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<p><strong>An International Monetary Fund (IMF) staff team led by Amine Mati, Senior Resident Representative and Mission Chief for Nigeria, visited Lagos and Abuja from January 29-February 12, 2020 to conduct its annual Article IV Consultation discussions on Nigeria’s economy. In this end-of-Mission press release, signed by Laraba Bonet, Office Manager and made available to OpenLife, the views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board</strong></p>



<p><em> ;“The
pace of economic recovery remains slow, as declining real incomes and weak
investment continue to weigh on economic activity. Inflation—driven by higher
food prices—has risen, marking the end of the disinflationary trend seen in
2019. External vulnerabilities are increasing, reflecting a higher current
account deficit and declining reserves that remain highly vulnerable to capital
flow reversals. The exchange rate has remained stable, helped by steady sales
of foreign exchange in various windows.</em></p>



<p><em>“High fiscal deficits are complicating
monetary policy. Weak non-oil revenue mobilization led to further deterioration
of the fiscal deficit, which was mostly financed by Central Bank of Nigeria
(CBN) overdrafts. The interest payments to revenue ratio remains high at about
60 percent.</em></p>



<p><em>“Under current policies, the outlook is
challenging. The mission’s growth forecast for 2020 was revised down to 2
percent to reflect the impact of lower international oil prices. Inflation is
expected to pick up, while deteriorating terms of trade and capital outflows
will weaken the country’s external position.</em></p>



<p><em>“Recognizing these vulnerabilities, the
authorities have taken a number of welcome steps. These include measures to
boost revenue through the adoption of the Finance Bill and Deep Offshore Basin
Act and; and improve budget execution by adopting the 2020 budget by
end-December 2019. The tightening of monetary policy in January 2020 through
higher cash reserve requirements to respond to looming inflationary pressures
is welcome. Progress on structural reforms—particularly in Doing Business,
finalizing power sector reforms, and strengthening governance—is commendable.</em></p>



<p><em>“Major policy adjustments remain necessary to
contain short-term vulnerabilities, build resilience, and unlock growth
potential.</em></p>



<p><em>“Non-oil revenue mobilization—including
through tax policy and administration improvements—remains urgent to ensure
financing constraints are contained and the interest payments to revenue ratio
sustainable. Recourse to central bank overdrafts should be limited and the
mission supports the authorities’ plans to use the low domestic yield
environment to front load their financing requirements.</em></p>



<p><em>“Further tightening of monetary policy—albeit
through more conventional methods—is needed to contain domestic and external
pressures arising from large amounts of maturing CBN bills. The mission
reiterated its advice on ending direct central bank interventions, securitizing
overdrafts to introduce longer-term government instruments to mop up excess
liquidity and moving towards a uniform and more flexible exchange rate.
Removing restrictions on access to foreign exchange for the 42 categories of
imported goods would be needed to encourage long-term investment.</em></p>



<p><em>“Banking system vulnerabilities should
continue to be addressed. The mission welcomed recent efforts to reduce legacy
non-performing loans. The introduction of risk-based minimum capital
requirements would also help strengthen bank resilience. Notwithstanding the
significant increase in lending, concerns about shortened maturity, asset
quality and conflicting monetary policy signals call for revisiting the minimum
lending to deposit ratio directive.</em></p>



<p><em>“Structural reforms—particularly executing
the much-delayed power sector recovery plan, implementing the anti-corruption
and financial inclusion strategy, and addressing infrastructure and gender
gaps—remain essential to boosting inclusive growth.</em></p>



<p><em>“Nigeria’s border closure will continue to
have significant economic consequences on the country’s neighbors. It is
important that all involved parties quickly resolve the issues keeping the
borders closed—including to stop the smuggling of banned products.</em></p>



<p><em>“The team held productive discussions with
senior government and central bank officials. It also met with representatives
of the banking system, the private sector, civil society organizations and
development partners. The team wishes to thank the authorities and all those it
met for the productive discussions, excellent cooperation, and warm
hospitality.”</em></p>

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