The World Bank says the only way Nigeria can ensuring robust economic recovery beyond 2021 is by sustaining reform momentum in the country which it claimed is critical.
Shubham Chaudhuri, World Bank Country Director for Nigeria stated this on Tuesday in Abuja at the presentation of the Nigeria Development Update, a bi-annual publication of the bank on the economic outlook of Nigeria.
The June edition of the publication is themed: “Resilience Through Reforms”.
Chaudhuri said though Nigeria was at a critical juncture, it had so much potential which had not been realised.
He added that with the COVID-19 crisis and the pressures on the economy, the pressures on society had been heightened.
He also said that Nigeria faced interlinked challenges in relation to inflation, limited job opportunities and insecurity.
He said “While the government has made efforts to reduce the effect of these by advancing long-delayed policy reforms, it is clear that these reforms will have to be sustained and deepened for Nigeria to realise its development potential.”
Citing the issue of removal of petroleum subsidy and subsidy on electricity, he said the over N100 billion a month that goes into petrol subsidy mostly benefits the rich.
He, however, said that a fraction could be used as cash transfers to support the poor at a time of rising prices or be geared towards primary health care or basic education.
“So that is part of the restructuring or policy reforms in a number of areas.
“What should the Federal Government be doing, what should the sub-national governments be doing and most importantly, what government should not be doing,” he said.
Marco Hernandez, World Bank Lead Economist for Nigeria, while speaking on the theme of the report, said reforms were very important to help Nigeria reach its potential.
He said it was commendable that Nigeria was able to exit recession much quicker than was expected, adding that there were now more potential regarding the economy.
He said “So we projected in 2021, a 1.9 per cent growth and in 2022 a 2.1 per cent growth for Nigeria, and that is good.
“However, we do see that it is still below the average rate that we are projecting for Sub-Saharan Africa which is 3.4 per cent in 2021 and four per cent in 2022, so we know that this is good news but there is more potential to come in.”
He, however, said the COVID-19 crisis had profoundly affected Nigerians and recovery was slower.
He said it was expected that between 2020 and 2022 there would be a decrease of about 13 per cent in per capita income in comparison with what would have been a situation without COVID-19.
He also said that inflation reduced the purchasing power of Nigerians and had been increasing not only constantly and at a very fast pace, but since August 2019 when the borders were closed.
Hernandez, however, said that as the crisis has had a profound effect on Nigerians, it also had been a wake-up call.
He said “We want to commend the government for events in a series of very bold and inaudible reforms that have been stalling for many years.
“That includes the doctrine of economic sustainability plan that plans a series of reforms over the coming years, greater transparency in old revenues and improved budgeting practices.”
He said that given the urgency to reduce inflation amidst the pandemic, a policy consensus and expedite reform implementation on certain areas should be considered.
He added that exchange-rate management, monetary policy, trade policy, fiscal policy and social protection would help save lives, protect livelihoods and ensure faster and sustained recovery.
At the panel discussion, Clem Agba, Minister of State for Budget and National Planning, gave reasons why some of the reforms like the removal of petroleum subsidy were suspended.
According to him, it is because the government is looking for alternatives to ensure that when the programmes continue, Nigerians do not suffer.
“To follow up with these reforms, we are working on the strategic revenue initiatives and we are beginning to see some improvements in revenue.
” I dare say that the country is no longer so much of a mono dependent economy because of the reforms that are ongoing.
“In the past, oil used to be the main driver of the economy in terms of revenues, oils was giving us about 70 per cent of revenue and about 90 per cent of foreign exchange.
“Today oil is only contributing about 45 per cent while non-oil sector is contributing about 55 per cent.”
He appealed to Nigerians to understand that the reforms were necessary to achieve the desired growth.
Speaking on the issues surrounding the removal of subsidy on petroleum, Gov. Kayode Fayemi of Ekiti said it was a failure of governance on the part of the leaders to continue to allow a position that was not sustainable.
He added that it was also not beneficial to the ordinary person for subsidy on petroleum to be maintained.
“I think the greater challenge is that, though we may not be a rich country, we are a country with enormous rent seeking opportunities that have now forced ordinary people to really labour in a trust deficit.
“You cannot say that you are a poor country and you are maintaining a lifestyle that is even much more unsustainable than people who have the wealth to be able to maintain such.
“There is also this false notion that Nigeria is resilient. Nigeria is a strong country but we are almost on the precipice, it is almost midnight in our country.
“If we do not take these tough measures that we will have to live with, then we will have to deal with the consequences,” he said.
Fayemi said that more collaboration was needed between the Federal Government and the states to convince Nigerians that subsidy was no longer sustainable.
This, he said, would eradicate the trust deficit between the people and the government and ensure a smooth ride into the subsidy removal regime.