Glimmers of positivity for Nigeria’s battered economy, World Bank says

As a result, many multinational companies have withdrawn from the country or reigned in their local investment. 

Alex Sienaert, World Bank Lead Economist for Nigeria, said in a presentation in Abuja to launch the bank’s Nigeria Development Update Report, titled ‘Staying the Course: Progress Amid Pressing Challenges’, that the country’s fiscal deficit (the difference between total revenue and total expenditure of a government) has reduced from 6.2% of GDP in the first half of last year, to 4.4% in the first half of this year. 

The reforms are creating “robust” activity in some areas of the service sector, the oil sector output has stabilised and there are improvements in the foreign exchange market. 

“Foreign exchange reserves – a buffer against external shocks – have risen from US$32.9-billion at the end of 2023 to more than $38.8-billion by mid-October 2024. However, inflation remains high, and inched up again in September 2024, mainly due to the most recent gasoline price increases and recent floods,” the World Bank report states. 

Given these promising results, the report argues that the new direction of macro-economic policies should be sustained, including the Central Bank of Nigeria’s tight monetary policy stance.  

Address long-standing structural constraints 

“Complementing them with measures to address long-standing structural constraints will enable faster progress in the fight against inflation, and spur the investment, growth and jobs which Nigeria urgently needs,” the World Bank says in a press release. 

In addition, the report explains that previous distortionary and unsustainable policies were hindering Nigeria from achieving its “immense potential”.  

Monetary and foreign exchange policies, including multiple exchange rates, were distortive and did not maintain price stability. Revenue collection was hampered by one of the lowest tax-to-GDP ratios globally (3.2% of GDP in 2022), while a large share of oil revenues was absorbed by a costly fuel subsidy.  

“The Central Bank initiated major foreign exchange policy reforms that resulted in a unified, better regulated, and market-reflective official exchange rate and the government has now moved towards market-based pricing of gasoline to address the enormous fiscal cost of subsidised pricing,” the report notes. 

Comments Ndiame Diop, World Bank Country Director for Nigeria: “Going forward, it will be important to consolidate the improving fiscal outlook and scale up the support for the poorest households to cope with purchasing power losses and hardships, while expanding opportunities for growth and productive jobs, especially for young Nigerians, is most urgent and crucial.”