Economy

Nigeria: Staff Concluding Statement of the 2022 Article IV Mission

Published

3 years ago

November 19, 2022

Eric

A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

The authorities have consented to the publication of this statement. 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. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

Notwithstanding higher oil prices, the economy is expanding at slightly above the population growth rate. The double-digit increases in Nigeria’s terms of trade and significant improvement in the trade balance created an opportunity to build fiscal space and foreign exchange (FX) reserves, but that opportunity was not harnessed. Inflation is elevated and fuel subsidies remain a formidable drain on fiscal revenues. Ensuring macroeconomic stability requires tightening across all policy levers, and stronger revenue mobilization and exchange rate reforms. In addition to consistent macroeconomic policies, a more robust growth trajectory would require measures to decisively tackle governance weaknesses and implement trade and agricultural reforms.

1. Economic recovery continues on the back of agriculture and services sectors. Output growth at 3.4 percent (y/y) in 2022Q2 marked the seventh consecutive quarter of growth driven by various services sectors, especially information technology, trade, and finance. Oil production has been on the decline since mid-2020, reflecting low investment and significant leakages associated with poor maintenance and theft. Despite Nigeria’s limited direct exposures, the war in Ukraine has permeated through higher domestic food prices with headline inflation reaching its 17-year high in October 2022 of 21.1 percent (y/y). High food insecurity is compounding the pandemic’s scarring effects on the vulnerable.

2. Output growth is expected to moderate in 2022 to 3 percent and improve slightly next year. The slowdown in growth reflects year-to-date weaknesses in oil production and the adverse effects of recent flooding. Supported by the authorities’ measures to curb ongoing oil theft and considering new production coming on stream, a protracted recovery in the oil sector is projected beginning late this year. Headline inflation is expected to moderate at end-2022 as the start of the harvest season more than counters the projected increase in
rice prices caused by recent flooding.

3. The near-term outlook faces downside risks, with some upside risks over the medium term. The effects of recent flooding and high fertilizer prices could become more entrenched impacting negatively both agricultural production and food prices in 2023.

Similarly, further volatility in the parallel market exchange rate and continued dependence on central bank financing of the budget deficit could exacerbate price pressures. In the medium term, there are downside risks to the oil sector from possible price and production volatility, while climate-related natural disasters pose downside risks to agriculture. There are also upside risks from a stronger rebound in oil production, investment in the gas sector and Dangote refinery coming on stream with a large production capacity.

Fiscal policy: Undertake Bolder Fiscal Reforms to Create Policy Space

4. Public finance is under stress with elevated fiscal deficits, high debt servicing costs and public debt projected to increase over the medium term. Despite higher non-oil revenues relative to 2021, the general government (GG) fiscal deficit is projected to widen to 6.2 percent of GDP in 2022, mainly due to fuel subsidy costs. Without bolder revenue mobilization efforts, costly fuel subsidies and rising debt servicing costs will keep overall fiscal deficits above 6 percent of GDP in the medium term raising public debt to about 43 percent of GDP by 2027.

While still deemed sustainable, such a level of debt is projected to take up nearly half of GG revenues in interest payments making the fiscal position highly vulnerable to real interest rate shocks. It also leaves little fiscal room for vital social spending on education and health, where Nigeria fares poorly compared to peer countries in sub-Saharan Africa (SSA).

5. Urgent revenue mobilization and fuel subsidy reforms are critical to create
much needed fiscal space. Successful revenue mobilization episodes in SSA highlight the
need for comprehensive fiscal reforms supported by high-level political commitment. The
mission recommended the following package of measures, which are estimated to create
fiscal savings of close to 6 percentage points of GDP during 2023-27 while also making room
for higher social spending.

• Remove fuel subsidies and address oil theft. As a near-term priority, the mission
highlighted the urgent need to remove fuel subsidies fully and permanently, which
disproportionately benefit the well-off, by mid-2023 as planned. The government should
also prioritize addressing oil thefts and governance issues in the oil sector to restore
production to pre-pandemic levels.

• Step up implementation of tax administration reforms. The mission welcomed the steady implementation of the tax automation system (TaxPro Max) and recommended stepping up efforts to further expand coverage under a well-designed roadmap and strengthen taxpayer segmentation centering on the Large Taxpayer Offices (LTOs). In the medium-term, the authorities should develop a compliance improvement program and comprehensive customs modernization program, improve the effectiveness of the State Internal Revenue Service’s administration of the Pay-As-You-Earn (PAYE) system, and strengthen inter-agency coordination and data sharing.

• Adopt tax policy reforms. The mission advised the authorities to consider adjusting tax rates to levels comparable to the average in Economic Community of West African States (ECOWAS) as compliance improves. This includes further increasing the VAT rate to 15 percent by 2027 in steps while streamlining numerous VAT exemptions based on systemic reviews, increasing excise rates on alcoholic and tobacco products while broadening the base, and rationalizing tax incentives by streamlining tax expenditures based on comprehensive periodic reviews.

• Increase well-targeted social assistance. To mitigate food insecurity and cushion the impact of high inflation and fuel subsidy removal on the poor, the mission recommended increasing social spending by up to 1.7 percentage points of GDP during 2023-27 in welltargeted programs in coordination with the World Bank and other development partners.

6. Fiscal transparency is critical for a sound fiscal policy. Notwithstanding recent improvements, some gaps remain. While the authorities have published the annual financial reports of the state-owned Nigerian National Petroleum Company (NNPC) since 2019, uncertainties remain regarding the nature of tax write offs and fuel consumption volumes. The mission recommended a closer look at the nature of NNPC’s financial commitments to the government and the costing details of the fuel subsidy, including through a financial audit. Stronger cash management and better coordination among key public institutions is needed to increase the realism of budgetary forecasts and reduce reliance on central bank overdrafts. Monetary and Exchange Rate Policies: Head off Inflation Drifts and Address BOP Pressures

7. Monetary conditions are accommodative despite tightening measures undertaken by the CBN. The mission welcomed measures taken by the Central Bank of Nigeria (CBN) to tighten liquidity and curb inflationary pressures through increasing the monetary policy rate (MPR) by a cumulative 400 basis points and raising the cash reserve ratio (CRR). However, overall conditions remain accommodative—the MPR is below inflation,
and financing provided to the budget and the CBN’s directed lending schemes continue to drive strong monetary expansion.

8. Decisive and effective monetary policy tightening is a priority to prevent risks of de-anchoring of inflation expectations. Given the multiplicity of monetary policy tools, market segmentation and weak interest rate transmission, the mission recommended the following measures to effectively tighten the monetary policy stance: (i) fully sterilize the impact of CBN’s financing of fiscal deficits on money supply; (ii) stand ready to further increase the MPR to send a tightening signal; and (iii) continue phasing out CBN’s credit intervention programs, which expanded rapidly during the pandemic to support the economy. The mission welcomed progress in the securitization of the CBN’s existing stock of overdrafts and recommended speedy finalization. Going forward, it would be important to limit reliance on CBN overdrafts for fiscal financing to the statutory limit of 5 percent of previous year’s revenues by pursuing fiscal consolidation, better budgetary planning and resorting to supplementary budgets in case of financing shortfalls. The mission also reiterated its previous recommendations to modernize the 2007 CBN ACT to establish price stability as its primary objective. It also recommended to enhance transparency through timely publishing of audited financial statements.

9. Despite improvement in the current account, the external sector continues to face pressures. Rising oil prices drove export revenues in 2022, generating a merchandise trade surplus. The current account is also improving despite higher profit repatriation by foreign companies. However, large net private outflows by domestic banks and nonbanks in the form of offshore deposits surpassed net inflows by foreign investors putting downward pressure on gross international reserves. Against this backdrop, Nigeria’s external position is preliminarily assessed to be moderately weaker than implied by economic fundamentals.

10. A unified and market-clearing exchange rate remains critical to enhancing confidence. Continued FX shortages, a stabilized exchange rate regime, rising inflation, limited debt servicing capacity, and administrative restrictions on current transactions fuel devaluation speculations. These factors hinder much needed capital inflows, encourage outflows and constrain private sector investment. The mission reiterated its past
recommendations to move towards a unified and market-clearing exchange rate by dismantling the various exchange rate windows at the CBN accompanied by clarity on exchange rate policy and supportive fiscal and monetary policies. In the medium term, the CBN should step back from its role as main FX intermediator, limiting interventions to smoothing market volatility and allowing banks to freely determine FX buy-sell rates.

Banking Sector: Prudently Navigate the Credit Cycle

11. The banking sector is profitable and liquid, while regulatory measures are being adopted. Profitability and banking sector liquidity have remained roughly stable while NPL ratio has dropped to near 5 percent. The share of questionable loans rebounded after the CBN announced the expiration of pandemic-related forbearance in loan classification by end2023; however, the authorities’ stress tests indicate that the banking system remains resilient to a potential significant rise in NPLs. The mission welcomed the implementation of Basel III regulation and recommended monitoring risks from less-regulated digital lenders, ongoing FX shortages faced by the corporate sector, and possible crowding out from the strong sovereign bank nexus, which has increased in recent years. The mission also advised to resolve weak smaller banks and proceed with the winding down of the public asset management company (AMCON) by end-2023.

12. Macro-financial linkages warrant close monitoring. Significant retail credit growth, while partly reflecting financial deepening, may be further propelled by a forthcoming regulation allowing households to tap into their pension savings for mortgage down payments. The mission recommended increased vigilance and adoption of selected macroprudential policy instruments to handle possible retail credit risks.

13. The authorities are making slow but steady inroads into financial inclusion. Nigeria continues to fall short of its inclusion targets, particularly in access to financial products. The share of population with financial access has increased benefiting from nonbanking and informal financial services, but financial exclusion rate at 36 percent remains high relative to peers in SSA. The mission welcomed further expansion of the agent network, the rising uptake of mobile money and electronic payments, and granting of payment service bank licenses to large mobile operators. The authorities have also recently launched promising initiatives to improve financial literacy and promote access to finance for women. The mission welcomed the imminent launch of CBN’s regulatory sandbox for fintech and encouraged the authorities to increase the number of banking agents in underserved regions, provide more targeted training in using financial products, and extend the eNaira further to the unbanked
population.

14. The authorities’ recent actions in response to the 2021 GIABA Mutual Evaluation Report have lessened the risk a public listing by the Financial Action Task Force (FATF). They updated and passed new laws and took regulatory and transparency measures. Sustained actions to address any remaining deficiencies would be important to avoid the risk of FATF grey listing.

Structural policies: Strengthen Agricultural Productivity and Address Corruption

15. Strengthening the performance of the agricultural sector is key to job creation, food security, and social cohesion. Over the next decade, an estimated 25 million additional jobs will be needed to employ the new labor market entrants. For agriculture to continue playing a strong role in employment and ensure food security, boosting production and yields through improved input usage, especially through affordable fertilizers and higher
quality seeds, better storage facilities and a more coordinated policy support across government agencies are recommended.

16. Addressing corruption remains critical to stimulating investment. The mission welcomed recent measures to fight corruption and promote the rule of law and accountability through the passage of the Proceeds of Crimes and Whistleblower’s Act, and efforts to increase the rate of asset declarations by the Code of Conduct Bureau. However, Nigeria is still assessed to have widespread governance weaknesses and the mission was not able to
assess progress in audits of the COVID-19 related emergency spending. The government should redouble its efforts to implement key aspects of the National Anti-Corruption Strategy (NACS), including measures to reduce bribery, improve prosecution and conviction rates for corruption cases, as well as the confiscation of related proceeds of crime.

17. Trade-enabling reforms are essential to promote economic diversification. The reopening of land borders earlier this year is a welcome move to facilitate trade. To speed-up compliance with rules on non-tariff barriers agreed under the African Continental Free Trade Agreement, the mission recommended making operational the already deployed scanners, which would limit tedious physical ports inspection processes and contain customs delays.

The IMF mission would like to thank the authorities and other counterparts for the frank and
thoughtful discussions and kind cooperation.

Economy

Tinubu Seeks World Bank Support to Boost Agriculture, Economic Reforms

Published

3 weeks ago

February 4, 2026

Eric

President Bola Tinubu has called on the World Bank to support Nigeria’s ongoing economic reforms, with a focus on agriculture, youth employment, and private sector growth, as part of his administration’s strategy to strengthen the economy and expand opportunities for the citizens.

The president made the remarks on Tuesday while receiving a delegation from the World Bank led by Anna Bjerde, Managing Director of Operations, at the State House, Abuja.

“Since we went into this tunnel of reform, we have our hands on the power and we’re never going to look back. Initially, it was painful and difficult, but those who win are not the ones who give up in difficult times,” Tinubu said.

The president highlighted the importance of mechanization and modernization of agriculture to increase productivity and create opportunities for Nigeria’s large young population.

“We have mechanization centers to help farmers with improved seedlings and fertilizers to enhance their programs. The goal is to move farmers from small-scale holders to large cooperatives that can create opportunities for Nigerians,” he explained.

Tinubu also pointed to the petrochemical sector and other domestic industries as areas where the government is working to improve outputs and strengthen local markets. He stressed that reforms are continuous and must be grounded in transparency, accountability, and stability.

“The first reaction to reforms was high inflation, but it has come down dramatically, and the Naira is now stable. We want to help investors operate with ease, reduce bureaucracy, and develop the skills of our people,” he said.

Anna Bjerde commended Tinubu’s administration for its consistent and steady approach to reforms over the past two years. She highlighted that Nigeria has become a global example of reform implementation, giving confidence to investors and policymakers worldwide. “The results achieved in the last two years are commendable. Your steady communication of the importance of reforms has given confidence and clarity, and there is no turning back,” Bjerde said.

She emphasized the importance of job creation, particularly for Nigeria’s youth, noting that Africa’s young population is growing rapidly and that SMEs are central to employment generation.

“Agriculture is a huge part of the economy and a major employer. Innovations in mechanization, cooperatives, value-chain development, and infrastructure can be scaled to create more opportunities,” Bjerde said.

She also highlighted the World Bank’s financial support for Nigeria, including public sector financing of $17 billion, private sector support of $5 billion through the IFC, and investment guarantees exceeding $500 million. These instruments are aligned with Nigeria’s reforms, including trade, digital initiatives, and inflation management, to stimulate private sector growth and human development.

“We want to work with Nigeria to accelerate growth, improve access to finance for SMEs, and support early childhood development as part of a comprehensive human development strategy,” she added.

The meeting underscored Nigeria’s push to attract foreign support for strategic reforms, particularly in sectors that directly affect youth employment, food security, and overall economic growth.

Economy

New Tax Laws: Presidential Committee Tackles KPMG over Criticisms of ‘Gaps’, ‘Errors’ and ‘Omissions’

Published

2 months ago

January 11, 2026

Eric

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has pushed back strongly against observations by KPMG on Nigeria’s new tax laws, saying the firm largely misunderstood the policy intent and misrepresented deliberate reform choices.

In a detailed statement shared on Saturday on X, Oyedele said the committee welcomed constructive feedback but argued that most of KPMG’s claims were flawed. “We welcome all perspectives that contribute to a shared understanding and successful implementation of the new tax laws,” he said. However, he added that “the majority of the publication reflected a misunderstanding of the policy intent, a mischaracterisation of deliberate policy choices, and, in several instances, repetitions and presentation of opinion and preferences as facts.”

According to Oyedele, several issues described by KPMG as errors or gaps were either based on “the firm’s own errors and invalid conclusions” or stemmed from “issues not properly understood by the firm.” He stressed that policy disagreements should not be framed as technical mistakes.

Addressing concerns about the taxation of shares and potential stock market sell offs, Oyedele said such fears were unfounded. “The fact is that the applicable tax rate on share gains is not a flat 30%,” he said, noting that “a significant majority of investors (99%) are entitled to unconditional exemption.” He added that market performance at an all time high showed investors understood the reforms.

On the commencement date of the new laws, Oyedele dismissed KPMG’s suggestion of aligning reforms strictly with accounting periods, describing it as “a narrow view of the complex transition issues” involved in wholesale tax reform.

He also defended provisions on indirect transfer of shares, saying they were aligned with global best practices. “The assertion that it may affect the country’s economic stability is disingenuous,” he said, explaining that the measure was designed to block long exploited tax loopholes.

Responding to claims of gaps in VAT exemptions, Oyedele said a specific exemption for insurance premiums was unnecessary. “If it is not broken, don’t fix it,” he stated, arguing that insurance premiums were not taxable supplies under existing law.

Oyedele further criticised proposals he said would undermine reform objectives, including calls to exempt foreign insurance companies from tax and allow deductions tied to parallel market foreign exchange. He said disallowing such deductions was “a critical fiscal policy choice designed to complement monetary policy, strengthen, and stabilise the Naira.”

On personal income tax, Oyedele rejected claims that higher rates would harm growth. He said the top marginal rate was competitive globally and ensured fairness without discouraging investment.

He also accused KPMG of factual errors, including references to the Police Trust Fund, noting that its taxing provisions expired in June 2025. “KPMG’s point that the new tax law should be amended to repeal the taxing section of the Police Trust Fund Act is needless,” he said.

While acknowledging clerical issues may arise in any major reform, Oyedele said these were already being addressed internally. He urged stakeholders to engage constructively. “We urge all stakeholders to pivot from a static critique to a dynamic engagement model,” he said, stressing that the reforms marked “a bold step toward a self sustaining and competitive Nigeria.”

Economy

NANS Makes U-turn, Cancels Planned Nationwide Protest over Implementation of New Tax Laws

Published

2 months ago

January 6, 2026

Eric

The National Association of Nigerian Students (NANS) has expressed support for the recently enacted Tax Reform Laws, describing it as a well-intentioned fiscal policy aimed at strengthening Nigeria’s economy and protecting low-income earners.

Reports said the endorsement followed extensive deliberations at the maiden Expanded National Executive Council (ENEC) meeting of NANS under the theme; “National Executive Council and Structural Stakeholders’ Forum 2026 on the Tax Reform Act”, which brought together student leaders, policy experts, and key stakeholders from across the country.

The meeting, held amid public debate and controversy over the new tax law, was attended by members of the NANS National Executive Council, leaders of NAUS, NAPS, and NANCES, zonal coordinators, joint campus council chairpersons, female student associations, and other stakeholders.

Earlier concerns had prompted NANS to issue a 14-day ultimatum, threatening nationwide protests if implementation of the law was not suspended pending further investigations and public enlightenment.

However, following engagements with the National Assembly, the Department of State Services (DSS), and the Federal Inland Revenue Service (FIRS), as well as the publication of the National Assembly’s investigation report, student leaders reported being better briefed on the objectives and safeguards embedded in the law.

Chairman of the Communiqué Drafting Committee and NANS President, Comr. Olushola Oladoja, said students were satisfied with the explanations provided by the government. Tax experts from FIRS used the forum to clarify grey areas and respond to concerns raised by Nigerians, giving student leaders a clearer understanding of the reform’s intent and framework.

At the end of the meeting, ENEC resolved that the Tax Reform Law is designed to improve revenue generation, ensure fairness in taxation, and strengthen social protection for vulnerable citizens, while requiring higher-income earners to contribute more equitably. The council affirmed the authenticity of the law as released by the National Assembly and announced the cancellation of the nationwide protest that had been scheduled for January 14, 2025.

NANS also pledged to serve as ambassadors of public enlightenment, committing to educate Nigerians on the purpose and benefits of the reform to boost public confidence during its implementation.

The meeting further passed a vote of confidence in the former FIRS Chairman, Zacch Adedeji and commended President Bola Tinubu for his fiscal reforms and the NELFUND initiative, reaffirming support for his administration’s economic transformation agenda.