IMF HAS NIGERIA
IMF - The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nigeria.
With oil receipts dominating fiscal revenue and exports, the Nigerian economy has been hit hard by low oil prices and falling oil production. The country entered into a recession in 2016, with growth contracting by 1.5 percent. Annual inflation levels doubled to 18.6 percent, reflecting hikes in electricity and fuel tariffs, a weaker naira and accommodating monetary conditions (broad money expanding at 19 percent y-o-y). Even with a significant under-execution in capital spending, the consolidated fiscal deficit increased from 3.5 percent of GDP in 2015 to 4.7 percent of GDP in 2016, because of significant revenue shortfalls. This resulted, over the same period, in a doubling of the Federal Government (FG) interest payments-to-revenue ratio to 66 percent. The external current account turned into a surplus in 2016, as import compression continues to offset falling exports. The foreign exchange regime was liberalized in June 2016, but FX restrictions remain in place and the market continues to be characterized by significant distortions that have contributed to a 50 percent parallel market premium, which was halved following recent increases in central bank interventions and the removal of prioritized allocation of foreign exchange.
Under unchanged policies, the outlook remains challenging. Growth would pick up only slightly to 0.8 percent in 2017, mostly reflecting some recovery in oil production and a continuing strong performance in agriculture. Policy uncertainty, crowding out, and FX market distortions would be expected to drag activity. Accommodative monetary policy would keep inflation in double digits. Financing constraints and banks' risk aversion would crowd out private sector credit and increase the Federal Government's already high debt service burden. A continued policy of prioritizing exchange rate stability would lead to an increasingly overvalued exchange rate, leading to a deterioration in the non-oil trade balance and gross reserves below adequate levels.
Recognizing the unsustainability of current policies, the authorities have adopted an Economic Recovery and Growth Plan (ERGP) to transform the economy into a more diversified and inclusive economy. Key priorities include ensuring food security through agro-related manufacturing, promoting industrialization, and achieving sufficiency in energy—including the recently approved Power Sector Recovery Plan. The ERGP's inclusive growth focus is to be supported through macroeconomic stability, investing in social infrastructure, building a globally competitive economy, and improving governance.
Executive Board Assessment
Executive Directors recognized that the Nigerian economy has been negatively impacted by low oil prices and production. Directors commended the efforts already made by the authorities to reduce vulnerabilities and enhance resilience, including by increasing fuel prices, raising the monetary policy rate, and allowing the exchange rate to depreciate. However, in light of the persisting internal and external challenges, they emphasized that stronger macroeconomic policies are urgently needed to rebuild confidence and foster an economic recovery.
Directors welcomed the authorities' Economic Recovery and Growth Plan (ERGP), which focuses on economic diversification driven by the private sector, and government initiatives to strengthen infrastructure—including the recently adopted power sector recovery plan. However, they underlined that without stronger policies these objectives may not be achieved.
Directors generally emphasized the need for a front-loaded, revenue-based fiscal consolidation starting in 2017, to reduce the federal government interest payments-to-revenue ratio to sustainable levels. They underscored that priority should be given to increasing non-oil revenue, including through raising VAT and excise rates, strengthening compliance, and closing loopholes and exemptions. Administering an independent fuel price-setting mechanism to eliminate fuel subsidies, strengthening public financial management, and developing a well-targeted social safety net would also support the adjustment. Directors stressed the need to contain the fiscal deficit of state and local governments, including through improved transparency and monitoring.
Directors underscored that external adjustment is necessary to protect foreign currency buffers and reduce vulnerabilities. They commended the recent easing of some exchange restrictions and urged the authorities to remove the remaining restrictions and multiple currency practices, thus unifying the foreign exchange market and helping regain investor confidence. Directors emphasized that these policies should be supported by tighter monetary policy and fiscal consolidation to anchor inflation expectations and to limit the risk of exchange rate overshooting, as well as structural reforms to improve competitiveness.
Directors welcomed the steps to strengthen banking sector resilience through stronger prudential requirements. With asset quality declining, they recommended further intensifying bank monitoring, enhancing contingency planning, and strengthening resolution frameworks. Directors encouraged quickly increasing the capital of undercapitalized banks and putting a time limit on regulatory forbearance.
Directors emphasized that ambitious structural reforms are key to achieving a competitive, investment-driven economy that is less dependent on oil. Priority should be given to improving infrastructure, enhancing the business environment, improving access to financing for small enterprises, and strengthening governance and anti-corruption efforts. Timely and effective implementation of these measures would promote sustainable and inclusive growth. Directors welcomed progress in improving the quality and availability of economic statistics and encouraged further efforts to compile subnational fiscal accounts.
|June, 20, 13:15:00|
|June, 20, 13:10:00|
|June, 20, 13:05:00|
|June, 20, 13:00:00|
|June, 20, 12:55:00|
|June, 20, 12:50:00|
NPD - Preliminary production figures for May 2018 show an average daily production of 1 629 000 barrels of oil, NGL and condensate, which is a decrease of 236 000 barrels per day compared to April.
PLATTS - Libyan crude production has fallen around 400,000 b/d -- or nearly halved -- due to militia attacks on the eastern oil terminals of Ras Lanuf and Es Sider, the head of the country?s National Oil Corp. said Tuesday.
PLATTS - Venezuela's crude output averaged 1.36 million b/d in May, down from 1.41 million b/d in April, and 1.9 million b/d in May 2017, according to S&P Global Platts. The International Energy Agency said it could fall to 800,000 b/d or even lower next year.
PLATTS - Nigerian oil has been slow to sell this month as bidders for the country's July-loading heavy and light sweet crudes have been absent from the market. Market participants pegged the amount of unsold Nigerian barrels loading in July at 20 million-34 million barrels, amounting to roughly 40%-75% of what is produced in a month.