The International Monetary Fund (IMF) on Friday called on the President Goodluck Jonathan-led federal government to intensify its fight against oil theft and production loss in Nigeria, stressing that the criminal act had caused a lot of setback to the economic growth of the nation.
Making this charge at the end of the IMF's executive board consultation with the Nigerian authorities, the Fund advised the federal government to strengthen the regulatory framework by passing a sound Petroleum Industry Bill with enhanced oversight and transparency provisions.
Members of the IMF board of directors further stated that a framework for anti-money laundering and combating the financing of terrorism could support these efforts.
They however commended the Nigerian 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, " they noted.
With regard to exchange rate policy, the IMF's directors noted that greater exchange rate flexibility could serve as an important buffer against external shocks.
They also noted that the financial system was well capitalized with low non-performing loans, just as they recommended continued improvements in the supervisory framework, especially with regard to increased exposure from cross-border financial activities.
Furthermore, they encouraged the Nigerian government to build on the progress made in strengthening prudential policies, including by further enhancing the framework for anti-money laundering and combating the financing of terrorism, and implementing the remaining Financial Sector Assessment Programme (FSAP) recommendations.
Welcoming the plan to wind down the operations of the Asset Management Corporation of Nigeria, the IMF's directors emphasized that structural reforms remain critical to improve competitiveness and productivity. To reduce poverty and inequality, the IMF's officials encouraged Nigeria to persevere with their Transformation Agenda with continued focus on education and health reforms, the improvement of power supply, and broadening agricultural production.
They said: "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 rebased GDP data and further improvements in statistical data collection should strengthen the basis for policy and private sector decision making in Nigeria."
On the economy, the IMF officials noted that economic growth in Nigeria was expected to improve further in 2014, driven by agriculture, trade and services. Inflation should continue to decline, with lower food prices from higher rice and wheat production and supported by a tight monetary policy and a budget execution that maintains medium-term consolidation objectives.
They however welcomed Nigeria's continued strong macroeconomic performance, underpinned particularly by sustained high growth in the non-oil sector, stating that inflation had 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," they said.
They also 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.