Friday, March 09,
2018 09:41 AM / FBNQuest Research
IMF’s executive board has concluded its 2018 Article IV Consultation with
Nigeria, so we offer our initial comments. As is appropriate with a
multilateral agency, the Fund treads carefully around the issue of
exchange-rate policy. It notes the improved fx availability and the increase in
official reserves, and detects a commitment from the authorities to unify
rates. The Fund urges the removal of the multiple exchange-rate practices. We
are not convinced that these changes are coming anytime soon.
While commending the steps made within the
FGN’s Economic Recovery and Growth Plan, notably improvements in tax
administration and the business environment, the Fund sees growth flattish, per
head incomes falling in real terms and unemployment rising.
It distinguishes between agricultural and
non-agricultural non-oil GDP, which we take to mean that it sees prospects
rather better for the former.
The game-changer to its way of thinking
would be substantial infrastructure spending, and structural and fiscal reform.
Such spending is very much part of the FGN’s fiscal agenda and a core element,
it appears, of the re-election strategy. The broader reforms may well be pushed
back to next year: this includes the suggested automatic fuel price-setting
mechanism, as practiced in Kenya and South Africa.
Turning to the table of selected
indicators, the Fund has growth forecasts of 2.1% and 1.9% for this year and
next, unchanged from the update to its World Economic Outlook in
We are unclear as to what extent the
projections for FGN interest payments as a proportion of FGN revenue allow for
the reduction in borrowing costs over the past six months. The Fund has the
ratio worsening from 59.7% this year to 68.0% in 2019.
It has public gross debt at 22.3% of GDP at
end-2017, including 18.4% for the FGN. The balance of 3.9% of GDP is lower than
we had expected, given that it covers overdrafts from the CBN and the debts of
The Fund estimates external debt including
the obligations of the private sector at US$56.5bn at end-2017. The Debt
Management Office has a figure of US$15.4bn for the debt of the FGN and the
state governments (necessarily guaranteed by the FGN) at end-September, since
which time there have been the two sovereign Eurobond issues. We know the size
of Nigerian banks’ USD-denominated bond issues, and see that bank credit lines
and other external borrowings therefore add about US$30bn to the total.
1. IMF Selected
Issues on Nigeria - Mobilizing Tax Revenues in Nigeria
2. IMF Executive
Board Concludes 2018 Article IV Consultation With Nigeria
3. IMF Programmes
in Africa and the Implications for Creditworthiness
4. Nigeria joins
OECD, World Bank to curtail Illicit Financial Flows
Urges Use of Factoring to Expand Africa’s Regional Value Chains
6. AfDB updates its
African Bond Index, to boost market liquidity
7. Abuja Selected
to Host Afreximbank’s 2018 Annual Meetings and 25th Anniversary
8. IMF and
BIS—Working Together to Boost Financial Stability
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releases Economic Recovery Plan for Nigeria