The World Bank has warned that reversing the federal government’s economic policies will spell doom for Nigeria.
The World Bank’s Country Director for Nigeria, Dr. Ndiame Diop, gave the warning in Abuja yesterday during the launch of the Nigeria Development Update (NDU) report titled ‘Staying the Course: Progress amid Pressing Challenges’.
Since inception, the administration of President Bola Ahmed Tinubu had initiated two key policies: the removal of petrol subsidy and the floating of the Naira.
Both policies are believed to be responsible for the current hardship in the country.
Diop said while the reforms might bring hardship, they were necessary for Nigeria’s long-term stability.
He stated: “Reversing these reforms would be detrimental and would spell doom for Nigeria”.
He said the recent increase in the federal government’s revenue in the first half of the year was largely due to the removal of fuel and forex subsidies, hence the need to sustain the reforms.
While presenting the report, Alex Sienaert, World Bank’s Lead Economist for Nigeria, noted that the forex subsidy in 2022 was even larger than fuel subsidy which was removed in June 2023.
He said Nigeria was subsidising both petrol and forex, which in total was about N10.7 trillion and more than 5 per cent of the gross domestic product (GDP).
He said: “We are seeing a fiscal consolidation underway with the fiscal deficit shrinking from 6.2 per cent of GDP in the first half of 2023 to 4.4 per cent of the GDP in H1, 2024, and that is largely due to expenditure being roughly constant.
“So, this surge in revenue is largely due to the removal of implicit subsidy which was even larger than the PMS subsidy that we talk about. So, if you look, in 2022 the PMS subsidy was around N5 trillion but if you look at the revenues the federal government should have been getting from anything dollar-related; be it oil revenues and taxes, Customs, etc, that hit N6 trillion in 2022. So, the combined cost was N10.7 trillion or 5% of GDP and that was what was driving the accumulation of Ways and Means”, he said.
He said the official exchange rate in 2022 being around N460 and the parallel being around N700, the federal government was losing around N250 for every dollar denominated revenue.
Also speaking, the Lead Economist of the World Bank for Poverty and Equity in Nigeria, Utz Pape, said governments, both at national and subnational levels, must make adequate plans to tackle Nigeria’s unemployment rate as the World Bank has estimated about 12 million of the country’s population will be in the labour market seeking jobs.
We’re at risk of being lynched due to FG’s policies – Bauchi gov
The governor of Bauchi State and Chairman of the Peoples Democratic Party’s (PDP) Governors’ Forum, Bala Mohammed, urged the federal government to review its fiscal and monetary policies as they are not yielding results in the areas of poverty alleviation and unemployment.
Mohammed stated that the Tinubu administration has put the political class at the risk of being lynched.
“With all humility, please review your policies; they’re not working. Even the growing (Federation Account Allocation Committee) FAAC allocation is not enough because inflation is eating it up and the purchasing power of the people is dwindling. We are all living with these people, and I can tell you we are at risk of being lynched because of your policies.
“We should go back to the basics. Nigerians are not enjoying the regime across board, not only the federal government, including the states and local governments. Therefore, the onus rests on you, the finance minister and the managers of the economy,” he said.
On the issue of the new minimum wage, the Bauchi governor said his state was still paying the old wage of N33,000, but had set up a committee to look into how it could commence payment of the new wage.
He emphasised that though revenue to the states had increased, there were lots of deficits in terms of power and infrastructure.
He said the leakages he had blocked had enabled the state to earn more revenues to solve domestic problems.
We’ll sustain reforms for long term gains – Wale Edun
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stated the commitment of the federal government to sustaining its reforms.
“Any effort that is not sustained will be a waste. Together with the Governor of the Central Bank of Nigeria (CBN) and the Minister of Budget and Economic Planning, we’ve been discussing on how to stay on course, tackle inflation and ensure we move in the right direction,” he said.
According to him, the government’s focus is on reducing inflation while ensuring investments flow into critical sectors where jobs can be created as the country is expecting huge investments in the coming days.
“What is important for Nigerians to know is that for the first time in 40 years, we are removing subsidy burden that was costing us almost five per cent of GDP annually. It takes time to do reforms, so what started on May 29, 2023, will take time.
“We now have market pricing of PMS and the benefit is showing for subnationals as FAAC is increasing and these are things we are looking at sustaining,” the minister said.
Ways and Means gone, Cardoso insists
The CBN governor, Olayemi Cardoso, affirmed that the era of Ways and Means borrowing to the federal government was over.