World Bank lists measures to put Nigeria on growth path

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The World Bank on Tuesday listed a raft of bold measures Nigeria must undertake to put the country on a ro­bust and sustainable long-run growth trajectory.

In its latest November 2021 Nigeria Development Update (NDU) report entitled, ‘Time for Business Unusual’, it highlighted urgent policy priorities that can be implemented over the next three to six months in four key areas to achieve the desired growth.

It asked Nigeria to eliminate fuel subsidy while protecting poor and vulnerable house­holds from any inflationary im­pact; reduce inflation through a coordinated mix of exchange rate, trade, monetary and fiscal policies; catalyze private invest­ment by enhancing foreign exchange management, ease trade restrictions, and foster a better business environment; and address fiscal pressures through enhanced domestic revenue mobilisation and re­duce the reliance on CBN defi­cit financing.

According to the Nigeria Development Update, under a business-as-usual scenario, GDP per capita will continue to decline, but reforms could accelerate growth.

It said Nigeria faces a crit­ical choice: it can continue to pursue a business-as-usual poli­cy approach while its economy and job market deteriorates, or it can undertake bold measures that will put Nigeria on a ro­bust and sustainable long-run growth trajectory.

The report said the Nigeri­an government took bold mea­sures to mitigate the effects of the COVID-19 pandemic in 2020 through bold reforms, but the momentum of the reform agenda has waned, undermin­ing Nigeria’s long-term growth prospects.

It noted that the insufficient supply of foreign exchange (FX) issues related to the pre­dictability of exchange rate management, the unsustain­able subsidy on premium mo­tor spirit (PMS), burdensome trade restrictions, and the sizeable fiscal deficit financing by the Central Bank of Nige­ria (CBN) are undermining the business environment, compounding underlying con­straints on domestic revenue mobilisation, foreign invest­ment, human capital devel­opment, and the delivery of public services.

The report indicates that despite a strong initial recovery and resurgent global oil prices, Nigeria’s pre-crisis challenges threaten the post-crisis recov­ery, highlighting the need to depart from business-as-usual policies.

“Even though Nigeria’s economy exited a pandem­ic-induced recession, several challenges persist including double-digit inflation, declin­ing incomes, and rising inse­curity. While the government took bold policy measures to mitigate the impacts of the COVID-19 crisis, the reform momentum has slowed which hinders Nigeria’s ability to reach its growth potential,” said Shubham Chaudhuri, World Bank Country Director for Nigeria.

The report notes mounting fiscal pressures due to low­er-than-expected revenues in 2021 and the rising cost of the premium motor spirit (PMS) subsidy.

It said that in contrast to past periods of high oil prices, this time the government has not been able to fully benefit from the oil boom because oil production has fallen below Nigeria’s estimated capacity and the OPEC+ quota due in part to rising insecurity and the higher cost of the PMS subsidy.

“In 2022 the Federal Gov­ernment plans to spend about N3,000 (US$7) per person for health, while the cost of the PMS subsidy for next year could reach N13,000 (US$32) per person. Not only is the PMS subsidy costly, but it mainly benefits richer households. Nigeria has the opportunity to establish a ‘compact’ with citi­zens that eliminates the subsidy and uses the savings to provide targeted cash transfers to low­er-income-households, invest in job-creating programmes, and improve its fiscal position,” said Marco Hernandez, World Bank Lead

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