Thursday, May 15, 2014 8.39 AM / FDC
The IMF Article IV is an annual country surveillance report which provides recommendations on a broad range of issues including fiscal, monetary and exchange rate policy; health care, pension, and labor market policy (including wages, unemployment compensation, and employment protection) and numerous other policy issues.
The document is a key tool for market analysts of IMF member countries to evaluate the success of their country’s economic policies and management in dealing with macro-economic stability and fostering growth. It also provides early warning signals for preventing economies from derailing and suffering the consequences of exogenous and internal shocks.
In the case of Nigeria, the IMF report, over the last two years, has focused on the status of the Asset Management Corporation of Nigeria (AMCON), which was setup to revive and stabilize Nigeria's banking industry by freeing up bank balance sheets through the purchase of non-performing loans (NPLs).
However, the 2013 recommendations were a significant departure from the previous year’s recommendations. While in 2012 the IMF was concerned with avoiding moral hazard and financial risks, and therefore recommended with a sunset clause for the end of 2017, the 2013 recommendations were tempered by a preference for a longer winding down period for AMCON and recommended that an inactive shell be maintained to reduce future cost in the event of need for a similar institution.
This shift in stance is an improvement from 2012 in that it recognizes AMCON’s achievements and acknowledges that risk factors remain inherent in the economy. However, we are of the opinion that the concerns of the IMF remain overly focused on unsystemic risk and that the threats from systemic risks remain necessitating AMCON’s continued active existence.
In other words, AMCON has become a vital institution in the Nigerian financial system and should be allowed to operate in its current form in the interest of the macro economy.