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Sticking to the reform path: moving forward despite challenges
Abuja, October 17, 2024 – Since May 2023, Nigeria has implemented significant reforms to stabilize its economy, resulting in moderate growth, improved fiscal health, and increased foreign exchange reserves. was added. Although these measures were necessary to urgently avert a fiscal crisis and put Nigeria on a stronger development trajectory, they placed short-term pressures on households and businesses. The World Bank’s latest Nigeria Development Report, titled “Staying on Course: Progress Amid Immediate Challenges,” highlights the structural and It emphasizes the need to maintain these policies while addressing the issues. Creation.
Although still in their early stages, the report states that the positive results of these reforms are beginning to appear at the macroeconomic level. For example, although production growth remains at a moderate level overall, it will gradually increase until mid-2024 due to stable production in the oil sector and strong activity in some services. I am doing it. The fiscal situation is also improving, with the federal government’s budget deficit shrinking from 6.2% of GDP in the first half of 2023 to 4.4% of GDP in the first half of 2024, helping to reduce debt-related risks. Foreign exchange reserves, a buffer against external shocks, increased from $32.9 billion at the end of 2023 to more than $38.8 billion by mid-October 2024. However, inflation remained high and gradually rose again in September 2024, mainly due to the most significant factors. The recent rise in gasoline prices and the recent floods.
Given these encouraging results, the report argues that the new direction of macroeconomic policy should be maintained, including the appropriate tightening monetary policy stance of the Central Bank of Nigeria. Complementing them with measures that address long-standing structural constraints could make faster progress in the fight against inflation and spur the investment, growth and jobs that Nigeria urgently needs. Sho. The report further explains that distorted and unsustainable policies have prevented Nigeria from realizing its immense potential. Monetary and foreign exchange (FX) policies have become increasingly opaque, distorted, and inconsistent with maintaining price stability, including multiple controlled and overvalued official exchange rates. Fiscal revenues are hampered by one of the lowest tax-to-GDP ratios in the world (3.2% of GDP in 2022), while the majority of the federation’s oil revenues are absorbed by expensive, regressive and opaque gasoline subsidies. Ta. The central bank initiated major foreign exchange policy reforms, resulting in an official exchange rate that is unified, better regulated, and reflective of the market. The government is now moving to market-based pricing for gasoline to address the huge fiscal costs of subsidized pricing.
“Nigeria has taken bold and courageous action to undertake difficult but important reforms, against a backdrop of already fragile economic conditions, food and transport inflation, and other growing uncertainties. Without these reforms, Nigeria would have fallen into a severe financial crisis, making it difficult for the government to meet its obligations to its people,” said Ndiam Diop, World Bank Country Director for Nigeria. said. It is most urgent to consolidate improving fiscal prospects and expand support to the poorest households coping with loss of purchasing power and hardship, while expanding opportunities for growth and productive work, especially for young Nigerians. and important. ”
The report builds on Nigeria’s macro-critical reforms and provides key recommendations on policy priorities to foster growth and job creation.
We will maintain tight monetary policy and continue to improve policy effectiveness until a sustainable path to deflation is achieved. Ensuring exchange rates are unified and reflect market conditions while expanding the foreign exchange market. To reduce debt risk and create space for development- and poverty-focused spending, continued removal of fuel subsidies and increased transparency in the oil sector, improved tax policies to increase non-oil revenues; We need to focus on four key areas: reducing government waste and direct spending. Commit to targeted poverty programs and stick to realistic budgets to avoid unplanned spending. Protect vulnerable people by expanding cash transfer programs and strengthening social safety nets. Continue to address long-standing structural constraints.
“Recent reforms are beginning to restore macroeconomic stability,” said Alex Sinert, World Bank chief economist for Nigeria. “GDP is projected to grow by 3.3% in 2024, rising to an average annual rate of 3.7% from 2025 to 2027. However, in the medium term, if the current policy mix continues to be implemented, inflation is expected to decline, to 14.3% by 2027 in the base case. It will be done.”
Press release number: 2025/025/AFW
contact address
**In Abuja:** Mansir Nasir,
+234 803354663
mnasir@worldbank.org
Mariam Raussi
+234 7034044857
mlaushi@worldbankgroup.org
