The so-called Article IV report by the International Monetary Fund (IMF) is a document outlining the Fund’s assessment of a country’s economic performance and policies over a given period.

Typically, these reports are published in Washington after the IMF’s Executive Board concludes an Article IV consultation with the country and during which the fund would meet with representatives of the different interest groups in a country including government officials and private organizations.

Key components of an Article IV Report include an analysis of the country’s current economic situation, including growth trends, inflation, and employment rates. It also comes with an evaluation of the country’s fiscal and monetary policies, including recommendations for improvement and a risk analysis that identifies potential risks and challenges facing the economy, such as external shocks or domestic policy slippages.

In examining the report, first the good things it says of Africa’s most populous nation.

The Good

The IMF has very kind words for the Central Bank of Nigeria and its governor and for good reasons too. The Fund acknowledges that the CBN now uses a globally acclaimed template for its FX market interventions not to bolster the Naira but to reduce excess volatility. The IMF report welcomes the results of the good work by the CBN, noting the stability of the fx market.

The IMF report welcomes the attempt to enthrone credible leadership at the NNPC as well as the return to the publication of monthly reports by the state-owned company, but it noted that the monthly reports lack the details to be expected.

In addition, the Article IV report highlighted the two recent rating upgrades by rating global agencies and acknowledged the slight increase in agricultural production which is leading to moderations in the rise of food price as well as improvements in tax collections in Nigeria.

In addition, the report noted that there has been a slight improvement in Nigeria’s fiscal position and the comfortable gross reserve position of the country which the fund says reduces risks to Nigeria. Inflation is moderating and the fund sees this lowering to 10% by 2030 provided the Naira does not suffer bouts of massive depreciation.

The Bad

On the negative side, the Article IV report noted that Nigeria now has the highest number of highly food insecure persons in the world, about 31 million in total.

There is also the worry over Nigeria’s revenue deficit and the allocation of 54% of tax revenues to payment of interests alone not counting principal payments.

The IMF listed five risks ahead of Nigeria and they include the erratic nature of oil revenues worsened by deliberate overstatement as well as security shocks arising from incidents around the country and their potential to destabilize food production in the country’s farm belts.

The third risk Is related to the geopolitical situation including the risk associated with US President Donald Trump and fourthly climate risks including the risk of acute flooding in key farm regions of the country.

The fifth and final risk Is related to policy and reform challenges that could arise from elections leading to a drop in reform momentum in Nigeria.

The report concludes with highlighting Nigeria’s struggle with crop yield, noting that the country has one of the world’s lowest crop yields. It noted the country’s huge electric power deficit which leads to over reliance on generators and the fund noted that no nation can grow GDP on generators.

The report contains a detailed analysis of the impact of the Dangote giant refinery, noting fears that domestic crude oil might always be available for the refinery which means significant dependence on imported crude. In its analysis the fund sees the refinery yielding up $5bn annually in additional fx for Nigeria after factoring import of up to 50% of crude requirement for the refinery and the fx cost of the balance 50% from domestic fields. (BusinessDay)