In its latest report on Nigerian Development Update (NDU) released last week, the World Bank chronicled a number of ills plaguing the economy of the biggest nation in Africa, ABDULWAHAB ISA reports
In the past months, for instance, all the major indices for tracking economic growth of a nation fell flat when benchmarked with Nigeria’s economic progress. Inflation has been on a double-digit trajectory in the last one year, with an adverse effect that pushes prices of food items beyond the reach of most Nigerians. The exchange rate is irretrievably on a higher side to the detriment of the national currency. The power sector has been in its worst comatose, with the national grid collapsing seamlessly. Also, the level of insecurity is at its worsening peak, rubbing off envisaged gains, which huge investment committed in agriculture would have accrued. These and other assorted economic challenges currently confronting the country formed the basis for pronouncements by some institutions, including the World Bank, in a recently-submitted Nigeria Development Update (NDU).
World Bank’s NDU report
The global bank submitted its latest edition on Nigeria Development Update (NDU) last week, saying that an additional one million Nigerians may be pushed into poverty by the end of 2022, in addition to the six million Nigerians that were already predicted to fall into poverty this year because of rising prices of food. In the report unveiled in Abuja, the bank expressed concern that Nigeria’s economy was vulnerable on all fronts arising from spikes in inflationary and fiscal pressures. Speaking at the unveiling of the NDU, the World Bank’s Country Director for Nigeria, Shubham Chaudhuri, who presented the highlights, predicted that inflationary pressure would be compounded by the fiscal pressure the country would face this year because of the high cost of fuel subsidy at a time when production continues to decline. He noted that inflation was the biggest challenge facing the country, having the highest number in the world before the war in Ukraine, with predictions to increase further due to the rise in global fuel and food prices caused by the war. He said: “That is likely to push an additional one million Nigerians into poverty by the end of 2022, on top of the six million Nigerians that were already predicted to fall into poverty this year due to the rise in prices, particularly food prices. The report also states that the inflationary pressures will be compounded by the fiscal pressures Nigeria will face this year because of the ballooning cost of gasoline subsidies at a time when oil production continues to decline. “Nigeria is in a paradoxical situation: growth prospects have improved compared to six months ago, but inflationary and fiscal pressures have increased considerably, leaving the economy much more vulnerable. When we launched our previous Nigeria Development Update in November 2021, we estimated that Nigeria could stand to lose more than N3 trillion in revenues in 2022 because the proceeds from crude oil sales, instead of going to the federation account, would be used to cover the rising cost of gasoline subsidies that mostly benefit the rich. Sadly, that projection turned out to be optimistic. “With oil prices going up significantly and with it, the price of imported gasoline, we now estimate that the foregone revenues as a result of gasoline subsidies will be closer to N5 trillion in 2022. And that N5 trillion is urgently needed to cushion ordinary Nigerians from the crushing effect of double-digit increases in the cost of basic commodities, to invest in Nigeria’s children and youth and in the infrastructure needed for private businesses small and large to flourish, grow and create jobs.”
Fuel underrecovery cost has remained Nigeria’s major economic challenge. It is one of the most financial items draining government’s purse, thus denying other critical sectors of government intervention. In her contribution to the NDU report last week, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, expressed concern that the Federal Government’s continuous retention of the controversial fuel subsidy regime was hurting Nigeria’s ability to service its debts. The minister called on Nigerians to understand that fuel subsidy was causing a massive fiscal burden, saying a situation whereby the Federal Government borrows for consumption was wasteful. She explained: “This premium motor spirit (PMS) subsidy is costing us an additional N4 trillion than was originally planned. So, this is an unplanned deficit. We have gone to the National Assembly; we have got approvals, but the approval was simply for us to cut down on some of the investment costs.
“Already, we have borrowing increasing significantly and we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate. So, it is a very difficult situation. So, Nigerians need to understand that this PMS subsidy we are carrying now is hurting the nation, it’s impeding government’s ability to be able to invest in human capital development. N4.5 trillion is money that we could have invested in health or education. So, investments that we needed to make in the oil and gas sector, which we are delaying and deferring to a later time and reducing the rollout of those investments. But we also had asked that we needed to borrow more, which is very serious. Already, we have borrowing increasing significantly and we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate, so, it is a very difficult situation. “But we are investing it in consumption, which is very wasteful, because how many Nigerians own cars that are benefiting from this subsidy.” The minister pointed out that Nigeria was facing challenges from not gaining from the current oil price rally. According to her, “we are at some kind of crossroads. It is not hearsay that Nigeria has not derived what it should from the current high crude oil prices, rather, rising crude oil prices are posing significant fiscal challenges to our economy and may lead to some negative receipts and, indeed, we have started seeing those negative receipts
In yet another occasion, government, last week, opened up on her bleak financial position, largely by pervasive security and other sundry challenges. The Acting Accountant General of the Federation, Mr. Chukwuyere Anamekwe, in a remark at a three-day retreat for members of the Technical Sub-Committee on Cash Management, themed: “Enthroning Fiscal Discipline in Nigeria’s Public Financial Management: A Clarion Call to Stakeholders,” let out dire financial position of government. For instance, he said due to dwindling revenues, the treasury has had to resort to other sources of revenue in order to augment the payment of the federal public servants. Anamekwe noted that there had been an increase in government expenditure due to increasing security challenges and social needs of the citizenry. He suggested pragmatic solutions towards addressing the fiscal challenges. He said: “Now that these challenges stare us in the face, you are expected at this gathering to come up with ideas that will push us through.” The AGF further explained that the cash management retreat had become a veritable tool providing the needed platform for sharing quality information and knowledge that help to keep stakeholders abreast of public financial management reforms and managing fiscal challenges, among others. He said the retreat would no doubt help in the advancement of the desired recovery strategies.
Going by the World Bank’s report, it has become imperative for government to begin implementation of remedial measures to rescue the economy from imminent collapse.