Nigeria - National Economic Empowerment and Development Strategy and joint IDA-IMF staff advisory note

The 2004 National Economic Empowerment and Development Strategy (NEEDS) focuses on Nigeria's commitment to sustainable growth, and poverty reduction. NEEDS is based on three pillars: 1) empowering people and improving social service delivery; 2) fostering economic growth, in particular in the non-oil private sector; and, 3) enhancing the effectiveness and efficiency of government, while improving governance. This Joint Staff Advisory Note (JSAN) was prepared in response to two recent events: the e-classification of Nigeria as an IDA-only country, and the authorities' request for the International Monetary Fund (IMF) to support their reform program under a proposed non-borrowing instrument. The JSAN presents an assessment of the strategy itself, progress in its implementation to date, and the staffs' advice on key priorities for strengthening NEEDS and its implementation. Poverty diagnosis in NEEDS is constrained by weak statistics on poverty, particularly on income poverty. The National Bureau of Statistics (NBS) estimates that in 2004, 54 percent of Nigerians lived below the relative poverty line of 2/3 of per capita household expenditures, while 22 percent lived below the extreme relative poverty line of 1/3 of average per capita household expenditures. To move towards an effective poverty monitoring system, it is recommended the government strengthen its framework for generating, regularly updating, and disseminating income and non-income poverty data. Nonetheless, the staffs support the thrust of the macroeconomic policies proposed in the NEEDS document. The medium-term macroeconomic framework presented in the NEEDS document is broadly in line with staff projections under a policy reform/high growth scenario. NEEDS provides for a considerable increase in public investments, which primarily reflects the government's desire to address the country's vast development requirements. The staffs recommend that the federal government accelerate the preparation of the first annual progress report and revise and update NEEDS based on the recent implementation experience. In sum, Nigeria's poverty reduction strategy is a major first step forward in defining a credible agenda and framework for economic growth and poverty reduction. At the same time, the staffs point to considerable risks for successful implementation of the NEEDS, and fundamental risks associated with a possible negative oil price shock. The report highlights the need to: maintain sound macroeconomic policies; strengthen the basis for private sector growth; improve transparency and accountability of the public sector; and, secure adequate resource allocations for the health and education sectors.