By Bassey Udo
Nigeria can grow its economy and lift at least 80 million people living in extreme poverty if it implements a comprehensive set of bold reforms in a timely manner, the World Bank has said.
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The latest Nigeria Country Economic Memorandum (CEM) describes the main trends, challenges, and opportunities for growth and job creation in Nigeria over the past 20 years and proposes a path forward with actionable policy options.
The report said despite Nigeria’s vast natural resources and a young, entrepreneurial population, development in the country has stagnated over the last decade and the country is failing to keep up with the gross domestic product (GDP) growth of its peers.
Despite declining private investment and demographic pressure, which pushes young Nigerians to pursue opportunities overseas, the report said Nigeria remains a rising growth star globally in the 2000s due to the implementation of several structural reforms in a context of increasing oil prices.
Between 2001 and 2010, the report said Nigeria ranked among the top 15 fastest growing economies in the world, with an average annual growth rate of 8.2 percent.
However, the report said the hard-won income gains from the 2000s evaporated between 2011 and 2021, due to the lack of deeper structural reforms, global shocks, conflicting macroeconomic policies, and increased insecurity percent.
“Creating more and better jobs is a necessary condition for accelerating poverty reduction and economic transformation in Nigeria. Unlocking private investment will enable the creation of more and better-quality jobs in a sustainable manner.
“To catalyze private investment and offer more opportunities to the youth, the priority is to restore and preserve macroeconomic stability, which has weakened in recent years due to conflicting monetary policy goals, over-reliance on crude oil exports, limited fiscal space, and restrictive trade policies,” its said.
The CEM outlines several policy proposals focused on boosting Nigeria’s macroeconomic stability and overall business enabling environment, such as: improving the exchange rate system; removing barriers to trade; increasing non-oil revenues; and tackling inflation which has pushed an estimated 8 million Nigerians into poverty between 2020-2021.
In addition, the report highlighted the importance of strengthening the rule-of-law and social cohesion and enhancing Nigeria’s competitiveness by addressing key constraints to private investment, such as unreliable power supply, protectionist trade regulations, poor access to finance, and low digitalization. While there is no silver bullet to accelerate growth, Nigeria can become a rising growth star again if it implements a comprehensive set of bold reforms in a timely manner.
The theme of the latest World Bank Nigeria Development Update (NDU) is “Nigeria’s Choice”, whether to continue down this path, or to chart a new course and rise to its tremendous potential.
The country’s economic growth slowed on the back of declining crude oil output, which dropped from 1.8 million barrels per day to about 1.65 million barrels per day, amid moderating non-oil activity.
Also, real gross domestic product (GDP) rose by 3.1 percent year-on-year (y-o-y) in the first three quarters of 2022, little more than the annual population growth of 2.6 percent. Nigeria’s growth performance, and its fiscal and external buffers, have decoupled from high oil prices, and macroeconomic vulnerabilities have increased.
To urgently address the key drivers of the decoupling and make reforms to strengthen Nigeria’s macro-fiscal framework, the World Bank report welcomed the federal government’s Strategic Revenue Growth Initiative (SRGI) as a good first step, reversing the previously declining trend in non-oil revenues as a share of GDP, adding that this initial success needs to be sustained and built upon.
“Nigeria has a choice to implement critical macroeconomic and structural reforms that can reduce crisis vulnerabilities and increase growth. Doing so will lift per-capita incomes, sustainably reduce poverty and deliver better life outcomes for many Nigerians”, World Bank Country Director for Nigeria, Shubham Chaudhuri, said.
“Urgent business-unusual choices are needed to avoid a scenario in which up to 80 million working-age Nigerians do not have a full-time job by 2030 and up to 23 million more Nigerians could be living in extreme poverty.”
Inflation has surged to 21.1 percent y-o-y in October 2022 and 21.47 percent in November, pushing as many as five million more Nigerians into poverty since the start of 2022.
Fiscal pressures have intensified, exacerbated by the soaring cost of the petrol subsidy, which would likely exceed N5 trillion this year.
Despite higher oil export revenues, official reserves have fallen, and the currency market is severely distorted, undermining the business environment and investment. The weaknesses in the macroeconomic policy framework are suppressing growth and making Nigeria more vulnerable to shocks.
“Previous episodes of reform progress and high growth, such as in the 2000s, show that Nigeria’s economy can turn around quickly, and its tremendous economic potential that could be unleashed is well-known.
“If Nigeria chooses to make reforms that stabilize its macro-fiscal policy settings and support investment, this would be transformative for 80 million poor Nigerians, for Nigeria as a whole, and for Africa.” World Bank Lead Economist for Nigeria and co-author of the Report, Alex Sienaert, said,
The Report presents the reform choices Nigeria can make in three key areas, namely restoring macroeconomic stability through measures to reduce the domestic and external imbalances.
This will require a coordinated mix of exchange rate, trade, monetary, and fiscal policies, notably including adopting a single, market-responsive exchange rate, eliminating the petrol subsidy, and increasing oil and non-oil revenues;
Also, boosting private sector development and competitiveness by eliminating structural constraints that hinder productivity; and expanding social protection to protect the poor and most vulnerable.
