## IMF Staff Concludes Visit to Nigeria

_IMF News, August 2, 2017_

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## Bibliographic details
- Published: August 2, 2017

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### Visit scope and context
- IMF staff team led by Amine Mati visited Nigeria from July 20-31, 2017 to discuss recent economic and financial developments, update macroeconomic projections, and review reform implementation.
- End-of-mission statement emphasizes preliminary findings and does not represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

### Recent economic developments and outlook
- Economic activity contracted in Q1 2017 by 0.6 percent, mainly due to maintenance stoppages reducing oil production.
- After four quarters of negative growth, the non-oil economy grew by 0.6 percent (year-on-year), driven by a rebound in manufacturing and strong agricultural performance.
- Various indicators suggest an uptick in activity in Q2 2017.
- Headline inflation decreased to 16.1 percent in June 2017, helped by favorable base effects, but remains high despite tight liquidity conditions.
- Preliminary data for H1 2017 indicate significant revenue shortfalls.
- At 0.8 percent, growth in 2017 will not be sufficient to make a dent in reducing unemployment and poverty.

### Key macrofinancial indicators and vulnerabilities
- Interest-payments to revenue ratio: 40 percent at end-June (projected to increase further under current policies).
- Non-performing loans (NPLs): increased from 6 percent in 2015 to 15 percent in March 2017 (8 percent after excluding the four undercapitalized banks).
- Reserves: increased above $30 billion following the new Investor and Exporter FX window.
- Domestic context: high domestic bond yields and tight liquidity continue to crowd out private sector credit.
- Main risks to the outlook:
  - Delays in policy implementation.
  - Reversal of favorable external market conditions.
  - Possible shortfalls in agricultural and oil production.
  - Additional fiscal pressures.
  - Continued market segmentation in a foreign exchange market dependent on central bank interventions.
  - Banking system fragilities.

### Policy progress noted during the visit
- The Economic Recovery and Growth Plan (ERGP) is driving the diversification strategy.
- Security in the Niger Delta improved through strengthened engagement.
- The new Investor and Exporter FX window has provided impetus to portfolio inflows, helped increase reserves above $30 billion, and contributed to reducing the parallel market premium.
- Important steps in implementing the power sector recovery plan.
- Introduction of a voluntary income and asset declaration program.
- Advancement of the 60-day national action plan to improve the business environment.
- Progress in the oil and energy sector through implementation of a new funding mechanism for cash calls.

### IMF staff recommendations and policy priorities
- Act immediately on a coherent set of policies to enhance economic recovery and reduce macroeconomic vulnerabilities.
- Near-term priority: a stronger push for front-loaded fiscal consolidation through a sustainable increase in non-oil revenues to create space for:
  - Infrastructure spending,
  - Social protection,
  - Private sector credit.
- Monetary policy: avoid direct financing of the government and keep policy sufficiently tight.
- Exchange rate policy: move to a unified and market-based exchange rate.
- Structural reforms: rapid implementation to support a diversified private-sector-led economy.
- Pursue these policies simultaneously to reduce vulnerabilities and create an environment for diversification.

### Engagement and consultations
- The IMF team held productive discussions with senior government and central bank officials, members of parliament, representatives of the banking system, private sector, civil society, and international development partners.
- The team expressed thanks for productive discussions, excellent cooperation, and warm hospitality.

*Press Release No. 17/314 — August 2, 2017.*

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## References

- [Niger and the IMF](http://www.imf.org/external/country/NER/index.htm)
- [Nigeria and the IMF](http://www.imf.org/external/country/NGA/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2017/08/02/pr17314-imf-staff-concludes-visit-to-nigeria_