Cablegate: Nigeria: Imf Forecasts Slowdown
PP RUEHMA RUEHPA
DE RUEHUJA #2386 3460842
ZNR UUUUU ZZH
P 110842Z DEC 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC 4651
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHOS/AMCONSUL LAGOS 0412
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS ABUJA 002386
DEPARTMENT PASS TO USTR AGAMA
TREASURY FOR PETERS, IERONIMO, HALL
DOC FOR 3317/ITA/OA/KBURRESS
DOC FOR 3130/USFC/OIO/ANESA/DHARRIS
E.O. 12958: N/A
TAGS: EFIN ECON EINV EPET PGOV NI
SUBJECT: NIGERIA: IMF FORECASTS SLOWDOWN
REF: A. ABUJA 2365
B. ABUJA 1289
1. (SBU) Summary: Despite Nigerian government (GON) official
statements to the contrary, the International Monetary Fund (IMF)
forecasts rising inflation. Following its November 10-25 visit in
the country, IMF says Nigeria's economy is slowing down because of
the global financial crisis. The effects of falling oil prices will
push GON revenues downward because 95% of revenues come from oil
exports. End Summary.
2. (SBU) The relationship between Nigeria and the IMF is one of
"surveillance" with IMF visits once a year to assess conditions.
The GON has considered a new policy support instrument (PSI) with
the IMF, but has not yet spelled out what type of policies or
reforms it would be interested in.
IMF Sees Slow Down
3. (SBU) In November an IMF team conducted a fact finding mission on
macroeconomic and structural issues in Nigeria. At a briefing on
November 25, the IMF team commented that the global financial crisis
is affecting Nigeria. The IMF concluded that non-oil GDP growth
declined from 8% in 2007 to 6.8% in 2008 and oil production will
decline in 2008, but should increase in 2009. Total GDP growth is
expected to be 7.2% with inflation rising in 2009.
4. (SBU) The IMF team categorized the 2008 budget as expansionary,
and was concerned with implementation. The IMF estimated that
only as high as 50% of the capital budget might be implemented.
(Comment: Mission expects that 2008 budget implementation will be
much less than optimistic IMF estimates. Most likely 30% of the
2008 budget has been implemented. End Comment.) IMF is also
concerned with implementation in the 2009 budget, which was
submitted to the National Assembly on December 2 for deliberations
(reftel A). The IMF team highlighted that distributions from the
excess crude account (ECA) have been very slow. The GON should
concentrate on funding infrastructure and allocating significant
resources for Millennium Development Goals.
5. (SBU) The IMF advised that there are five key areas that the GON
should focus on to increase GDP:
-- Efficient oil revenue allocations;
-- Improving budget procedures;
-- Reforming tax policy;
-- Dealing with petroleum subsidies;
-- Increasing Public-Private Partnerships.
6. (SBU) Comment. Continued discussion with the IMF and GON on a PSI
is a positive step. The GON should propose a new PSI in order to
increase confidence in GON policy making. End Comment.
7. (U) This message was coordinated with ConGen Lagos.