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The World Bank has advised the Nigerian Government to unify the nation’s multiple exchange rate windows and carry out a number of other reforms to strengthen the economy and restore macroeconomic stability.
In its latest Macro Poverty Outlook for Nigeria: April 2023, the bank said implementing economic reforms in the non-oil revenue space would reduce fiscal and debt pressures alongside the planned removal of fuel subsidies by the Federal Government.
The bank had said worsening economic environment in the country had pushed millions of Nigerians into poverty through chronically high inflation that has been on the rise since 2019, especially for food items, eroding the purchasing power of poor and vulnerable Nigerians and increasing poverty.
The inflation reached an annual average of 18.8 per cent in 2022, a 21-year high, with food inflation in 2022 estimated to have pushed five million Nigerians into poverty.
However, outlining additional solutions to the proposed subsidy removal which is expected to drastically increase inflation, the World Bank advised the government to restore macroeconomic stability to help cushion its effects.
It read, “Macroeconomic stability has weakened amidst declining oil production, costly fuel subsidies, exchange rate distortions, and monetization of the fiscal deficit.
“The authorities can strengthen the economy by restoring macroeconomic stability through reforms to increase oil and non-oil revenues, tighten monetary policies to reduce inflation and unify the multiple FX windows and adopt a single, market-responsive exchange rate.”
It added that increased insecurity as well as adverse climate change effects could further dampen the economic outlook for Nigeria.
It asserted that”Oil price booms have previously supported the Nigerian economy, but this has not been the case since 2021. Instead, macroeconomic stability has weakened amidst declining oil production, costly fuel subsidies, exchange rate distortions, and monetization of the fiscal deficit. The deteriorating economic environment is leaving millions of Nigerians in poverty. Risks are tilted to the downside given the lack of macro-fiscal reforms, the naira”.
