IMF Executive Board Concludes 2020 Article IV Consultation with Nigeria

IMF News, February 8, 2021

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IMF Executive Board Concludes 2020 Article IV Consultation with Nigeria

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• Published: February 8, 2021

Macroeconomic impact of COVID-19 and near-term outlook

• Real GDP is estimated to have contracted by 3.2 percent in 2020 amidst the pandemic-related lockdown.
• Headline inflation rose to 14.9 percent in November 2020, a 33-month high.
• Unemployment rate reached 27 percent in the second quarter of 2020; youth unemployment at 41 percent.
• Pandemic-related support package equivalent to 0.3 percent of GDP was adopted in the 2020 revised federal budget.
• Nigeria received IMF emergency financial assistance of $3.5 billion under the Rapid Financing Instrument in April 2020.
• External vulnerabilities increased due to lower oil prices and weak global demand; the current account remained in deficit in the first half of 2021.
• Socio-economic conditions deteriorated: rising food inflation, elevated youth unemployment, mass protests in October 2020, and surveys show worsening food insecurity with significant impact on the vulnerable.
• Risks are tilted to the downside, including:
  • resurgence of the pandemic,
  • security situation,
  • unfavorable external environment,
  • capital outflow risks from record-low domestic interest rates and large foreign holdings of domestic securities.
• Upside factors include recovering oil prices and completion of the Dangote oil refinery potentially catalyzing more domestic crude oil production and boosting growth.

Executive Board assessment and policy recommendations

• Directors commended measures to address health and economic impacts of COVID-19 and emphasized need for urgent policy adjustment and more fundamental reforms to sustain macroeconomic stability and lift growth and employment.
• Fiscal policy and revenue:
  • Welcomed reforms including removal of the fuel subsidy and steps toward cost-reflective tariff increases in the power sector.
  • Stressed the need for significant revenue mobilization to reduce fiscal sustainability risks, relying initially on progressive and efficiency-enhancing measures with higher tax rates awaiting a more sustained economic recovery.
  • Highlighted need for improved social safety nets to cushion potential negative impacts on the poor.
• Exchange rate and external sector:
  • Noted multiple rates, limited flexibility, and foreign exchange shortages are posing challenges.
  • Recommended a gradual and multi-step approach to establishing a unified and clear exchange rate regime with near-term focus on allowing for greater flexibility and removing the payments backlog.
• Monetary policy and financial stability:
  • Observed accommodative monetary stance remains appropriate in the near term; tightening may be warranted if balance of payments or inflationary pressures increase.
  • Recommended that in the medium term, the monetary policy operational framework should be reformed and Central Bank financing of the budget deficit phased out in order to reduce inflation.
  • While welcoming banking sector resilience, called for continued vigilance to contain financial stability risks.
  • Stated COVID-19 debt relief measures for bank clients should remain time-bound and limited to those with good pre-crisis fundamentals.
• Structural reforms and governance:
  • Welcomed recent progress in structural reforms and called for continued reforms to promote economic diversification, reduce dependence on oil, and increase employment.
  • Encouraged strengthening governance and anticorruption frameworks, including compliance with AML/CFT measures.
  • Welcomed the ratification of the African Continental Free Trade Area and underscored that implementing trade-enabling reforms remains critical to rejuvenate growth.

Selected economic and financial indicators, 2017–21 (key figures)

• Real GDP (at 2010 market prices): 2017: 0.8; 2018: 1.9; 2019: 2.2; 2020: -3.2; 2021 (proj): 1.5
• Oil and Gas GDP: 2017: 4.7; 2018: 1.0; 2019: 4.6; 2020: -10.5; 2021 (proj): 3.0
• Non-oil GDP: 2017: 0.5; 2018: 2.0; 2019: -2.5; 2020: 1.4
• Non-oil non-agriculture GDP: 2017: -0.6; 2018: 1.8; 2019: -4.0; 2020: 1.2
• Production of crude oil (million barrels per day): 2017: 1.89; 2018: 1.93; 2019: 2.00; 2020: 1.80; 2021 (proj): 1.84
• Nominal GDP at market prices (trillions of naira): 2017: 114.9; 2018: 129.1; 2019: 145.6; 2020: 157.7; 2021 (proj): 183.4
• Nominal GDP per capita (US$): 2017: 1,969; 2018: 2,033; 2019: 2,230; 2020: …
• GDP deflator: 2017: 11.1; 2018: 10.2; 2019: 10.4; 2020: 11.8; 2021 (proj): 14.6
• Non-oil GDP deflator: 2017: 7.1; 2018: 8.5; 2019: 13.0; 2020: 15.0; 2021 (proj): 14.4
• Consumer price index (annual average): 2017: 16.5; 2018: 12.1; 2019: 11.4; 2020: 13.2; 2021 (proj): 14.8
• Consumer price index (end of period): 2017: 15.4; 2018: 12.0; 2019: 15.2; 2020: 13.8
• Gross national savings (Percent of GDP): 2017: 18.2; 2018: 20.8; 2019: 22.4; 2020: 21.8; 2021 (proj): 3.3
• Public (Percent of GDP): 2017: -0.5; 2018: 0.7; 2019: 0.4; 2020: -1.3; 2021 (proj): -0.2
• Private (Percent of GDP): 2017: 18.8; 2018: 20.1; 2019: 22.0; 2020: 23.1
• Investment (Percent of GDP): 2017: 14.7; 2018: 19.0; 2019: 25.4; 2020: 24.6; 2021 (proj): 23.5
• Current account balance (Percent of GDP): 2017: 2.8; 2018: -3.8; 2019: -3.7; 2020: -2.2; 2021 (proj): -2.3
• Total revenues and grants (Percent of GDP): 2017: 6.6; 2018: 7.9; 2019: 5.9; 2020: 6.9
• Total expenditure and net lending (Percent of GDP): 2017: 12.8; 2018: 12.6; 2019: 11.7; 2020: (not specified)
• Overall balance (Percent of GDP): 2017: -5.4; 2018: -4.3; 2019: -4.8; 2020: -5.9; 2021 (proj): -4.7
• Non-oil primary balance (Percent of GDP): 2017: -6.7; 2018: -7.2; 2019: -6.8; 2020: -5.6
• Non-oil revenue (Percent of GDP): 2017: 4.0; 2018: 4.2; 2019: 3.9; 2020: 4.5
• Public gross debt (Percent of GDP)1: 2017: 25.3; 2018: 27.7; 2019: 29.1; 2020: 34.4; 2021 (proj): 34.3
  • Of which: FGN debt: 2017: 25.0; 2018: 26.5; 2019: 31.0; 2020: 30.7
  • Of which: External debt: 2017: 5.0; 2018: 6.4; 2019: 6.2; 2020: 8.4; 2021 (proj): 7.7
• FGN interest payments (percent of FGN revenue): 2017: 58.4; 2018: 60.7; 2019: 52.6; 2020: 92.6; 2021 (proj): 60.8
• Interest payments (percent of consolidated revenue): 2017: 20.5; 2018: 19.9; 2019: 35.2; 2020: 23.0
• Broad money (percent change; end of period): 2017: -1.2; 2018: 9.7; 2019: 17.3
• Net foreign assets (percent change): 2017: 10.8; 2018: -18.0; 2019: 2.1; 2020: -7.9
• Net domestic assets (percent change): 2017: -12.0; 2018: 24.5; 2019: 25.2
• Credit to the private sector (y-o-y,%): 2017: -1.8; 2018: -11.9; 2019: 19.3
• Velocity of broad money (ratio; end of period): 2017: 3.8; 2018: 3.5
• Exports of goods and services (annual percent change): 2017: 32.3; 2018: 29.9; 2019: -32.4
• Imports of goods and services (annual percent change): 2017: 40.6; 2018: 40.7; 2019: -24.0
• Terms of trade (annual percent change): 2017: 9.4; 2018: 12.4; 2019: -5.1; 2020: -18.2; 2021 (proj): 6.5
• Price of Nigerian oil (US dollar per barrel): 2017: 54.4; 2018: 71.1; 2019: 64.0; 2020: 42.8; 2021 (proj): 48.0
• External debt outstanding (US$ billions)2: 2017: 94.8; 2018: 99.2; 2019: 112.4; 2020: 105.5; 2021 (proj): 107.6
• Gross international reserves (US$ billions): 2017: 39.5; 2018: 38.1; 2019: 29.5
  • (equivalent months of imports of G&Ss): 2017: 6.0; 2018: 4.4; 2019: 3.1

1 Gross debt figures for the Federal Government and the public sector include overdrafts from the Central Bank of Nigeria (CBN) and AMCON bonds. 2 Includes both public and private sector.

Press Release No. 21/35 — February 8, 2021; IMF Communications Department.

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• Nigeria and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• http://www.IMF.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home