The World Bank has highlighted three major reforms that the incoming administration of Bola Tinubu needs to undertake if it is to address Nigeria’s economic challenges.
In its April 2023 Macro Poverty Outlook, the World Bank listed an increase; tightening monetary policies to reduce inflation, unifying the multiple foreign exchange windows and adopting a single, market-responsive exchange rate.
The Wasghinton based lender also stated that increased insecurity as well as adverse climate change effects could further dampen the economic outlook for Nigeria.
According to the global lender, oil price booms have previously supported the Nigerian economy, but that has not been the case since 2021.
The World Bank said: “The deteriorating economic environment is leaving millions of Nigerians in poverty. Risks are tilted to the downside given the lack of macro-fiscal reforms, the naira demonetization, and an uncertain external outlook.
“Nigeria’s fiscal position has deteriorated since 2015 due to declining oil revenues and rising expenditures, resulting in persistently high fiscal deficits. The oil sector, historically the main contributor to fiscal revenues and accounting for about 90 percent of total exports, has underperformed since 2020.
“Declining oil production and the mounting cost of the petrol subsidy have prevented Nigeria from reaping the benefits of higher global oil prices. The weakness in oil production stems from technical and security challenges in the oil-producing Niger Delta region, ageing infrastructure and inadequate investments in the sector, and the Nigerian National Petroleum Company’s (NNPC) delays in paying for the government’s share of costs in joint-venture operations.
In the report, the World Bank provided some statistics that paint a true picture of how the Nigerian economy has regressed in recent times:
GDP growth decelerated from 3.6 per cent in 2021 to 3.3 per cent in 2022. Growth was driven by manufacturing, construction, and most services. In contrast, the oil sector shrank by 19.2 per cent.
Nigeria’s economy is projected to grow by an average of 2.9 per cent per year between 2023 and 2025, only slightly above the population growth rate of 2.4 per cent.
The number of Nigerians living below the national poverty line will rise by 13 million between 2019 and 2025 in the baseline projection.
The fiscal deficit was estimated at 5.0 per cent of GDP in 2022, breaching the stipulated limit for the federal fiscal deficit of 3 per cent. This has kept the public debt stock at over 38 per cent of GDP and pushed the debt service to revenue ratio from 83.2 per cent in 2021 to 96.3 per cent.
