## Public Information Notice: IMF Executive Board Concludes 2010 Article IV Consultation with Nigeria _IMF News, February 17, 2011_ ## Source details **Canonical URL:** [Public Information Notice: IMF Executive Board Concludes 2010 Article IV Consultation with Nigeria](https://www.imf.org/en/news/articles/2015/09/28/04/53/pn1125) ## Other formats - [Markdown version](/en/news/articles/2015/09/28/04/53/pn1125/index.md) - [Structured JSON version](/en/news/articles/2015/09/28/04/53/pn1125/index.json) - [Bundle manifest](/en/news/articles/2015/09/28/04/53/pn1125/bundle-manifest.json) ## Bibliographic details - Published: February 17, 2011 --- ### Background - Nigeria weathered the global economic recession and a domestic banking crisis "reasonably well." - Economic growth: - First half of 2010: remained above 7½ percent. - Expected for whole year 2010: about 8½ percent (recovery in oil production and continued strong growth in other sectors). - Inflation: "stuck in the low double digits for the past two years." - Foreign reserves: have been falling as the Central Bank of Nigeria (CBN) focused on maintaining exchange rate stability and low interest rates. - Fiscal policy in 2010: - Consolidated public spending increased by 37 percent in 2010 (after rising by 10 percent in 2009). - Non-oil primary deficit increased by 5 percentage points to 32 percent of non-oil GDP. - Despite world oil prices well in excess of the budget benchmark price, the government spent all current oil revenues and drew on savings in the Excess Crude Account. - Monetary policy actions: - CBN reduced the rate on its standing deposit facility despite high inflation. - In response to pressure on the currency, the CBN sold reserves rather than raise interest rates or let the exchange rate depreciate. - The CBN recently raised interest rates, but short-term real interest rates remain negative. ### Economic Outlook and Risks - Projections: - Nigeria’s economy projected to grow by 7 percent in 2011, moderating gradually in subsequent years. - Inflation projected to decline to 9 percent by the end of 2011. - Upside risks: - Shift in government spending towards capital formation. - Planned reforms in the power sector. - Passage of the Petroleum Industry Bill could unlock additional investments in the oil sector. - Downside risks: - Greater risk of lower rather than higher oil production. - Inflation risk hinges on the 2011 budget; a more expansionary budget passed by the National Assembly could undermine the CBN’s ability to deliver on inflation. - Speculation against the naira could intensify should reserves continue to fall. ### Executive Board Assessment and Policy Recommendations - General assessment: - Strong external position and low debt helped mitigate the impact of the global financial crisis. - Pro-cyclical fiscal stance and accommodative monetary policy resulted in high inflation and a loss in international reserves. - Fiscal policy: - Directors supported planned fiscal consolidation to rebuild fiscal space and contain price pressures. - Welcomed efforts to strengthen nonoil revenues and the draft budget for 2011 aiming to reverse the expansion in real public spending in 2010. - Saw need for a strong oil-revenue rule to prevent policy pro-cyclicality. - Welcomed the authorities’ intention to establish sovereign wealth funds under the Nigerian Sovereign Investment Authority (NSIA) to shield the budget from oil-revenue volatility and enhance management of oil wealth. - Encouraged channeling NSIA-financed infrastructure expenditures through the budget to safeguard the stabilization function of the NSIA and the quality of public investment. - Monetary and exchange rate policy: - Considered the central bank’s recent increase in policy rates appropriate; further tightening may be needed should inflation pressures continue. - Took note of staff’s assessment of an overvaluation of the naira; stressed that greater exchange rate flexibility would prevent one-way bets in the foreign exchange market and cushion external shocks. - Expressed concerns about potentially conflicting objectives of monetary policy; advised that the policy framework should focus more clearly on price stability. - Generally agreed that moving gradually toward an inflation-targeting regime, once necessary institutional underpinnings are in place, would help anchor inflation expectations. - Central bank activities and financial sector: - Generally supported scaling back the central bank’s development finance initiatives as soon as feasible while protecting the central bank’s balance sheet and pursuing reforms to deepen capital markets. - Commended authorities for actions to stabilize the financial sector. - Welcomed establishment of an asset management corporation to clean up bank balance sheets and encouraged maintaining full transparency in bank resolution. ### Selected Economic and Financial Indicators, 2007–10 (key statistics) - Real GDP (at 1990 factor cost, annual percentage change): 2007: 6.4; 2008: 6.0; 2009: 7.0; 2010 Est.: 8.4 - Oil and Gas GDP (annual percentage change): 2007: -4.5; 2008: -6.2; 2009: 0.5; 2010 Est.: 11.1 - Non-oil GDP (annual percentage change): 2007: 9.5; 2008: 9.0; 2009: 8.3; 2010 Est.: 7.9 - Production of crude oil (million barrels per day): 2007: 2.21; 2008: 2.09; 2009: 2.16; 2010 Est.: 2.36 - Nominal GDP at market prices (trillions of naira): 2007: 20.9; 2008: 24.6; 2009: 25.1; 2010 Est.: 32.3 - Nominal non-oil GDP at factor cost (trillions of naira): 2007: 13.1; 2008: 15.2; 2009: 17.4; 2010 Est.: 21.4 - Nominal GDP per capita (US$): 2007: 1,153; 2008: 1,401; 2009: 1,112; 2010 Est.: 1,387 - Consumer price index (annual average): 2007: 5.4; 2008: 11.6; 2009: 12.5; 2010 Est.: 13.8 - Consumer price index (end of period): 2007: 6.6; 2008: 15.1; 2009: 13.9; 2010 Est.: 12.8 - Consolidated government operations (percent of GDP): - Total revenues and grants: 2007: 28.4; 2008: 32.8; 2009: 19.9; 2010 Est.: 25.5 - Of which: oil and gas revenue: 2007: 21.9; 2008: 26.6; 2009: 13.0; 2010 Est.: 19.0 - Total expenditure and net lending: 2007: 28.7; 2008: 28.2; 2009: 30.4; 2010 Est.: (not specified) - Overall balance: 2007: -0.4; 2008: 4.6; 2009: -10.4; 2010 Est.: -6.9 - Non-oil primary balance (percent of non-oil GDP): 2007: -29.1; 2008: -28.4; 2009: -27.3; 2010 Est.: -32.2 - Excess Crude Account / Sovereign Wealth Fund (US$ billions): 2007: 14.2; 2008: 19.7; 2009: 7.1; 2010 Est.: 3.4 - Money and credit (Change in percent of broad money at the beginning of the period): - Broad money: 2007: 44.2; 2008: 57.8; 2009: 17.5; 2010 Est.: 12.1 - Net foreign assets: 2007: 23.5; 2008: 23.3; 2009: -10.9; 2010 Est.: -12.0 - Net domestic assets: 2007: 20.8; 2008: 34.5; 2009: 24.1; 2010 Est.: (not specified) - Credit to consolidated government: 2007: -10.5; 2008: -11.7; 2009: 10.5; 2010 Est.: 18.1 - Credit to the rest of the economy: 2007: 59.6; 2008: 50.6; 2009: 21.7; 2010 Est.: 3.3 - Current account balance (percent of GDP) (percentage change, unless otherwise specified): 2007: 18.7; 2008: 15.7; 2009: 13.3; 2010 Est.: (not specified) - Exports, f.o.b. (percentage change): 2007: 14.1; 2008: 26.9; 2009: -28.0; 2010 Est.: (not specified) - Oil and gas export volume (percentage change): 2007: 4.2; 2008: -7.5; 2009: -2.5; 2010 Est.: (not specified) - Imports, f.o.b. (percentage change): 2007: 49.5; 2008: 24.0; 2009: -12.7; 2010 Est.: 37.5 - Terms of trade (percentage change): 2007: 1.2; 2008: 16.6; 2009: -21.6; 2010 Est.: (not specified) - Price of Nigerian oil (US$ per barrel): 2007: 71.1; 2008: 97.0; 2009: 61.8; 2010 Est.: 78.9 - Nominal effective exchange rate (end of period): 2007: 99.8; 2008: 100.6; 2009: 82.2; 2010 Est.: (not specified) - Real effective exchange rate (end of period): 2007: 109.5; 2008: 123.8; 2009: 109.7; 2010 Est.: (not specified) - External debt outstanding (US$ billions): 2007: 4.0; 2008: 4.5; 2009: 4.8; 2010 Est.: (not specified) - Gross international reserves (US$ billions): 2007: 51.3; 2008: 53.0; 2009: 42.4; 2010 Est.: 34.1 - (equivalent months of imports of goods and services): 2007: 10.1; 2008: 8.0; 2009: (not specified) - Notes: - Sources: Nigerian authorities; and IMF staff estimates and projections. - Includes all components of the proposed sovereign wealth fund. - Large errors and omissions in the balance of payments suggest that the current account surplus is overestimated by a significant (but unknown) amount. - Includes $2.6 billion in 2009 on account of the SDR allocation. *Source: Public Information Notice (PIN) No. 11/25, February 17, 2011.* --- ## References - [Nigeria and the IMF](http://www.imf.org/external/country/NGA/index.htm) - [Public Information Notices](https://www.imf.org/en/news/searchnews) - [http://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn1125_