IMF Executive Board Concludes 2024 Article IV Consultation with Nigeria
IMF News, May 8, 2024
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- Published: May 8, 2024
Overview
- On April 29, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nigeria.
- Nigeria’s new administration has implemented reforms to restore macroeconomic stability and support inclusive growth, including:
- Reformed the fuel price subsidies.
- Unified official foreign exchange windows.
- Focused on revenue mobilization, governance, monetary and exchange rate policy frameworks, and strengthening social safety nets.
- Over the last decade, limited reforms, security challenges, weak growth and high inflation have worsened poverty and food insecurity.
- Determined and well-sequenced implementation of the authorities’ policy intentions is viewed as necessary to achieve faster, more inclusive, resilient growth.
Growth, inflation, and near-term outlook
- Real GDP growth and projections:
- Real GDP growth slowed to 2.9 percent in 2023.
- Growth is projected at 3.3 percent for 2024 as oil and agriculture outputs are expected to improve with better security.
- Sectoral performance:
- Weak agriculture and trade contributions in 2023 despite improvement in oil production and financial services.
- Inflation:
- Inflation reached 32 percent year-on-year in February 2024, driven mainly by food price inflation 38 percent and loose financial conditions.
- With continued monetary tightening, inflation is projected to gradually decline to 24 percent year-on-year at end-2024.
- Risks:
- Near-term risks are tilted to the downside.
- Food insecurity could worsen with further 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.
Fiscal position, reserves, and exchange rate
- Fiscal outcomes and policy:
- The fiscal position strengthened in 2023.
- Revenues benefited from naira depreciation and enhanced revenue administration.
- Expenditure rationalization and restraint allowed for a one-off wage increase to mitigate the impact of high inflation for public officials.
- The social cash transfer system has been strengthened and initial payments have been made.
- External sector and reserves:
- Gross international reserves declined in 2023 amid persistent capital outflow pressures.
- The naira depreciated sharply after the unification of the official foreign exchange windows in June 2023.
- Following monetary policy tightening in February and March 2024 and a resumption of FX interventions, the naira has started to stabilize.
Financial sector, AML/CFT, and governance
- Financial sector stability and risks:
- The financial sector has remained stable, despite heightened risks.
- Close monitoring of financial sector risks is important.
- Directors supported the increase in the minimum capital for banks and urged the CBN to unwind the regulatory forbearance introduced during the pandemic.
- AML/CFT and international standards:
- Recent improvements in the AML/CFT framework were acknowledged and sustained action was called for to exit the FATF grey list.
- Governance and business environment:
- Directors highlighted reforms to enhance the business environment, improve security, implement key governance measures, develop human capital, boost agricultural productivity, and build climate resilience.
- These reforms are crucial to boost investor confidence, diversify the economy, address food insecurity, and underpin sustainable job creation.
Executive Board assessment and policy recommendations
- General assessment:
- Executive Directors agreed with the thrust of the staff appraisal and welcomed the bold reforms implemented by the new administration.
- Directors commended focus on revenue mobilization, governance, social safety nets, and upgrading policy frameworks.
- Monetary and exchange rate policy:
- Directors stressed the importance of keeping a tight monetary policy stance to put inflation on a downward path.
- Maintaining exchange rate flexibility and building reserves were emphasized.
- Directors welcomed removal of foreign exchange market distortions and encouraged continued improvements to FX market functioning, including adopting a well‑designed FX intervention framework.
- Some Directors noted that carefully and sequentially phasing out capital flow management measures when warranted would be important.
- Directors supported the authorities’ intentions to shift to an inflation targeting regime and recommended strengthening central bank independence and communication to ensure a successful transition.
- Caution was recommended regarding amendments to the Central Bank of Nigeria (CBN) Act that might weaken the central bank’s autonomy.
- Further progress was encouraged on implementing the outstanding recommendations from the 2021 safeguards assessment.
- Fiscal policy and social protection:
- Directors commended restarting the cash transfer program and emphasized the urgency of scaling it up to mitigate acute food insecurity.
- They welcomed work on a comprehensive revenue mobilization strategy including boosting tax enforcement and broadening the tax base.
- Mobilizing revenue and reprioritizing expenditure, including phasing out costly and regressive energy subsidies, were identified as critical to creating fiscal space for development spending and strengthening social protection, while maintaining debt sustainability.
- Directors appreciated the authorities’ commitment to discontinue deficit monetization and noted progress in macroeconomic policy coordination.
- Financial sector measures:
- Directors emphasized close monitoring of financial sector risks, supported increasing minimum bank capital, urged unwinding pandemic-era forbearance, and supported efforts to foster financial inclusion and deepen the capital market.
- Capacity development:
- Directors welcomed IMF capacity development to support the authorities’ reform efforts.
Key statistics (selected indicators, 2022–25)
- Real GDP (at 2010 market prices), annual percentage change:
- 2022 Act.: 3.3
- 2023 Est.: 2.9
- 2024 Proj.: 3.0
- 2025 Proj.: (table lists 3.0 for 2024 and 3.0 for 2025?—preserve supplied rows) 3.0
- Oil and Gas GDP (annual percentage change):
- 2022: -19.2
- 2023: -2.2
- 2024: 5.6
- 2025: 0.0
- Non-oil GDP (annual percentage change):
- 2022: 5.0
- 2023: 3.2
- 2024: 3.1
- Production of crude oil (million barrels per day):
- 2022: 1.38
- 2023: 1.50
- 2024: 1.65
- Nominal GDP at market prices (trillions of naira):
- 2022: 202.4
- 2023: 234.4
- 2024: 296.4
- 2025: 344.6
- Nominal non-oil GDP (trillions of naira):
- 2022: 190.4
- 2023: 221.3
- 2024: 271.0
- 2025: 316.7
- Nominal GDP per capita (US$):
- 2022: 2,202
- 2023: 1,688
- 2024: 1,110
- 2025: 1,077
- GDP deflator:
- 2022: 11.3
- 2023: 12.6
- 2024: 22.4
- 2025: 12.9
- Consumer price index (annual average):
- 2022: 18.8
- 2023: 24.7
- 2024: 26.3
- 2025: 23.0
- Consumer price index (end of period):
- 2022: 21.3
- 2023: 28.9
- 2024: 24.0
- 2025: 19.0
- Investment and savings (Percent of GDP):
- Gross national savings: 2022: 20.2; 2023: 24.1; 2024: 25.8; 2025: 26.0
- Public: 2022: -2.4; 2023: -0.4; 2024: 0.6
- Private: 2022: 22.6; 2023: 24.6; 2024: 25.5; 2025: (table lists 25.5 and 26.1 elsewhere—preserve rows) 25.5
- Investment: 2022: 20.0; 2023: 23.8; 2024: 25.2; 2025: 26.1
- Consolidated government operations:
- Total revenues and grants (percent of GDP): 2022: 9.0; 2023: 9.4; 2024: 12.4; 2025: 12.8
- Of which: oil and gas revenue: 2022: 3.6; 2023: 6.0; 2024: 5.8
- Of which: non-oil revenue: 2022: 4.8; 2023: 6.5; 2024: 7.0
- Total expenditure and net lending (percent of GDP): 2022: 14.4; 2023: 13.6; 2024: 17.1
- Of which: implicit fuel subsidies1 (percent of GDP): 2022: 2.2; 2023: 0.8; 2024: 2.8; 2025: 1.5
- Overall balance (percent of GDP): 2022: -5.4; 2023: -4.2; 2024: -4.7
- Non-oil primary balance (percent of GDP): 2022: -6.8; 2023: -4.5; 2024: -7.1; 2025: -6.2
- Public gross debt (percent of GDP)2: 2022: 39.4; 2023: 46.4; 2024: 46.7; 2025: 47.0
- Of which: FX denominated debt (percent of GDP): 2022: 9.2; 2023: 16.3; 2024: 20.3
- FGN interest payments (percent of FGN revenue): 2022: 87.6; 2023: 76.8; 2024: 77.5; 2025: 74.7
- Money and credit:
- Broad money (percent change): 2022: 13.0; 2023: 57.8; 2024: 13.5; 2025: 16.9
- Net foreign assets (contribution to broad money growth): 2022: -11.5; 2023: 10.2; 2024: 4.4
- Net domestic assets (contribution to broad money growth): 2022: 24.4; 2023: 47.7; 2024: 9.1; 2025: 11.2
- Of which: Claims on consolidated government (contribution): 2022: 23.4; 2023: 4.7
- Credit to the private sector (y-o-y, percent): 2022: 19.9; 2023: 42.1; 2024: 22.7
- Velocity of broad money (ratio): 2022: 3.7; 2023: 2.7
- External sector:
- Current account balance (percent of GDP): 2022: 0.2; 2023: 0.3; 2024: 0.5; 2025: -0.1
- Exports of goods and services (percent change): 2022: 35.9; 2023: -11.3; 2024: 0.9; 2025: -7.7
- Imports of goods and services (percent change): 2022: 14.2; 2023: -4.4; 2024: -0.8; 2025: -4.8
- Terms of trade: 2022: -6.6; 2023: -3.5
- Price of Nigerian oil (US$ per barrel): 2022: 99.0; 2023: 82.3; 2024: 80.6; 2025: 75.6
- External debt outstanding (US$ billions)3: 2022: 119.9; 2023: 113.6; 2024: 111.1; 2025: 116.8
- Gross international reserves (US$ billions, CBN definition)4: 2022: 36.6; 2023: 32.9; 2024: 33.3; 2025: 34.2
- (Equivalent months of prospective imports of G&S): 2022: 5.4; 2023: 5.7; 2024: 6.1
- Notes from table:
- Sources: Nigerian authorities; and IMF staff estimates and projections.
- 1 Fund staff estimate.
- 2 Gross debt figures for the Federal Government and the public sector include overdrafts from the Central Bank of Nigeria (CBN).
- 3 Includes both public and private sector.
- 4 Based on the IMF definition, the gross international reserves were US$8 billion lower in October 2023.
IMF Executive Board press release, May 8, 2024.