- Going back on the ongoing reforms in the economy could worsen Nigeria’s economic woes, the World Bank has warned.
The World Bank Country Director, Dr. Ndiame Diop, gave the warning at the presentation of the latest edition of Nigeria Development Update (NDU) in Abuja on Thursday.
On assumption of office in May 2023, the Bola Tinubu administration initiated a number of reforms to restore macroeconomic stability.
Apart from the removal of subsidy from the pricing template of petroleum products, the Central Bank of Nigeria (CBN) rolled out major foreign exchange policy reforms aimed at unifying the official and black market exchange rates, ensuring better regulation of the market to establish market-reflective official exchange rate.
The new policy on petroleum products has since driven retail pump prices of petrol from N187 per litre to the current average of N1,300 per litre, resulting in galloping inflation and excruciating high cost of living for the people.
The reform in FX has been able to stabilise the exchange rate of the Naira at an average of N1,650 to the dollar.
Despite the negative impact of the reforms on the people, the World Bank insists it remains the best route to sustainable recovery.
“We need to stick to the plan and keep moving forward. Turning back or opposing the reforms will only make things worse,” Diop said.
“We are seeing, like in all fiscal positions driven by high revenues, a reduction in borrowing from ways and means, and a stronger external position used by the foreign reserve.
“The reforms that started in May 2023 have clearly helped prevent the fiscal crisis and are stabilizing the Nigerian economy.”
The World Bank Country Director cited the improvement in the debt service to revenue ratio, which he noted was about 100% in 2022, and has reduced to below 60% this year.
“Staying the course is essential for securing a better future for all Nigerians. But the effort must be accompanied by reforms enabling the private sector to create more embedded jobs with targeted support to youth and the old,” he said.
The World Bank, he said, is looking forward to hearing their insights in the government action plan to consolidate the early gains and keep Nigeria on the path of progress.
The scale of the challenges and opportunities, he pointed out, require strong collaboration between government, private sector, development partners, and the Nigerian people.
The Chief Economist of the Bank, Dr. Alex Sienaert, lamented a situation where the World Bank was not being seen as the most popular institution in Nigeria these days, apparently as a result of of its recommendations in the face of the policies that have inflicted enormous pressures on the people.
“The widespread belief that foreign interests are keeping Nigeria down is not correct. The World Bank team, including me, think that the president’s signature reforms are trying to end this crisis. It’s very difficult. It’s not going to be possible overnight. But there’s a chance.
“If that chance could crystallize, it would put Nigeria on a new direction and transform this country. And that would transform Africa and contribute to the whole world. Nigeria and Africa would be where they should be, which is defining the global frontier,” he said.
Nigeria, he said, was on the brink of a full-blown fiscal crisis last year, adding the difficult reforms have pulled the country from the brink.
The FX reforms, he said, helped the CBN achieve a market-reflective exchange rate, adding that fiscal consolidation appears underway after fiscal deficit shrank from 6.2% of GDP in the first half of last year to 4.4% in the first half of this year.
Lead Economist for Poverty and Equity at the World Bank, Utz Pape, said the government has acknowledged the pains of Nigerians and has rolled out a cash transfer to 15 million households.
Pape said what Nigeria need is a jobs growth agenda that is inclusive.
“So Nigeria, I will not tell you anything new. In fact, in 2034, there will be 12 million more entrants into the labour market than in 2024. So the youth, the labour market, they will need jobs. They will need opportunity. Otherwise, they will not be able to escape poverty. This is fundamentally important for Nigeria to be able to benefit from its demographic dividend. Otherwise, the demographic dividend will become a demographic burden,” Pape said.
