Opinion

Interrogating World Bank’s prescriptions for Nigeria’s economy

Without a doubt, the Nigerian economy has been in dire straits for a while, even before the onset of the coronavirus pandemic (by March 2021) that is yet ravaging the globe. This is why in such a short period of five years (2016 to 2020), the economy had twice sunk into deep recession; and all efforts of the government had focused on pulling the economy out of the chasm. Truly, the government has been pushing out a potpourri of policies and programmes, some of them ill-digested, to reclaim the economy from the doldrums. And this explains the countless number of ‘intervention packages’ from various agencies of the government, especially the Central Bank of Nigeria, to stimulate the economy and put it on a sustainable growth trajectory. However, the economy has neither attained a momentum nor robust recovery; but a wonky and fragile limp-thus practically pushing the fiscal and monetary authorities to their wits end as to the way forward.

This reality has unwittingly attracted the usually unpalatable and unpopular pontifications and prescriptions of the Bretton Woods institutions (the World Bank and the International Monetary Fund) for economic growth and development. Thus, in recent times the IMF and the World Bank have been showing ‘special interest’ on the way forward to any meaningful economic recovery and growth for Nigeria.

The voices of these global institutions are becoming louder; their visitations and publications about Nigeria and its economy are becoming more regular than ever before. Their comments are getting more pungent and punchy; and their prescriptions now come with a ‘ring of urgency of now’. And so, on a seeming note of flattery, the World Bank on November 23, 2021 said the Nigerian government took bold measures to mitigate the effects of the COVID-19 pandemic in 2020 through bold reforms, but observed that the momentum of the reform agenda had waned, thus undermining Nigeria’s long-term growth prospects.

In its latest ‘Nigeria Development Update (NDU)’ titled “Time for Business Unusual,” the Bank highlighted what it termed urgent policy priorities that can be implemented over the next three to six months in four key areas:

(1) eliminating the PMS subsidy while protecting poor and vulnerable households from any inflationary impact;

(2) reducing inflation through a coordinated mix of exchange rate, trade, monetary and fiscal policies;

(3) catalysing private investment by enhancing foreign exchange management, easing trade restrictions, and fostering a better business environment; and

(4) addressing fiscal pressures through enhanced domestic revenue mobilization and reducing the reliance on CBN deficit financing. A casual look at these prescriptions will show them as wholesome; yet, a dispassionate interrogation of some of them would show their (intended and incidental) deleterious impacts on the Nigerian polity, especially at this point in time. For instance, the issue of subsidy on PMS has been on the policy cards of successive administrations in Nigeria for more than a decade.

Now, the World Bank recommends that the subsidy must be removed in full in no more than six months. But, how come the subsidy in the first place? Over the years Nigeria has been importing a certain percentage of its PMS needs; and so, in order not to sell such PMS to the consumers at outrageously high prices (dictated by the cost of importation), governments have been absorbing part of the costs.

In the past couple of years, all the refineries (owned by the Federal Government) were shut down, and Nigeria has been importing all its PMS. And since the higher the price of crude oil (which Nigeria exports), the higher the price of PMS (since the refining nations import crude) which Nigeria imports (ceteris paribus), rising oil prices in the international market has become counterproductive for Nigeria. This scenario is getting worse to the point that what is being earned from crude oil export is now hardly enough to import sufficient PMS for the country and service its burgeoning external debt.

*Okeke, a practising Economist and Consultant on Business Strategy and Sustainability, writes from Lagos. He can be reached at: obioraokeke2000@ yahoo.com OR 08033075697 (SMS only)

 

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