US embassy cable - 01ABUJA2518

C O N F I D E N T I A L ABUJA 002518 
 
SIPDIS 
 
 
E.O. 12958: DECL: 10/03/2011 
TAGS: EFIN, ECON, PREL, NI 
SUBJECT: NIGERIAN PERSPECTIVES ON PROSPECTS FOR A RENEWED 
IMF PROGRAM 
 
 
REF: (A) ABUJA 2301 (B) ABUJA 2338 
 
 
1. (U) Classified by Ambassador Howard F. Jeter for reasons 
1.5 (b) and (d). 
 
 
2. (C) In an October 2 telcon with Debt Management Office 
Director-General Akin Arikawe, EconOff learned that, from 
recent meetings with the IMF and USG officials in Washington, 
the GON is cautiously optimistic of a renewed IMF program. 
The IMF, he said, "does not have sufficient ground to say the 
SBA has failed," when in fact the GON made significant 
progress on most benchmarks.  Although Arikawe admitted that 
the GON had failed to stabilize the country's macroeconomic 
environment over the past 8 months, he believed it possible 
that the GON could adopt a new framework between now and 
December that would alleviate the imbalances in the system. 
He said that "President Obasanjo is more committed now than 
ever before." 
 
 
3. (C) In particular, Arikawe said the GON could improve its 
performance on reducing excess liquidity and reduce the 
disparity between parallel and official exchange rates.  He 
underscored this second issue as the most important raised by 
IMF officials during the recent GON visit to Washington. 
Arikawe opined that there was strong political sentiment 
attached to the current exchange rate, with some political 
leaders of the position that the Naira's official rate was 
already undervalued.  Arikawe believed, however, that the 
official rate for the Naira needs to be weakened further -- 
to N115 per USD, rather than the current N112 -- while the 
parallel market rate should appreciate.  He said the parallel 
rate could strengthen to N130 per USD under the current 
psychology of falling oil prices if the GON were careful 
about disbursing excess oil revenues to the State Governments 
(reported septel) in small, staggered tranches.  On monetary 
policy, Arikawe averred that the CBN's poor performance on 
mopping up excess liquidity during the first half of the year 
could not be allowed to continue.  He reported that the CBN 
had purchased more certificates on the open market than it 
had sold, effectively injecting N20 billion into the market. 
 
 
4. (C) Arikawe commented that the IMF team was scheduled to 
visit Abuja the week of October 8 and would have the task of 
determining how a new program could be structured: whether it 
would be short or medium term and what specific benchmarks 
could be met under what timeline.  Arikawe also reported that 
U.S. Treasury DAS Radelet said that the Paris Club may decide 
to meet to determine whether Nigeria might qualify for debt 
reduction under a new IMF program.  The original objective of 
implementing the IMF's one-year Stand-by was to achieve an 
IMF medium-term program that would then provide the basis for 
debt reduction discussions with Paris Club creditors. 
Arikawe was hopeful that a renewed IMF program would enable 
these discussions to begin. 
Jeter