By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-International monetary fund (IMF) Friday said it’s endorsing the plans of Nigerian authorities to wind down the operations of the asset management corporation of Nigeria (AMCON).
This is part of the Fund’s executive board assessment on the conclusion of the 2014 Article IV consultation with Nigeria.
‘’They welcomed the plan to wind down the operations of the asset management corporation of Nigeria,’’ the IMF executive board assessment said.
On March 29, 2013, after the IMF concluded its 2012 Article IV consultation with Nigeria and recommended that the country’s authorities should wind down the operations of AMCON in what it described as the need to curb moral hazard and fiscal risks.
Following this, Mustapha Chike-Obi, Managing Director/Chief Executive Officer, of Nigeria’s asset management company expressed his dissatisfaction with the recommendation of the IMF.
According to Chike-Obi the IMF had commended Nigeria for fixing the banking industry; but suggested winding down AMCON. He affirmed his surprise that the IMF will come up with such a recommendation without explaining how to do it and what they as a global institution can do to help Nigeria in that regard.
InvestAdvocate sent a text message to Chike-Obi requesting his e-mail to send a copy of the IMF’s 2014 Article IV consultation with Nigeria to draw his attention and seek his views on the purported plan by the Nigerian authorities to wind down AMCON; but as at the time of filling in this report, no reply was received.
However, the IMF’s board assessment noted that Nigeria’s financial system is well capitalised with low nonperforming loans and recommended continued improvements in the supervisory framework, especially with regard to increased exposure from cross border financial activities.
The IMF board also encouraged Nigeria 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 Program (FSAP) recommendations.
Similarly, the IMF 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,’’ the report said.
Also, the IMF board called for strong action to address oil theft and production losses. They advised the authorities to strengthen the regulatory framework by passing a sound Petroleum Industry Bill with enhanced oversight and transparency provisions. The framework for anti money laundering and combating the financing of terrorism could support these efforts.
They further highlighted the need for improving oil revenue management, including by completing the transition from the Excess Crude Account to the Sovereign Wealth Fund. These measures should be supported by full implementation of the Treasury Single Account and the integrated information management systems. Maintaining fiscal discipline in the run up to the elections is also important.
In terms of real GDP, the IMF projected Nigeria’s real GDP to grow at 6.4 percent in 2013 to 7.3 percent in 2014 owing to continued strong performance in the non-oil sector.
The IMF said inflation declined to 7.9 percent at year end, supported by lower food price, fiscal consolidation, and a tight monetary policy stance. ‘’The external current account surplus fell to 3.1 percent of GDP from 7.8 percent at end-2012, but reserves remained at a comfortable 5.6 months of next year’s imports, despite uncertainties about the timing of the tapering of unconventional monetary policies,’’ the report said.
The Fund said Nigeria’s economic growth is 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.
‘’The current account is also expected to improve. Key risks to be managed include: (i) uncertainty about the pace of global recovery; (ii) unwinding of UMP; (iii) persistently lower oil prices; (iv) persistent oil production losses; (v) continuation of insurgency in the North; and (vi) slow implementation of reforms,’’ the IMF affirmed.
