obligations and set new modalities for commercial banks, BDC operators, and IMTOs.
  - Measures include automating BDC operations, reducing number of BDCs, removal of allowable limit on exchange rate quoted by IMTOs (announced Feb. 1, 2024), and lifting daily cap of N2 billion on remunerable Standing Deposit Facility (SDF) in October 2023.
  - CBN limited cash pool of international oil companies (IOCs) to 50 percent of repatriated export proceeds initially, with balance repatriated after ninety (90) days from date of inflows.

### Financial sector policies and supervision
- Resilience and prudential actions:
  - Key financial soundness indicators within regulatory limits; CBN implementing and supervising prudential guidelines.
  - Increasing deposit-taking corporations’ (DTCs) minimum capital and adopting Basel 3 capital framework.
  - Phasing out regulatory forbearance and maintaining tight supervision.
  - NOP limit imposed on January 31, 2024: not to exceed 20 percent short or 0 percent long of shareholders’ funds unimpaired by losses using the Gross Aggregate Method.
- Fintech and financial integrity:
  - CBN attentive to Fintech through regulatory sandbox, code-based phone transactions, and mandated data sharing between banks and Fintechs.
  - Government committed to maintaining correspondent banking relationships and financial flows, and addressing AML/CFT deficiencies that led to FAFT increased surveillance in 2023.

*International Monetary Fund — Nigeria: staff statement and authorities’ statements (April 29, 2024).*

### 14. The   government   remains   committed   to   good   governance   practices,   and   improved

### 14. The   government   remains   committed   to   good   governance   practices,   and   improved

### Governance, transparency, and anti-corruption
- The authorities "have intensified efforts to enforce public disclosure measures for contracts, licenses, permits, and revenue streams."
- They "aim to pass laws facilitating public access to Public Officers' Declarations."
- The Technical Unit on Governance and Anti-Corruption Reforms (TUGAR) "issues periodic reports on governance and anti-corruption frameworks, identifying areas for improvement and guiding reform efforts."
- "The government also conducts audits of federal institutions to assess governance practices."

### Regulatory reforms and investment-attraction strategy
- Authorities are pursuing "the necessary regulatory reforms to position Nigeria as an investment destination of choice to counter the uncertainties caused by insecurity and spillovers from the global environment."
- Commitment to "robust and comprehensive consultation with stakeholders in the medium term within the framework of predictable, coherent, and consistent policies."
- Continued support for "growth-enhancing sectors with job creation capacity, as well as export-oriented sectors."
- Priorities include "reforms aimed at enhancing competition, innovation, and domestic productivity and scaling up private investment."
- Plans to "further strengthen the frameworks for concessions and public-private partnerships, including working with the legislature to address legal and regulatory bottlenecks to unlock private investments in key sectors."

### Security and the investment environment
- Measures to "bolster defense and internal security" to "enhance the investment environment."
- The government will "sustain current efforts to properly equip and motivate the armed forces, police, and paramilitary units."
- Plans to "overhaul the internal security architecture and introduce new operational strategies to enhance law enforcement capabilities and safeguard lives, properties, and investments across the country."
- "The various services will work proactively and collaboratively to address attendant security challenges to achieve enduring peace, stability, and public safety, to provide a conducive business environment."

### Electricity, infrastructure, and support for SMEs
- Authorities are "committed to ensure a competitive electricity market to provide affordable electricity and increase power generation/distribution capacity."
- Plans to "increase investment in critical power grid infrastructure in the medium-term, focusing on projects that optimize grid reliability and interconnectedness."
- Government will "provide infrastructure to lower business costs, enhance economic activity, domestic productivity, and competitiveness, incentivize private investment, and contribute to projected growth."
- Intention to "improve access to sustainable finance for small and medium enterprises in critical sectors."

### Climate policy and energy transition
- Authorities "made appropriate adjustments to energy policies and regulations" to "address climate change and promote sustainable practices."
- They view "stricter emission standards, carbon pricing mechanisms, and renewable energy targets" as important to "reshape the future oil market landscape and investment decisions."
- Government will "review governance reforms and accelerate energy transition plans, demonstrating its unwavering commitment to a sustainable future."

### Conclusion and commitment to reforms
- Authorities "reaffirm their commitment to implement comprehensive policy interventions and reforms to address the challenging economic and social landscape" the country is navigating.
- Committed reforms include "ease of doing business initiatives, improving the regulatory environment, and efforts to diversify the economy away from oil dependency."
- Reforms are "geared to create a more investor-friendly climate and enhance Nigeria's investment appeal."
- Authorities "appreciate Fund advice and technical support and look forward to Directors' support in concluding the 2024 Article IV consultation."

*https://www.imf.org/-/media/files/publications/cr/2024/english/1ngaea2024002.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1ngaea2024002.pdf_