The World Bank has lauded the economic reforms spearheaded by the Bola Tinubu administration, asserting that the measures are beginning to yield positive impacts such as macro-economic stabilisation and pro-people priorities.
The commendation was part of the insights shared in the 45-page bi-annual Nigeria Development Update for December 2023, titled "Turning the Corner: From Reforms and Renewed Hope to Results," unveiled at the Yar’Adua Centre in Abuja on Wednesday, December 13, 2023.
The World Bank's analysis emphasizes that the continuation of these challenging reforms is crucial for enhancing Nigeria’s growth prospects and reducing poverty.
The report highlighted key policy decisions taken by the incoming administration in May and June 2023, resulting in price and exchange rate adjustments in the latter part of the year.
While acknowledging the temporary pain caused by these adjustments, the World Bank stressed that they were essential to avoid a fiscal crisis and enable faster growth.
The reforms included ending petroleum subsidies and adopting a market-reflective exchange rate, resulting in a 163% increase in gasoline prices and a 41% depreciation in the Naira to the US dollar official exchange rate. By October 2023, Nigeria's inflation had risen to 27% year-on-year.
To mitigate the impact on vulnerable households, the government initiated targeted cash transfers of ₦25,000 (about $32) per month to 15 million recipients and their families for three months. The World Bank stated that the total cost of these transfers is similar to what Nigeria was previously spending on subsidies every three months.
While acknowledging the progress made by the Federal Government in ongoing economic reforms, the World Bank cautioned against premature celebrations. The foreign exchange market remains volatile, and further clarity is needed on oil revenues, including fiscal benefits from the petroleum subsidy reform. Inflation levels in Nigeria remain at record highs.
The World Bank urged a closely coordinated mix of fiscal, monetary, and foreign exchange policies to reduce inflation and achieve macroeconomic stabilisation.
Sustaining savings from the petroleum subsidy reform and implementing revenue-led fiscal consolidation were identified as crucial measures to prevent escalating debt levels.
The multilateral agency underscored the importance of additional measures to increase market stability in the government's exchange rate policy.
It stated the need for a well-articulated policy direction and strategy to build market confidence and expedite economic stabilisation.
Looking forward, the World Bank stressed that Nigeria must extend its reform momentum to address longstanding structural constraints and propel the nation's economy toward high and inclusive growth. The agency recommended strengthening public services, reducing insecurity, improving the business environment, and increasing openness to trade to unlock stronger growth and allow economic development to regain momentum.