Summary: Nigeria is at a critical juncture in its economic reform journey, but without pro-poor policies and efficient governance, the road to recovery remains rocky. Economists say the government must cut the cost of governance, redirect funds to poverty-alleviation initiatives, and foster private sector job creation. Past reforms like the Washington Consensus and Structural Adjustment Program have delivered mixed results, but the key to success lies in balancing market reforms with policies that uplift the poor.
For Nigeria, reducing the cost of governance and redirecting excess funds toward pro-poor initiatives, while fostering productive job creation through the private sector, is crucial.
Lessons from history
Historically, Nigeria has adopted several policy reforms associated with Bretton Woods Institutions. Two of the most significant are the Washington Consensus and the Structural Adjustment Program (SAP). While both focus on neoliberalism and market fundamentalism, their application and implementation have varied.
The current administration has ticked some of the key boxes in these policy documents, including exchange rate unification, subsidy removal, and deregulation. However, some agendas, such as tax reform, await approval, while privatisation has continued gradually over the years.
The Path to Success
A 2021 study by Ngozi Okonjo-Iweala, Belinda Archibong, and Brahima Coulibaly revealed that while some countries experienced an initial decline in per capita GDP after adopting reforms (Washington Consensus/SAP), the implementation of pro-poor policies was crucial to the countries that saw notable increases in per capita real GDP growth in the post-2000 period.
Some of the countries that have keyed into these policy reforms include Botswana, Singapore, and Indonesia. While others like Rwanda, Kenya, and Namibia have mixed results.
According to the study, the ability to balance market-oriented reforms with pro-poor initiatives was central to the success of reforms.
As Olugboyega Oyeranti, Associate Professor of Development Economics, describes it, pro-poor policies are those “that carry everyone along — not leaving the poor behind.” These policies are key to reducing poverty, improving social equity, and ensuring that economic growth benefits the most vulnerable segments of society.
Recommendations for Nigeria
In the Nigeria Development Update (NDU) released by the World Bank in October 2024, the institution highlights critical measures that could ensure Nigeria stays the course of reform. Chief among them is reducing the cost of governance and redirecting inefficient spending towards more targeted, pro-growth, and pro-poor initiatives. This approach is vital for supporting the poor and boosting long-term growth.
The report underscores the need for productive job creation to lift Nigerians out of poverty. According to the World Bank, without productive jobs, poor Nigerians will remain trapped in poverty.
Sustained poverty reduction depends on creating wage jobs, which can only happen through macro-fiscal stability, economic growth, and private sector development, complemented by investment in human capital.
Prioritising the Non-Oil Sector
With around 90 percent of Nigeria’s exports reliant on oil, an industry that offers limited job creation, the country must focus on expanding its non-oil sector to create productive jobs.
The World Bank reiterates that reducing trade barriers can help lower prices and boost Nigeria’s competitiveness. The institution also advises increased investment in transport and digital infrastructure, in partnership with the private sector, as well as efforts to provide a reliable power supply and address insecurity.
The Price of Non-Compliance
Failure to adhere to these reform recommendations could bring more pain to Nigerians. Human capital development and the creation of productive jobs must be at the forefront of Nigeria’s reform agenda if the nation is to thrive.
Strong institutions as bedrock of successful reforms
“Nigerian institutions are generally weak, which encourages corruption and nepotism. No reform can work or have meaningful impact without strong institutions,” Abiodun Folawewo, a Professor of Macroeconomics, said.
For reforms to succeed, Nigeria must establish a robust institutional and regulatory framework, underpinned by transparency and accountability.
