International Monetary Fund IMF, Executive Board, has urged the Federal Government to take strong action to address oil theft and production losses. IMF also advised the government to strengthen Nigerian oil industry regulatory framework by passing a sound Petroleum Industry Bill with enhanced oversight and transparency provisions. It said that the framework for anti-money laundering and combating the financing of terrorism could support these efforts.
IMF in its review of the Nigerian economy in its article IV 2014 released weekend urged the government to also highlight the need for improving oil revenue management, by completing the transition from the Excess Crude Account to the Sovereign Wealth Fund. These measures, it said, should be supported by full implementation of the Treasury Single Account and the integrated information management systems. It said that maintaining fiscal discipline in the run up to the elections is also important.
The body also urged the Federal Government to rebuild fiscal buffer, reduce oil subsidy, curtail waivers, and boost non-oil revenue in order to ensure current progress in the country. IMF commenting on the Nigerian economy after consultation with the Nigerian authorities emphasized the need to rebuild fiscal buffers and to strengthen the framework further.
In the report, the IMF said: “Efforts should be geared towards boosting non-oil revenue by broadening the tax base, improving tax administration and curtailing exemptions, and further reducing oil subsidies.
“Directors underscored that adopting a rule-based reference oil price in fiscal projections and further strengthening public financial management should help the authorities achieve their consolidation objectives. Directors commended the authorities for lowering inflation and considered the current tight monetary policy stance to be appropriate, given the risks associated with potential capital flow reversals. To better manage liquidity, they generally encouraged more reliance on open market operations to guide short-term interest rates.
“With regard to exchange rate policy, directors noted that greater exchange rate flexibility could serve as an important buffer against external shocks. Directors noted that the financial system is well capitalised with low non-performing loans and recommended continued improvements in the supervisory framework, especially with regard to increased exposure from cross border financial activities. Directors encouraged the authorities to build on the progress made in strengthening prudential policies by further enhancing the framework for anti-money laundering and combating the financing of terrorism, and implementing the remaining Financial Sector Assessment Program (FSAP).
The report “welcomed the plan to wind down the operations of the Asset Management Corporation of Nigeria, AMCON. Directors emphasized that structural reforms remain critical to improve competitiveness and productivity, and reduce poverty and inequality. They encouraged the authorities to persevere with their Transformation Agenda with continued focus on education and health reforms, the improvement of power supply, and broadening agricultural production.
“Reform efforts should also aim at enhancing the business environment, improving productivity, boosting financial access to small and medium sized enterprises, and strengthening governance and institutional capacity. The upcoming release of re-based GDP data and further improvements in statistical data collection should strengthen the basis for policy and private sector decision-making in Nigeria.
According to the IMF, “Executive Directors welcomed Nigeria’s continued strong macroeconomic performance, underpinned particularly by sustained high growth in the non-oil sector. Inflation has continued to decline and the reserves position is adequate. While the economic outlook remains favourable, key risks include continued lower oil revenues from oil production losses and lower oil prices, the impact from the unwinding of unconventional monetary policy in advanced economies, and domestic political and security uncertainties.
“Directors underscored that steadfast implementation of prudent macroeconomic policies and reforms will be essential to address the risks and vulnerabilities, generate more inclusive and balanced growth, and reduce unemployment.
“Directors welcomed the authorities’ continued commitment to fiscal consolidation and noted the improvements made to the fiscal framework. However, to ensure macroeconomic stability, they emphasized the need to rebuild fiscal buffers and to strengthen the framework further.
“Directors commended the authorities for lowering inflation and considered the current tight monetary policy stance to be appropriate, given the risks associated with potential capital flow reversals. To better manage liquidity, they generally encouraged more reliance on open market operations to guide short-term interest rates. With regard to exchange rate policy, Directors noted that greater exchange rate flexibility could serve as an important buffer against external shocks. Directors noted that the financial system is well capitalized with low non-performing loans.
“They recommended continued improvements in the supervisory framework, especially with regard to increased exposure from cross border financial activities. Directors encouraged the authorities to build on the progress made in strengthening prudential policies, including further enhancing the framework for anti-money laundering and combating the financing of terrorism, and implementing the remaining Financial Sector Assessment Program (FSAP) recommendations.
“They welcomed the plan to wind down the operations of the Asset Management Corporation of Nigeria. Directors emphasized that structural reforms remain critical to improve competitiveness and productivity, and reduce poverty and inequality. They encouraged the authorities to persevere with their Transformation Agenda with continued focus on education and health reforms, the improvement of power supply, and broadening agricultural production. Reform efforts should also aim at enhancing the business environment, improving productivity, boosting financial access to small and medium sized enterprises, and strengthening governance and institutional capacity. The upcoming release of re-based GDP data and further improvements in statistical data collection should strengthen the basis for policy and private sector decision-making in Nigeria.”
