Nigeria’s reforms win praise from World Bank’s top economist

Nigeria’s ongoing economic reforms could yield “massive” rewards for the nation if seen through to the end, says Indermit Gill, World Bank’s Chief Economist.

Speaking at the just concluded Nigerian Economic Summit Group annual gathering in Abuja, Gill argued that policy measures such as cutting fuel subsidies and floating the Naira are starting to make Nigeria’s economy more appealing to investors.

“The naira’s real exchange rate is at its most competitive in at least 20 years,” Gill told the audience, adding that Nigeria’s exchange rate regime presents “a great opportunity for the private sector.”

He said that the steep devaluation of the Naira provides the nation with an opportunity to expand its non-oil exports and steer the economy towards long-term recovery and growth.

Stay the course

Gill cautioned that, when it comes to implementing difficult economic reforms, half measures don’t suffice. It is therefore crucial for Nigeria’s government to sustain the momentum of the ongoing reforms to fully realise their benefits, he argued.

“This is only the beginning. Nigeria will need to stay the course for at least another 10 to 15 years to transform its economy,” he noted. “It is very difficult to do these things, but the rewards are massive.”

While welcomed by foreign investors, critics blame the economic reforms undertaken by President Bola Tinibu’s administration for plunging the country into a deepening cost of living crisis.

The devaluation of the naira and removal of fuel subsidies have ignited inflation and a sharp rise in the cost of living for ordinary Nigerians. Inflation came in at 32.7% in September, with Proshare analysts forecasting that the headline inflation rate will average 32.57% in 2024, diverging from the central bank’s 21.40% inflation target.

Protect the vulnerable

Acknowledging the hardships faced by many Nigerians, Gill urged authorities to boost short-term payments to poor households. He also called for the implementation of a social safety net, financed by the savings from the removal of fuel subsidies.

“The government must do everything in its power to protect the most vulnerable citizens against hardships.”

The World Food Programme (WFP) says nearly 26.5 million people in Nigeria face food insecurity in 2024, up from close to 19 million in 2023. It attributes this to conflict and insecurity, the impact of the climate crisis and rising inflation. Additionally, WFP also estimates that around 84 million Nigerians, representing about 37% of the total population, live below the poverty line.

As President Bola Tinubu continues to implement economic reforms, experts warn that his administration must balance these efforts with the need to protect the nation’s poorest citizens. He must also find a political solution to ease the public’s fierce resistance to the structural reforms.

In recent months, numerous protests (pictured above) have erupted across Nigeria over rising living costs, leading to deadly clashes between protesters and security forces. Amnesty International has reported 21 fatalities as a result of these confrontations.

According to the International Monetary Fund (IMF), quelling public resistance to structural economic reforms requires increased two-way engagement between authorities and citizens. Support for economic reforms hinges on communication, engagement, and trust, it notes in its October 2024 World Economic Outlook report.

“Dialogue between officials and the public should be two-way. Allowing people to help shape policies and voice concerns fosters a sense of community ownership over reforms, making individuals more likely to support proposed changes,” the IMF says.