The World Bank has advised the federal government to maintain its commitment to ongoing economic reforms, warning that reversing course could worsen the situation.
The World Bank’s Country Director for Nigeria, Dr. Ndiame Diop, gave this advice during the presentation of the Nigeria Development Update (NDU) in Abuja on Thursday.
“We need to stick to the plan and keep moving forward. Turning back or opposing the reforms will only make things worse,” Diop said. He praised the reforms initiated in May 2023, which he noted had stabilized Nigeria’s economy and averted a fiscal crisis.
Diop noted key improvements such as the reduction in borrowing from the Central Bank of Nigeria’s (CBN) Ways and Means Advances, a strengthened foreign reserve position, and a sharp improvement in Nigeria’s debt-service-to-revenue ratio, which dropped from about 100 percent in 2022 to below 60 percent this year.
One of the most significant achievements of the reforms, Diop noted, was the near doubling of FX turnover in Nigeria’s official FX market. However, he acknowledged the downside: many Nigerians are grappling with high inflation and a rising cost of living. “Progress is real, but so are the struggles of many citizens,” Diop said.
He stressed the importance of complementing fiscal reforms with initiatives that enable the private sector to create jobs, particularly for the youth and elderly, to ensure inclusive growth. “Staying the course is essential for securing a better future for all Nigerians,” Diop added.
Dr. Alex Sienaert, the World Bank’s Chief Economist for Nigeria, echoed these sentiments, noting that the Nigerian economy has shown resilience despite recent volatility and uncertainty. He attributed this to robust growth in the services sector and stabilization in the oil sector.
Sienaert also commended Nigeria’s FX reforms, which have resulted in a more market-reflective exchange rate. “CBN has shown a renewed focus on addressing the economic crisis, and we will follow through on that,” Sienaert said.
He noted the shrinking fiscal deficit, which decreased from 6.2 percent of GDP in the first half of 2022 to 4.4 percent in the same period of 2023. This, he explained, was largely due to rising revenues, spurred by the removal of the implicit FX subsidy, which had cost the country over N10 trillion in lost revenue.
Utz Pape, Lead Economist for Poverty and Equity at the World Bank, commended the Nigerian government’s efforts to alleviate the financial burden on its citizens.
He pointed to the cash transfer programme, which aims to reach 15 million households—impacting an estimated 60 to 70 million individuals. So far, around 4.5 million households have received their first payments.
Pape also addressed the impact of the recent minimum wage increase, which he said has primarily benefited only four percent of Nigerians, most of whom are public sector workers.
While this reform has provided some relief, he noted that it also comes with a fiscal cost and leaves many low-income earners without direct benefits.
Looking to the future, Pape stressed the urgent need for a job creation strategy that includes all Nigerians, particularly the youth.
“In 2034, there will be 12 million more entrants into the labor market than in 2024. These young people will need jobs and opportunities, or they will not be able to escape poverty,” he warned.
Failure to create sufficient jobs, Pape said, would turn Nigeria’s demographic advantage into a demographic burden.
“This is fundamentally important for Nigeria to benefit from its demographic dividend,” he concluded.
As Nigeria continues to navigate its economic recovery, the World Bank said it remains committed to supporting the government’s efforts.
“Staying the course and pursuing inclusive growth is key to transforming not just Nigeria, but Africa as a whole,” Sienaert added.