IMF tasks Nigeria on passage of Petroleum Industry Bill – The Guardian

THE International Monetary Fund (IMF) has called for early passage of the Petroleum Industry Bill (PIB) to enable massive investments into the country’s oil and gas sector.

The international watchdog, noted that the PIB would boost investment, government revenue, and fiscal transparency.

The IMF, in a Public Information Notice, (PIN), released recently, said that it welcomed reforms underway in the energy sector and looked forward to early passage of the PIB.

IMF also declared Nigeria’s macro-economic performance as being “broadly positive over the past year”, notwithstanding that “real Gross Domestic Product (GDP) growth is projected to have decelerated slightly to 6.3 per cent, reflecting the effects of the nationwide strike in early 2012, floods in the fourth quarter of 2012, and continued security problems in the north.

“Yearly inflation increased from 10.3 per cent in 2011 to 12.3 per cent in 2012, owing mainly to the adjustment of administrative prices of fuel and electricity; large increases in import tariffs on rice and wheat; and the impact of floods in third quarter.

“The external position has strengthened and international reserves rose from $32.6 billion at end-2011 to $44 billion at end-2012 driven by sustained high oil prices, stricter administration of the gasoline subsidy regime, and strong portfolio inflows.”

The agency noted that the country’s fiscal policy stance was tightened in 2012, and fiscal buffers are being rebuilt.

“The non-oil primary deficit of the consolidated government is estimated to have narrowed from about 36 per cent of non-oil GDP in 2011 to 30.5 per cent in 2012, mainly due to expenditure restraint,” it stated.

“Monetary policy remained tight in 2012 in response to inflationary pressures. The central bank kept its policy rate unchanged during the year but raised the cash reserve requirement for banks from eight per cent to 12 per cent and lowered allowable open foreign exchange position for banks. Financial soundness indicators point to continued improvements in the health of the banking system.”

It also noted: “In 2013, growth is expected to recover to above seven per cent. Inflation is projected to decline below 10 per cent, supported by the tight monetary policy stance and ongoing fiscal consolidation.

“The key downside risks are a large drop in world oil prices, and slow progress in building consensus around key fiscal reforms.

Overall conclusions

The IMF executive directors commended the federal government for its “prudent macroeconomic policies that have underpinned a strong economic performance in recent years.”

However, the directors agreed, “widespread unemployment and poverty remain key challenges for policymakers,” and called for renewed efforts to make economic growth more broad-based and inclusive.

The directors also supported government’s strategy to consolidate the fiscal position while opening up policy space for needed investment in infrastructure and human capital.

“To this end, they underscored the need to improve tax administration, better prioritise public expenditure, strengthen public financial management, and improve the fiscal framework.

They added that efforts to mobilise public support for these reforms should be intensified.

The directors considered the current tight monetary stance to be consistent with the authorities’ objective of reducing inflation to single digits, adding that the exchange rate in real effective terms is broadly in line with fundamentals.

By Roseline Okere, May 22, 2013.