RESTRICTED
WORLD TRADE WT/BOP/6/Rev.1/Add.2
28February 1997
ORGANIZATION(97-0855)
Committee onBalance-of-Payments Restrictions
CONSULTATION WITH NIGERIA UNDER ARTICLE XVIII:12(b)
OFTHE GATT 1994 AND RELATED UNDERSTANDING
Basic Document Supplied byNigeria
Addendum
I. OVERVIEW OFMACROECONOMIC PERFORMANCE IN1996
1. Alargemeasure ofmacroeconomic stability wasachieved during 1996. Theyearalsowitnessed
continuous progress intheeconomy. TheGross Domestic Product (GDP) grew by3.25percent,
compared withthe2.2and1.3percentgrowth achieved in1995and1994, respectively. Thegrowth
inoutput reflected improved production invitalsectors oftheeconomy. Themanufacturing and
agricultural sectors grew by0.7percentand3.79percent, respectively, compared to-5.5percent
and3.4percentrecorded in1995. Output ofthemining sector increased by3.4percent,indicating
abetter performance thanthe2.6percentachieved in1995. Capacity utilization which was29.3per
centin1995 increased to32.5percentin1996, although farbelow theinstalled capacity.
2. TheGDPisprojected toincrease byabout 5.5percentin1997, when theimpact ofthepolicies
andprogrammes, especially those aimed atstimulating non-oil activities, begin toyield results.
Moreover, itisalsoexpected thatthepolicy measures andprogrammes willhaveanimpact onthe
lifeofNigerians.
3. Thelevelofinflation wasbrought under control in1996. Itdeclined steadily from 72.8per
centinDecember 1995, toabout 28percentattheendofDecember 1996. Thedramatic fallinthe
inflation ratewasattributed tothepositive impacts ofthemacroeconomic policy measures thatwere
putinplace. Monetary andfiscal policies wereharmonized, resulting inrelative stability ininterest
andexchange ratesandprices.
4. Although alarge measure ofmacroeconomic stability wasachieved in1996, theNigerian
economy isstillcharacterized byanumber ofsocio-economic problems. These include: import
dependence, dependence onasingle export commodity (oil), weak industrial base, lowlevel of
agricultural production, weak private sector andheavy external debtburden, aswellasregional
inequalities andrural-urban migration, sluggish growth, inefficient public utilities andlowquality of
social services. Other socio-economic problems include unemployment andunder-employment and
theabsence ofavibrant middle class.
II. FISCAL OPERATIONS OFTHE FEDERAL GOVERNMENT
5. Thefiscal operations oftheFederal Government improved considerably in1996 resulting in
anoverall fiscal surplus ofN37billion. Total federally-collected revenue increased by33.3percent
overthelevel in1995. In1995, amodest surplus ofonlyN1billion of.06percentofGDP was
accomplished, while there was,infact,ahugh deficit ofN81billion in1994. Theimprovement inWT/BOP/6/Rev.1/Add.2
Page2
government fiscal operations wasattributed tohighlevelofdiscipline andaccountability. Astatement
oftheFederal Government Consolidated Account isshown asAnnex I.
III. BALANCE OFPAYMENTS
6. In1995, anoverall balance ofpayments deficit of$2,774.4 million (N195,216.3 million) was
recorded andfinanced bydeferment ofdueobligations onexternal debtanddrawdown onexternal
reserves. Thecurrent account deficit stood at$3,615.1 million (N254,366.7 million) while thecapital
account hadasurplus of$732.6 million (N64,527.9 million). Official external reserves stood at
N31,556.3 million ($1,441.0 million).
7. Although thedataofthebalance ofpayments for1996isnotyetavailable, thelevelofofficial
reserves stood at$4,086.0 million compared with$1,441.0 million recorded attheendof1995.
IV. PUBLIC DEBT
(a) External Debt
8. Theservicing ofexternal debtremains amajor source ofresource outflow. Attempts are
currently being made tosecure IMFsupport andsubsequently debtrelief from creditors. However,
forthefirsttimeinfiveyears andwithout fresh debtrescheduling, Nigeria succeeded inreverting the
trend ofrising external debtstock from$32.584 billion in1995to$28.060 inNovember 1996. This
wasachieved through theimplementation ofsuchstrategies likerestraint onexternal borrowing;
reconciliation ofdebts owed totheParis Club; conversion ofParis Club debts within theDebt
Conversion Programme, andappraisal oftheprojects financed withInternational Capital Market (ICM)
Loans inorder todetermine whether thecountry obtained commensurate value fromtheborrowings.
Allthese steps weretaken in1996 towards theresolution oftheproblem ofexternal debtover-hang.
(b) Domestic Debt
9. AtotalofN5billion wasdisbursed in1996 aspartpayment forgenuine debts owed tolocal
contractors, andprovision hasbeenmade inthe1997 budget fortheoutstanding balance ofabout
N3billion. Similarly, Government willpayN7,692 billion (principal only) astotalindebtedness of
Federal andState governments tobanks inNigeria inthefirstquarter of1997.
V. FOREIGN EXCHANGE MARKET
10. Theforeign exchange market remained stable in1996. Consequently, government willcontinue
in1997withitspolicy of"guided deregulation" oftheoperations ofthemarket. Thetwo-tier exchange
ratesystem would bemaintained withtheultimate aimoftheirsubsequent merger. Intheattempt
tofurther deregulate theoperations oftheforeign exchange market, thefollowing restrictions have
beenremoved witheffect from 1January 1997:
(i) payment offees,tariffs andother charges inforeign currency inrespect ofservices
rendered inNigeria isnowoptional andatthediscretion oftheparty making the
payment;
(ii) thesuspension ofbillsforcollection isnowlifted andhenceforth, billsforcollection
would bepaidthrough theAutonomous Foreign Exchange Market (AFEM);WT/BOP/6/Rev.1/Add.2
Page3
(iii) thecurrent limitation onpersonal travelling allowance isnowlifted. Henceforth, these
transactions should becarried outattheAFEM withnolimitation;
(iv) therestriction onhome remittances byforeign nationals currently limited to75percent
oftheirsalaries isnowremoved; and
(v) approval hasbeengiven forremittances through AFEM foralllevels ofeducational
studies inoverseas institutions.
VI. MONETARY AND CREDIT POLICIES
11. Thefiscal andmonetary measures introduced during theyearledtofinancial andeconomic
discipline. Monetary growth exceeded thetargets asboththenarrow money (M1) andbroad money
(M2) roseby28.6and29.8percent,respectively attheendoftheyearcompared withtherespective
maximum targets of14.5and16.8percentforthewhole year. Nevertheless, theobjective ofreducing
inflation wasachieved because netdomestic credit stock for1996 wasreduced byover70percent
from thelevelin1995.
12. In1997, monetary andcredit policies aredesigned tobring about further reduction intherate
ofinflation, induce higher rateofgrowth ofoutput andemployment, andstrengthen theexternal sector
andtheNaira exchange rate. Thefollowing policy targets havebeensetfor1997:
(i) growth innarrow money (M1) ofnotmore than13.5percent;
(ii) growth inbroad money (M2) ofnotmore than15.7percent;
(iii) anincrease inaggregate domestic credit (net)ofnotmore than20percent; and
(iv) reduction ininflation rateto15percent.
13. Torealisetheseobjectives,thegovernmentshallcontinuewithindirectmonetarycontrolthrough
theOpen Market Operations (OMO), cashreserve requirement ofcommercial banks at8percent,
andtheliquidityratioofCommercialandMerchantBanksat30percent,includingtotaldepositliabilities
aswellascertificates ofdeposit andpromissory notes heldbythenon-bank public. Discount houses
willalsoinvest aminimum of70percentoftheirtotaldeposit liabilities intreasury bills.
VII. INTEREST RATE POLICY
14. Theremoval ofadministrative controls oninterest ratewhich wasundertaken witheffect from
1October 1996, willbemaintained in1997. However, Central Bank ofNigeria (CBN) willcontinue
toinfluence interest ratesthrough itsintervention withvarious instruments. Meanwhile, theMinimum
Rediscount Ratewhich isthenominal anchor ofCBN'sinterest ratepolicy willbemaintained at
13.5percentandtheTreasury BillRateat12percent. Inthelightofexchange rateandinflation
ratedevelopments andtheerosion ofthecapital funds ofbanks thatarenotrecapitalized before
31March 1997 willbeliquidated.
VIII. CENTRAL BANK 'SROLE
15. Witheffect from1January 1997retail banking activities oftheCentral Bank ofNigeria would
stop. Federal Ministries, Parastatals, andextra-Ministerial Departments andallLocal Governments
mayselect abank oftheirchoice from those banks approved bytheGovernment. TheCBN will,
however, retain thefollowing government accounts:WT/BOP/6/Rev.1/Add.2
Page4
(i) consolidated Revenue Fund Account;
(ii) Federal Sub-Treasury Account;
(iii) Federal Inland Revenue Service Account;
(iv) Federation Account;
(v) Nigeria Customs Service Account;
(vi) Federal Government Petroleum Product Main Account;
(vii) NNPC Main Account;
(viii) Presidential Task Force Account;
(ix) NNPC Domiciliary Account;
(x) Petroleum Trust Fund Account.
16. TheCBN hasalsobeen brought under theFederal Ministry ofFinance witheffect from
1January 1997 andwould report totheHead ofState through theMinister ofFinance. TheCBN
Decree No.24of1991, andtheBanks andOther Financial Institutions Decree (BOFID) No.25of
1991havebeenamended accordingly. TheCBN willnowhaveaBoard ofDirectors withapart-time
Chairman while theGovernor oftheCBN willbetheChairman oftheBoard ofGovernors.
IX. REVIEW OFCUSTOMS AND EXCISE TARIFFS
(a) Tariff Changes
17. Customsandexcisetariffswerereviewedgenerallydownward.Witheffectfrom1January1997,
import dutyratesapplicable tothefollowing shallbeasfollows:
Duty Rate
(i) Writing Ink-HSCode 3215.9000 0%
(ii) Talc(Crushed orPowdered)
HSCode 2526.2000 25%
(iii) Electrical Accumulators (Automotive Batteries)
HSCode 8507.9000 45%
(iv) Textile fabrics Chapter 50-60
- HSCode 5208 -woven fabrics ofcotton, containing
85%ormore ofcotton etc. 45%
- HSCode 5208.1100 -Plain woven -5212.2500 45%
- HS5407 -Woven fabrics ofsynthetic filament yarnetc.
HSCode 5407.1000 45%
HSCode 5408.3400 45%
- HS5701 -Carpets andother textile floor coverings, knotted
whether ornotmade up
HSCode 5701.1000 45%
HSCode 5705.0000 45%
HS5801 -Woven pilefabrics andchenille fabrics
HSCode 5801.1000 45%
HSCode 5804.3000 45%WT/BOP/6/Rev.1/Add.2
Page5
Note:
Thecurrent ratesofdutyonarticles oftextiles remain unchanged buttheyareremoved from import
prohibition.
(v) - Spare parts forcommercial aircrafts -HSCode 8803.1000
to8803.3000 0%
(vi) - Agricultural items:
- Fertilizers -HSCode 3101.0006 to3105.9000 10%
- HSCode 3808.1200 Agricultural Insecticides 0%
- HSCode 3808.2000 Fungicides 0%
- HSCode 3808.3000 Herbicides 0%
- HSCode 3808.9000 Others 0%
Note:
HSCodes 3808.1900 and3808.4000 arenotamended.
- Machinery equipment tools -HSCode
8432.1000 to8437.9000 0%
- Tractors -HSCode 8701.1000 to8701.9000 0%
(vii) Machinery, plant equipment imported byindustrial establishment
using gasinthemanufacturing process. 0%
(viii) Water Treatment Chemicals
- HSCode 2801.1000 -Chlorine 0%
- HSCode 2806.1000 -Hydrogen Chloride 0%
- HSCode 2833.2200 -Sodium sulphate ofAluminium 0%
- HSCode 2833.3000 -Sodium Sulphate Alums 0%
(b) Excise duty
18. With effect from 1January 1997, textiles isexempted from paying excise duty.
(c) Removal from Import Prohibition List
19. Witheffect from1January 1997, thefollowing products areremoved fromImport Prohibition
Listandwillbeassessed todutyratesasfollows:
(i) Textiles fabrics andarticles 45%
(ii) Furniture:
-Pre-fabricated building 45%
(iii) Other furniture 65%WT/BOP/6/Rev.1/Add.2
Page6
(d) Import Duty Rebate
(i) Import dutyrebate willbereduced from 35to25percentin1997.
(ii) Synthetic fibreorpolyester tothelistofitems forimport dutyrebate.
(iii) Items removed from Import Prohibition Listarenoteligible forimport
dutyrebate.WT/BOP/6/Rev.1/Add.2
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Annex I
Statement offederal government consolidated account 1996
1995 1996
Inflation rate 72.8% 28%
Gross domestic product 2.2% 3.25%
Surplus N N1billion N37billion
External reserve $1.441 billion $4.086 billion
Oilrevenue billion $7.899 billion $10.891 billion
Nonoilrevenue N N81billion N1.08billion
Interest rate 21% 16%-21%
Recurrent expenditure N N66billion N79billion
Capital expenditure N44billion N51billion
External debt $32.6billion $28billion
Exchange rate Stable StableWT/BOP/6/Rev.1/Add.2
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Annex II
Selected macroeconomic indicators
1991 1992 1993 1994 1995 1996a
Domestic output andprices
RealGDP (growth rate%) 4.7 3.0 2.3 1.3 2.2 3.0
Oilsector 9.2 2.7 -2.6 -6.0 098 4.0
Non-oil sectors 4.0 3.0 3.1 1.6 2.4 2.9
Oilproduction (mbd) 1.89 1.94 1.96 1.9 11.88 2.0
Manufacturing capacity utilization (%) 39.4 41.8 37.2 30.4 29.3 32.6
Inflation rate(%) 13.0 44.6 57.2 57.0 72.8 38.0
Money andcredit (growth rate%)
Netdomestic credit 45.3 69.1 91.4 29.2 30.0 7.6
Netcredit toGovernment 82.9 109.7 121.8 27.7 18.4 1.0
Credit toprivate sector 23.7 34.6 51.8 32.2 61.8 18.0
Narrow money (N1) 32.6 52.8 54.4 47.8 8.1 23.0
Broad money (N2) 32.7 48.2 49.8 39.1 10.3 19.7
External sector
Current account balance (inpercentofGDP) -3.9 -0.9 -2.4 -5.4 -5.8 -0.9
Overall balance (inpercentofGDP) -4.9 -18.3 -5.1 -4.7 -3.1 -4.8
External reserves (US$ million) 4,487 713 1,330 1,659.0 1441.0 2,321.0
Average oiloutput price (US$/barrel) 20.5 19.8 17.5 16.2 16.7 19.4
Average official exchange rate(N/$) 9.9 17.3 22.0 21.9 21.9 21.9
Federal Government finances (inpercentofGDP)
Overall fiscal balance -11.0 -7.1 -15.4 -7.7 -0.5 0.1
Primary balance -2.9 -1.7 -1.8 -0.1 4.4 3.8
Netdomestic bank borrowing 9.9 6.1 14.0 6.4 2.9 0.1
Domestic debtstock 35.9 29.3 37.2 37.3 28.5 n.a.
External debtstock 101.2 98.4 90.2 71.0 50.0 n.a.
Social indicators
GDP percapita (=N=) 1,069 1,088 1,089 1,060.0 1,073.6 1,090.7
Population growth rate(%) 2.1 3.2 2.1 2.1 2.1 2.1
Lifeexpectancy atbirth(years) 51 52 52 52.0 52.0 52.0
Adult literacy rate(%) 54 54 55 55.0 55.0 55.0
Human development index 0.328 0.348 0.389 0.384 0.384 0.384
a Note: 1996 figures areprovisional
n.a. Notavailable.WT/BOP/6/Rev.1/Add.2
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Annex III
Selected macroeconomic indicators, 1991-96
(Percent)
1991 1992 1993 1994 1995 1996
T A T A T A T A T A T A
Growth inMonetary Aggregates
Money Supply (M1) 14.6 32.8 24.3 66.4 20.0 54.6 21.4 47.8 9.4 8.1 14.5 28.6
Money Supply (M2) - 32.7 26.8 49.2 18.0 49.8 14.8 39.1 10.1 10.3 16.8 29.8
Domestic Credit 10.6 46.3 13.2 73.0 17.5 75.9 9.4 29.2 11.3 36.9 12.0 12.0
Credit toPrivate Sector 16.4 23.7 17.7 34.7 20.0 16.6 32.6 28.3 21.9 51.8 29.5 18.4
Credit toGovernment 0.0 82.5 7.7 109.6 14.6 120.7 0.0 27.7 5.6 27.6 0.0 16.9
Fiscal Deficit -GDP Ratio -11.9 -10.2 -15.4 -7.7 0.1 1.9
RealGDP Growth 4.7 3.9 2.3 1.3 2.2 3.7
Manufacturing Capacity Utilization 39.4 41.8 37.2 30.4 29.3 32.5
Inflation Rate 13.0 44.6 57.2 57.0 72.8 29.2
Average Exchange Rate(=N=$)
-Official AFEM 9.9995 17.2985 22.0468 21.8861 21.8861 21.8861
-AFEM 81.1491 81.2527
Balance ofPayments Position (%ofGDP)
-Overall -4.9 -18.3 -5.1 -4.7 -3.1 -5.6
-Current Account -3.9 -0.9 -2.4 -5.4 -5.6 -0.7
External Reserves (US$ million) 4.487 71.3 1330 1659 1441 4074.7
T=Target.
A=Actual.
Source: Central Bank ofNigeria Publications.