The World Bank has urged Nigeria to find a new path for growth through a chosen set of reforms, including the elimination of gasoline subsidies, and has warned that this is having an impact on net government revenues in addition to crude theft.
This information was provided by Alex Sienaert, the new lead economist for Nigeria at the World Bank, during the Thursday Nigeria Development Update and Country Economic Memorandum in Abuja.
Reiterating the need for Nigeria to reduce inflation, Sienaert emphasised the need for the federal government to rely less on Central Bank of Nigeria (CBN) financing.
The top official of the World Bank stated that in order for Nigeria to find a new path for growth, a number of priority reforms in the areas of macroeconomic and institutional enablers as well as investment accelerators are required.
Despite the rise in oil prices, Sienaert urged the Federal Government to end the subsidy on gasoline, noting that oil revenue has continued to fall.
He pointed out that the primary factor putting pressure on crude oil revenue has been the gasoline subsidy, which has increased from N4 trillion to more than N9 trillion.
He said, “Despite the production pressures, production revenues have increased but PMS subsidies have increased, As a result, net revenues would be lower this year at N2.3 trillion than they were in 2020, it’s the main culprit.”
However, Sienaert noted that this has been sufficient to offset what they have seen on the net oil revenue side. Sienaert noted that Nigeria has been making efforts to counter this by increasing non-oil revenues, which has been important to prevent an even worse squeeze.
He emphasised how the cost of debt has significantly increased as a result of this.
The Brettonwood Institution promoted the adoption of a single, market-reflective exchange rate, raising VAT and excise rates, improving tax administration, and reducing the federal government’s reliance on CBN financing in order to increase non-oil revenues and control inflation.
The Federal Government, he continued, can also promote competition by incorporating it into policy, improving enforcement, and streamlining regulations to cut costs.
Investment Enablers for Nigeria
Some of the investment enablers proposed by the World Bank top official for the country include;
- Facilitating Trade and boosting domestic value added by removing import and foreign exchange restrictions.
- Increasing access to finance by strengthening the institutional infrastructure for financial remediation.
- Boosting Power generation by investing in infrastructure to reduce technical and commercial losses
- Facilitating transport connectivity by reducing interstate transport costs.
