The IMF broadly supportive of government policy




Monday, March 09, 2015 8:54 AM / FBN Capital Research


An IMF press release dated 04 March noted that the annual Article IV consultations with the FGN have been concluded. We have seen some commentary that the Fund is calling for another devaluation of the naira exchange rate: this is not our interpretation of its praise for the scrapping of the retail Dutch auction system (RDAS) and its observation that “greater exchange rate flexibility could help cushion external shocks”.


In this context we recall the lively exchanges on the subject between the Fund and the previous CBN governor, Lamido Sanusi.


The press release was broadly supportive of the FGN’s policy stance, which we can see from the approving comments on the closure of RDAS and on the Senate’s 2015 budget proposals including a US$52/b oil price benchmark.


The Fund has trimmed its growth forecast for this year to 4.8%. There is a range of GDP projections for reasons cited in the press release (oil market uncertainty, insecurity in parts of the country and election outcome). Additionally, we would mention the dearth of consumption indicators on which to construct an expenditure-based forecast and the size of the grey/informal economy. We are sticking with our projection of 5.3% for the year.


For the external sector, the Fund assumed average crude oil production of 2.3 mbpd and an average Nigerian crude oil price of US$52.8/b, and yet saw the current account remaining in surplus in 2015 (at 0.2% of GDP). We have a modest deficit (equivalent to 0.8% of GDP) and, it would appear, higher compression of import demand.


The statistical authorities will have appreciated the view expressed in the press release that the economic data in Nigeria are “broadly adequate” for surveillance. It noted the room for improvement on the balance of payments series, which tend to show unusually high errors and omissions.


The executive directors saw the value of reviewing the present revenue sharing arrangements with a view to narrowing regional disparities. This diplomatic call might be construed as suggesting that the insecurity in the north east stems in part from its very low social and economic indicators.


In due course the Fund will, with the go-ahead of the Nigerian authorities, publish the report in full, at which point it has been known to drop its guard a little and share some of its thinking.

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