. Says productive jobs key to poverty reduction
. FG stabilising economy, naira, says Edun
By Cynthia Egboboh & Favour Okpale, Abuja
Nigeria is riding solely on its monetary tyre, with the fiscal, social and investment tyres missing and holding back gains of painful reforms, according to the World Bank.
President Bola Tinubu instituted reforms including ending a decades-old petrol subsidy and devaluing the currency to try to boost economic output which has been sluggish for about a decade.
The global financial institution expressed optimism about the economic reforms but noted gaps in fiscal, social and investment policies.
Indermit Gill, the World Bank’s chief economist, said the economy was riding with only one tyre – the monetary tyre, which has only just been reflated. “But now, the fiscal, social and investment tyre has to be reflated.
“I think it is right that the economy has turned the corner, but it has turned the corner with three deflated tyres,” Gill said.
“This is not gonna go very far.
Gill went further to say what needed to be done to get the fiscal, social and investment levers firing.
“For the fiscal tyre, there has to be a reallocation to the development priorities. And I think the governors and coordinating minister of the economy are important here.
“The long-term agenda is infrastructure while the short-term agenda is education.
“In the medium-term, it has to be agriculture,
“For the second tyre, which is the social protection, you have to help the poor. It cannot be that you wait until the economic reforms trickle down,” Gill said.
The World Bank can play the role of a spare tyre, according to Gill.
“Nigeria has too good a car. And I think once the other tyres are working, it doesn’t need a full-size spare.
“You just need a small-size spare. And we’ll be there, we can be that small-size spare. But I think that on the fourth tyre, which is the enterprise tyre, there has to be much more economic freedom,” he said.
The World Bank also endorsed the petrol subsidy removal.
Gill said the subsidy removal was unavoidable because it was an unsustainable burden for the government. He explained that the reforms must ensure that the nation’s resources are used in ways that benefit everyone.
He stressed the need for economic freedom, which he said should extend to investment in education that can lead to many skilled workers that could work in the country as well as other countries.
He said that Nigeria may have to stick to these reforms for 10 to 15 years to make the reforms sustainable; otherwise, the country may go back to the other way. He also noted the need for teamwork between the central bank governor, the coordinating minister of the economy and the state governors.
“Nigeria is today a good story. But that’s the reason why I’m so scared that this story can become a not-so-good story,” he added.
According to the report titled ‘Staying the course: Progress and pressing challenges’, the World Bank Group noted that sustaining and deepening reforms is essential to maximise gains while intensifying support for the poorest households to cope with inflation and expand opportunities.
It stated that the monetary policy stance needs to remain tight until a sustained disinflation path is achieved, along with continued improvements in policy transmission.
“Exchange rate policy should continue to be geared towards maintaining a unified, market-reflective exchange rate, whilst deepening the FX market. The CBN should continue efforts towards deepening the official FX market, including by facilitating formal remittances inflow, allowing international oil companies to fully concentrate their FX sales in the official markets.
“On the fiscal front, focus on four key areas can reduce debt risks and create more space for development and pro-poor spending. Building on progress towards market-reflective pricing is essential to address the remaining implicit PMS subsidy by allowing retail prices to adjust periodically in line with market fundamentals. This would open the PMS market to competition and boost federation revenues.”
The report also showed that in parallel with stabilising the macroeconomic, it is critical to protect the poor and the economically insecure by enhancing the social protection framework.
It states without jobs, poor Nigerians will not be able to escape poverty. “However, employment on its own is not enough to lift people out if poverty: Nigeria needs productive jobs but these jobs are scarce.
“Sustained poverty reduction depends on creating wage jobs through macro-fiscal stability, growth, and private sector development, complemented by building human capacity,” the report stated.
Tinubu’s reforms not working- Bauchi governor
Speaking at the World Bank event, Bala Mohammed, the governor of Bauchi State, decried the increasing poverty in Nigeria, stating that the economic policies of the Tinubu-led federal government were not yielding the desired results.
According to him, the revenues available to state governments are not enough to address the challenges in states, adding that Nigerians are far from enjoying the expected gains promised by the federal government.
“We should go back to the basics. Nigerians are not enjoying the regime at this time across board, not only the federal government, including the state and local governments. Therefore, the onus rests on you, the finance and the managers of the economy.
“We need to come up with a budget programme with economic policies that will reduce hardship. The money that we are sharing is not enough. The report spoke about employment, and wages. How many percent of Nigerians are even employed? Most of our people operate in the informal sector; we should look at how we can make them self-employed.
“The purchasing power has dwindled, these policies are not working and you know that.”
Economy turning the corner- Edun
Also speaking, Wale Edun, minister of finance and coordinating minister of the economy, highlighted some strategies aimed at steering the nation towards sustainable economic growth and stability.
The minister noted that substantial progress has been achieved. According to him, monetary policy adjustments led by the central bank, alongside fiscal support, have been instrumental in stabilising interest rates, the exchange rate, and bolstering foreign exchange reserves.
“Was it six months ago or so, we talked about turning the corner. Clearly, the corner has been turned. When you look at the figures, what has been done in terms of monetary policy by the governor of the central bank, has assisted, I will say, by the fiscal side, coping with those heightened interest rates, all in a bid to get the economy stable, to get the exchange rate stable, to get foreign exchange into the system. That has been done and now we are looking at staying the course,”
He also said that through partnerships with the African Development Bank and the Ministry of Agriculture, the government has empowered 400,000 farmers and the potential harvest of over 1.2 million metric tonnes of grains this season which indicate a decline in food prices, suggesting a positive outlook for consumers and the economy.
In the oil and gas sector, Edun added that significant investments have been announced, such as a $3 billion commitment from Total Energy and a planned $10 billion investment from ExxonMobil. These reforms and fiscal incentives, he said are designed to attract further investment and player engagement in the energy sector.
On revitalising the manufacturing sector, the minister said an accelerated stabilisation plan has been introduced, aiming to provide concessional interest rates and incentives to attract investment.
Alex Sienaert , the World Bank’s lead economist for Nigeria, said that Nigeria’s fiscal deficit has reduced from 6.2% of Gross Domestic Product (GDP) in the first half of last year to 4.4% in the first half of this year, with the reforms leading to robust growth in service sectors, stability in the oil sector, and improvements in the foreign exchange market.
“We are seeing a fiscal consolidation underway with the fiscal deficit shrinking and that’s driven by a combination of expenditure being roughly constant in real terms, and revenues which are surging,” Sienaert said during a presentation in the capital Abuja.
“This surge in revenues is largely due to the removal of the implicit forex subsidy that was happening before, which was even larger than the petrol subsidy, which we talk a lot about,” he said.
The World Bank expects Nigeria’s economy to grow at 3.3% this year, rising to 3.6% in 2025.
Nigeria’s fiscal crisis had been mounting following two economic recessions in the last eight years due to a combination of economic mismanagement and policy challenges.
The recent reforms, including a focus on price stability and a unified market-reflective exchange rate by the central bank, have proven critical in stemming an economic downturn, but they have stoked inflation.
“The ultimate purpose here, of course, is jobs and opportunities,” Sienaert said.
