Nigeria needs to improve the productivity of its farmers, end insecurity that’s kept farmers away from cultivation, and invest in agro-processing to tame high food prices and return lost spending power to its over 200 million citizens, Mathew Verghis, the World Bank’s country director for Nigeria, said in an exclusive interview with BusinessDay. Wasiu Alli and Cynthia Egboboh bring the excerpt:
“There are other reasons besides monetary and fiscal policy why inflation might remain high. These include things like the transport costs that make it expensive to bring food from the farms to the market, the cost of things like energy that contribute to the costs, and the unreliability of it that contributes to the costs of firms.”
The NDU warns that macroeconomic stabilisation “has yet to substantially improve Nigerians’ livelihoods.” What concrete policies should the government prioritise now to translate macroeconomic gains into productive and remunerative jobs, rather than just informal or subsistence activities?
These are absolutely critical for Nigeria, and without those foundational reforms, it would be hard to make progress on anything. I just want to emphasise the importance of those reforms and the fact that they are already having a very strong impact on stabilisation. The exchange rate has stabilised, inflation is coming down, growth has picked up a little bit, reserves are much higher, confidence in the economy is growing, and the bond markets and rating agencies are recognising the progress that has been made.
Now, what is clear is that for Nigerians to start fully feeling the benefits of this, two things need to happen. One is: inflation needs to come down much faster. Although there’s been real progress, inflation is still very high, particularly food inflation, and this particularly affects the poor. And bringing that down will be a high priority as consolidation of the stabilisation.
But in the longer term, all Nigerians will start to benefit when the economy is producing, when there are more and more productive jobs in the economy. And that will require a further series of reforms on what we call the structural side, creating an economy where firms and individuals find it profitable to work, to invest, and to work. So this will be lowering the cost of business, simplifying regulations, easing trade constraints, improving power and transport services, and strengthening competition rules so that medium- and small-scale enterprises can succeed. These are all reform measures that make it easier for the private sector to operate. One of the things that is very useful in situations like this is to have a big package of reforms that sends a very credible signal to Nigerians who are thinking about investing that this is a good time to invest, that things have changed in a way that maybe will be profitable for them. That will lead to jobs over time.
In the meantime, while all of this is happening, it will also be important for the government to continue to invest in people, to provide support to the poorest Nigerians, because their livelihoods have been particularly affected. The President has announced that he intends to provide support to 15 million households. This is an excellent target. Good progress has been made. It has reached – we believe now – about 8 million households, all done through a digital delivery system and using a social registry, so that it is done in a more transparent way with good governance. We fully support this and support the layout of that system to the full 15 million as planned by the President.
The NDU emphasises that “jobs alone are not enough”; Nigeria needs “productive jobs” that lift households out of poverty. How can policymakers balance rapid job creation with ensuring job quality, especially for youth and women?
In developing countries like Nigeria, like my own country, India, if you look at the unemployment numbers, they are not very high because people who are not employed can often find low-productivity jobs just to get by. And this is why we emphasise that it’s not just about jobs; it’s about high productivity and high-wage jobs, or higher-wage jobs than we’re seeing in the market now. In the long run, the most fundamental determinant of productivity and creating good jobs will be the quality of the workforce. So invest in people, highly educated people, especially girls, and then if you target schools, you’ll be targeting young people. This will be the best way to increase productivity.
With that, you would combine the kinds of measures that I talked about in my previous answer, which are measures to make the economy more private sector-led, where people and firms feel that it will be in their interest to invest in those kinds of measures, along with a highly skilled workforce, and then Nigerians will do the rest. It’s a wonderfully talented population, and if they are given the opportunities, I think the sky is the limit. The sky is definitely the limit.
Nigeria’s poverty levels have increased, as reported by the World Bank, and inflation, on the flip side, is slowing at 16% now. How can job creation efforts be aligned with social protection policies to avoid a growth-poverty trap?
Well, it’s a two-stage process, and I think the first step at the moment will be to prioritise reducing inflation. Because as long as inflation remains high and growth has not taken off, then people’s purchasing power is reducing significantly every month. As prices keep rising and your income is not rising commensurately, your purchasing power is falling. Now, reducing inflation is usually done through monetary and fiscal policy.
In Nigeria’s case, we think that at the moment, both monetary policy and fiscal policy are doing what they should to try and bring inflation down. And they’re having some impact because inflation is coming down. But to bring it down faster, at this point in the report, we recommend other measures that can be taken.
There are other reasons besides monetary and fiscal policy why inflation might remain high. These include things like the transport costs that make it expensive to bring food from the farms to the market, the cost of things like energy that contribute to the costs, and the unreliability of it that contributes to the costs of firms. Fixing these is important, but these will take time.
In the short run, one set of measures that we suggested could reduce inflation would be measures around trade. Nigeria has both high tariffs and import bans that contribute to keeping prices higher than they need to be and higher than its neighbours. And so, reducing some of these import tariffs and import bans, especially on goods that the poor consume, will lower the prices for that. Commensurate with that, also reducing import tariffs on intermediate imports, on things that are used by firms to produce Nigerian goods, imports that are needed to help produce Nigerian goods, and exporting them.
So, a set of measures to lower inflation will be important. And then, the other two items on avoiding a growth poverty trap will be the things I talked about earlier: measures to speed up the economy and a good social protection system, starting with the coverage of the 15 million households that the President has announced will be done.
Read also: Farmers chasing urban profit fuel food inflation in rural Nigeria
The NDU presents a growth outlook but warns that structural reforms are needed for “inclusive growth”. Which sectors (beyond oil) hold the greatest potential for scalable job creation over the next 5 years? And how can the government and private sector collaborate to harness those sectors?
Looking at the structure of the Nigerian economy, there seem to be a few sectors where we see a lot of potential. One is agriculture and agro-processing, simply because a large percentage of the population is already in these sectors, and we can increase productivity and create jobs in agro-processing in addition to simply agriculture, which has significant potential to create jobs. In Nigeria, logistics and trade have the potential to create jobs. So, we know that there are huge infrastructure needs in Nigeria, you know, in terms of roads, in terms of energy, in terms of ports, and better air services. Improving all of these will be job-creating. And then once that infrastructure is created, that itself will help generate growth in other sectors. Logistics and trade — we see a high-potential area.
The third area we see is digital and technology-enabled services. So, Nigeria is already starting to see interest and results in investments in digital and technology-enabled services. And we’re already starting to see in Lagos and some other places some really dynamic, forward-looking firms that are coming together. This is also a sector that we see as high-potential. Making these sectors grow, we think, would benefit from a new approach that really combines public and private infrastructure. For example, in agriculture, in the past, governments have focused on inputs. And the World Bank too has focused on inputs, like trying to make sure that the farmers get access to seeds, fertilisers, and extension and using that as a basis for increasing productivity in farming. Now, that leads to higher output.
But it often doesn’t lead to agro-processing, where those outputs can quickly go to the most profitable use, the most profitable markets. So, we are suggesting a different approach that tries to bring the private sector and agro-processors, who can work directly with the farmers. So, a mix of public and private to enable quick increases in productivity, but also in agro-processing.
A similar approach can be taken in digital, for example, where the World Bank has a project that is trying to do this, where the government wants to expand digital broadband connectivity and is using the private sector and public financing to incentivise the private sector to come in and deliver the services in an efficient and fast way with the private sector’s own skill and the key investments. So, in these sectors, we think that there’d be a lot of progress that can be made by using more creative public-private partnerships, where the public financing is used to incentivise the private sector to expand and to invest.
The World Bank’s mission of 300 aims to connect 300 million people in Africa to electricity by 2030, with a major focus on Nigeria, using a mix of grid, mini-grid, and off-grid solutions. How has the implementation of this programme been in Nigeria compared to other peers? And what are the challenges encountered? And what specific policy changes would you advocate to overcome them?
So, we see Mission 300 as a fantastic initiative. We are very supportive of it. And there has been significant progress in recent months. So, there was the signing of the National Energy Compact in Tanzania by the President, focusing on five pillars: generation, investing and transmission, fostering financially viable utilities, and incentivising private sector participation. What I mentioned before, embracing clean cooking solutions and leveraging the benefits of increased regional integration – these are all the outlines of a plan that will allow the implementation.
And the signing by the President was a very clear signal that this is a priority for Nigeria. There has also been the establishment of a Nigeria Compact delivery monitoring. Since 2025, the government of Nigeria has established a monitoring unit to monitor progress. And this is already leading to results. Over a million Nigerians have been provided with new access to electricity since July 2023 using off-grid solutions. There have been important reforms that have happened, including the unbundling of the transmission company of Nigeria and the granting of derogation by NERC. So, this is an important measure that allows solar off-grid and large solar off-grid solutions to be provided.
These are all important policy changes that have happened. Now, given the size of the challenge and the importance of reaching it, of course, there are challenges. And the challenges seem to be mostly around just moving the implementation forward, continuing to keep the momentum up.
The next steps are for some of these private firms that are going to help connect these mini-grids to be set up for a special purpose vehicle that will manage this process to be set up. So, there is work underway that sometimes takes a little time, but it’s important, and it’s challenging, and it’s important to do it right. But our overall sense is that there’s been good progress on Mission 300, and we look forward to continuing to support the government in its ambitions.
How can the government and development partners best de-risk private investment in distributed renewable energy projects to hit the ambitious funding targets required by the Mission 300 compact?
Well, it’s a combination of policies that make the sector friendly for the private sector so that they understand that the risks have been lowered because the policies are supporting them. But we can also use public financing to lower the costs, to lower the viability gap, so that if there are projects that the private sector would not undertake on its own because they are not viable as private projects, the public sector can provide just enough financing to make them viable, but also expect the private sector to still put its own money in so that they have the incentives to deliver and to make sure that people get connected. So, it’s a combination of policies that make the sector attractive to the private sector but also provide just enough financing to encourage the private sector to enter the process.
We expect, for example, through the DARES project that is supporting Mission 300, the World Bank will put in $750 million, but we expect to capitalise $1.1 billion from the private sector. So, it will more than double the financing that the World Bank is providing to the government and will, therefore, double the impact of what it would have otherwise.
The NDU links energy access to economic empowerment. What strategy is the bank looking at to ensure that new energy access provided through Mission 300 is specifically utilised to support Micro, Small, and Medium Enterprises (MSMEs) in manufacturing or value-added agriculture, rather than just residential consumption?
Well, first, I should say that providing energy access to residential households is also important and will contribute to growth. It has an important growth impact by providing lighting for children to study and providing clean water so that they can stay healthy.
So, providing energy to households is also important. It has a growth impact, and that’s the main focus of Mission 300. Having said that, about $200 million of the World Bank’s DARES project has been earmarked to provide the delivery of solar for business solutions and productive use of energy equipment targeting MSMEs and economic clusters like markets, plazas, and agro-processing.
That’s about $200 million from DARES, which should generate about double that amount and will probably be doubled through the private sector contributions. So, there will be a significant contribution on that side as well.
The NDU identifies reducing food inflation as a top priority, noting that rising food prices disproportionately affect the poor. What structural bottlenecks in Nigeria’s agricultural value chains must be addressed to stabilise and lower food prices?
There are some things that are continuing to keep food prices up that will take a longer time to address, and this will include increasing productivity in farms so that more goods are produced, more agricultural products are available, and more food is available in Nigeria. It’s rising fuel costs, it’s insecurity, and it’s weak logistics. So, it’s expensive to bring food from the farms to the markets, both because of the poor quality of the roads and because of the insecurity and the many checkpoints. These are all structural barriers that need to be addressed over time. Transport, energy access, and one big improvement that has been made is that the Naira is now less volatile. I think that’s been helpful for markets.
But all of these other things need to be addressed as well. We also make the point, as I mentioned earlier, that there are trade policies that are keeping food prices high in Nigeria. There are import bans and high tariffs on food and key imports, and these lead to higher prices and higher prices than in Nigeria’s neighbours. So, bringing those, easing these restrictions, lowering tariffs, and changing some import bans – it doesn’t have to be all in one shot; it doesn’t have to be very dramatic, but as much as can be done will support lower prices.
Given the potential of agriculture to provide employment and income, especially for rural populations and youth, as well as to contribute to food security and export earnings, how can Nigeria reorient agricultural policy to promote agro-processing, value-addition, and agribusiness rather than just raw commodity production?
This refers to something that I talked about when I was talking about how agriculture is an important sector that can create jobs and how to do it in a way that involves the private sector. The key part of increasing productivity in agriculture is making sure that farmers have access to the inputs that are needed to increase productivity. This is fundamental and remains important. But to make sure that this then translates to better agro-processing and higher incomes. One way of doing this is to better link farmers with agro-processors and cooperatives and agribusiness firms that can work with these farmers, both to support them in making sure they are using the inputs in the right way, fertiliser and seeds in the right way for that area.
We have buyers for those products, you know; the firms that are working with the farmers will then have a guarantee to buy the products at a good price and will then market this in the cities or abroad, as the case may be. So it’s a combination of a traditional focus on making sure that farmers have the inputs they need, but doing it in a way where they are already aligned with the agri-processors and the marketers that will help them translate that food and make sure that it reaches markets and that they get the best price possible for it. So it’s a public-private partnership.
What incentives (access to credit, subsidies, land-use reforms, extension services) are needed to encourage investment in agro-processing and competitive agriculture supply chains?
One set of incentives that we think would be very helpful would be using incentives to encourage the private sector to enter agro-processing. Public incentives can reduce the costs and reduce the incentives for cooperatives and marketers to enter, and this will then encourage the farmers because they will then start getting higher prices for their products. You can also use climate-smart technology. It’s important to use the best technology. Investing in research and in the dissemination of that research so that you have the right seeds for the Nigerian agro-climatic conditions and so that you’re using the right kinds of fertiliser in the right dosages will be important. Investing in making sure that farmers have the technological support they need. All of these can be useful. So it’s a combination of support for inputs and support for the private sector to get a public-private solution that we think can be quite productive.
