Hope seen for cheaper funds as Nigeria keys into IMF data transparency standards

There are hopes for Nigeria and other emerging market economies that are transparent with their data to borrow cheap from international multilateral institutions, according to a research by the International Monetary Fund (IMF).

“Our new research shows that greater data transparency leads to a 15 percent reduction in the spreads on emerging market government bonds one year after the transparency improvements are made,” the IMF said in a report, ‘Transparency Pays: Emerging Markets Share More Data’.

The IMF said Nigeria and 12 other African countries, including Senegal, Sierra Leone and Tanzania are fast implementing its enhanced General Data Dissemination Standard, which could lower the cost of borrowing.

“These countries use an IMF data standards initiative, the Special Data Dissemination Standard, to compile their data, which they publish on national websites,” the report stated.

Recent and updated publications of data by the Yemi Kale-led Nigerian Bureau of Statistics (NBS) on GDP growth, consumer price index, employment and the Central Bank of Nigeria (CBN) regular disclosures of monetary policy thrust through regular reports and its MPC meetings, as well as public disclosures of budgets by some states of the federation, are among some of the transparent initiatives that would lower the cost of borrowing for the country.

The Bretton Wood institution said such publications provide policy makers, investors, rating agencies, and the public with easy access to information critical for monitoring economic conditions.

The above and a plan to publish full Advance Release Calendars, would commit them to discipline in data publication, thereby reducing uncertainty for investors, which should further enhance data transparency.

Using data from 26 countries, the IMF said it found a statistically significant effect of data transparency reforms on government bond spreads, which is the difference between the interest rate on a US government bond and that on a bond issued by another country. It is used as a measure of a country’s risk when it comes to investing.

“While our findings point to the benefits of subscribing to the Special Data Dissemination Standard, we see advantages from adopting a less demanding transparency reform, such as the enhanced General Data Dissemination System,” the IMF said, adding that as of June 2017, all the IMF data standards initiatives covered 146 emerging markets and developing countries.

It said since late 2015, 20 of these countries have implemented the enhanced General Data Dissemination Standard to encourage countries with lower statistical capacity to disseminate the data used in their policy dialogue with the IMF, noting that the initiative has been popular, especially in Africa, and the next wave is expected in the Asia-Pacific region.

In the Asia-Pacific region, Bhutan, Nepal, and Samoa, have also implemented it, and Micronesia is expected to by the end of July 2017. Bangladesh, Cambodia, Maldives, Mongolia, and Myanmar are all in the pipeline.

“Transparency through reliable data means policymakers and the public can pursue better policies, and create a more resilient economy,” the IMF noted.