Consider macro-economic reforms to reduce economic shocks, World Bank advises Nigeria

World Bank has advised the Nigerian Government to consider reforms in three key areas so as to mitigate the impact of a slowing world economy occasioned by the Russia-Ukraine conflict, Covid-19 and other global and external shocks.

In its December 2022 Nigeria Development Report, the bank said findings indicate that reforms can be made in three key areas namely: “Restoring macro-economic stability through measures to reduce the domestic and external imbalances; Boosting private sector development and competitiveness by eliminating structural constraints that hinder productivity; as well as, Expanding social protection to protect the poor and most vulnerable.”

According to the World Bank, restoring macro-economic 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.

The bank noted that 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,” the report added.

Thus, the bank stressed that the country needs to urgently address the key drivers of the “decoupling and make reforms to strengthen Nigeria’s macro-fiscal framework.

The World Bank, however, commended some of the reforms of the Nigerian government calling them ‘the right step to take,’ while also urging their sustainability.

“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.”

Meanwhile, the International Monetary Fund (IMF) has said that 2023 will present tougher challenges for global economies.

IMF Managing Director Kristalina Georgieva made the observation, while speaking on the CBS Sunday morning news programme; ‘Face the Nation.’

“The New Year is going to be tougher than the year we leave behind. Why? Because the three main economies – the U.S., EU and China – are all slowing down simultaneously,” she said.

In October, the IMF cut its outlook for global economic growth in 2023, reflecting the continuing drag from the war in Ukraine as well as inflation pressures and the high interest rates engineered by central banks like the U.S. Federal Reserve aimed at bringing those price pressures to heel.

Since then, China has scrapped its zero-COVID policy and embarked on a chaotic reopening of its economy, though consumers there remain wary as coronavirus cases surge.

In his first public comments since the change in policy, President Xi Jinping on Saturday called in a New Year’s address for more effort and unity as China enters a “new phase.”

“For the first time in 40 years, China’s growth in 2022 is likely to be at or below global growth,” Georgieva said.

Moreover, a “bushfire” of expected COVID infections there in the months ahead are likely to further hit its economy this year and drag on both regional and global growth, said Georgieva, who traveled to China on IMF business late last month.

“I was in China last week, in a bubble in a city where there is zero COVID,” she said. “But that is not going to last once people start traveling.”

“For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative,” she said.