Nigeria’s economy needs to grow faster to reduce poverty. Despite favorable global oil prices, “business as usual” economic management is not delivering desired outcomes and, even if a crisis is avoided in the near-term, long-standing policy and institutional challenges are persisting and severely constraining the economy. This hinders the prospects of the vast majority of the country’s people, at least 80 million of whom live in extreme poverty. Whether to continue down this path, or to instead chart a new course and rise to its tremendous potential, is Nigeria’s choice. This is the theme of the latest World Bank Nigeria Development Update (NDU): “Nigeria’s Choice”.
According to the document obtained by TimeAfrica, “Nigeria’s economic growth has slowed on the back of declining oil output and moderating non-oil activity. Real gross domestic product (GDP) rose by 3.1 percent year-on-year (y-o-y) in the first three quarters of 2022, little more than the annual population growth of 2.6 percent.
“Nigeria’s growth performance, and its fiscal and external buffers, have decoupled from high oil prices, and macroeconomic vulnerabilities have increased.
“It is urgent to address the key drivers of this decoupling and make reforms to strengthen Nigeria’s macro-fiscal framework.
“The Strategic Revenue Growth Initiative (SRGI) of the federal government is a welcome first step, reversing the previously declining trend in non-oil revenues as a share of GDP. This initial success needs to be sustained and built upon.
“Nigeria has vast potential, but development has stagnated over the past decade. The country is characterized by strong spatial inequalities and a large north-south divide.
“Creating better jobs is a necessary condition for accelerating poverty reduction and economic transformation. A combination of limited job creation, booming demographics, and unfulfilled aspirations is pushing young Nigerians to emigrate abroad in search of gainful employment.
“As a result, Nigeria is at a critical historical juncture, with a choice to make. To chart a new and inclusive growth path, Nigeria needs macroeconomic and institutional enablers and investment accelerators.
“To catalyze private investment and offer more opportunities to the youth, the priority is to restore and preserve macroeconomic stability. To do so, it will be critical to improve the availability of FX, and the predictability and credibility of the exchange rate system to ensure a level playing field across all firms and individuals.
“While there is no silver bullet to accelerate growth, Nigeria can become a rising growth star again if it implements a comprehensive set of bold reforms in a timely manner. To implement this set of prioritized reforms, the authorities need to walk the talk and shift their focus from the “what” to the “how”.
Shubham Chaudhuri, World Bank Country Director for Nigeria, said, “Nigeria has a choice to implement critical macroeconomic and structural reforms that can reduce crisis vulnerabilities and increase growth. Doing so will lift per-capita incomes, sustainably reduce poverty and deliver better life outcomes for many Nigerians.
“Urgent business-unusual choices are needed to avoid a scenario in which up to 80 million working-age Nigerians do not have a full-time job by 2030 and up to 23 million more Nigerians could be living in extreme poverty.”
He lamented that inflation surged to 21.1 percent in October 2022, pushing as many as five million more Nigerians into poverty since the start of 2022.
“Fiscal pressures have intensified, exacerbated by the soaring cost of the petrol subsidy which will likely exceed five trillion naira this year. Despite higher oil export revenues, official reserves have fallen, and the currency market is severely distorted, undermining the business environment and investment.
” The weaknesses in the macroeconomic policy framework are suppressing growth and making Nigeria more vulnerable to shocks, he said.
Also Alex Sienaert, World Bank Lead Economist for Nigeria and co-author of the Report, said, “Previous episodes of reform progress and high growth, such as in the 2000s, show that Nigeria’s economy can turn around quickly, and its tremendous economic potential that could be unleashed is well-known.
“If Nigeria chooses to make reforms that stabilize its macro-fiscal policy settings and support investment, this would be transformative for 80 million poor Nigerians, for Nigeria as a whole, and for Africa.”
The Report presents the reform choices Nigeria can make in three key areas: (1) Restoring macroeconomic stability through measures to reduce the domestic and external imbalances. This will require a coordinated mix of exchange rate, trade, monetary, and fiscal policies, notably including adopting a single, market-responsive exchange rate, eliminating the petrol subsidy, and increasing oil and non-oil revenues; (2) Boosting private sector development and competitiveness by eliminating structural constraints that hinder productivity; and (3) Expanding social protection to protect the poor and most vulnerable.