The World Bank has urged Nigeria to chart a new growth path through a selected base of reforms which include the elimination of petrol subsidies, warning that it is affecting net government revenues alongside crude theft.
This was disclosed by the World Bank’s new Lead Economist for Nigeria, Alex Sienaert, at its Nigeria Development Update and Country Economic Memorandum in Abuja on Thursday attended by Nairametrics.
Sienaert reiterated on the need for Nigeria to curb inflation through the reduction of the federal government’s recourse to Central Bank of Nigeria (CBN) financing.
Priority reforms needed in Nigeria
The World Bank’s top official noted that a selected set of priority reforms are needed in Nigeria to chart a new growth path, in the areas of macroeconomic and institutional enablers and also investment accelerators.
Sienaert urged the Federal Government to eliminate petrol subsidy, adding that oil revenue has continued to decline despite the increase in oil prices.
He noted that the petrol subsidy which has jumped from N4 trillion to more than N9 trillion is the major reason crude oil revenue has been under pressure.
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.”
Sienaert, who said that Nigeria has been making efforts to counter this with increasing non-oil revenues, which has been important to prevent an even worse squeeze, however, noted that this has been enough to counter what they have seen on the net oil revenue side.
He pointed out that this has resulted in a substantial increase in debt costs.
The Brettonwood institution advocated for some other macroeconomic enablers which include; adopting a single and market-reflective exchange rate; increasing non-oil revenues by raising VAT and excise rates and strengthening tax administration as well as containing inflation by reducing the federal government’s recourse to CBN financing.
He added that Federal Government can also boost competition by embedding it into Policy, enhancing enforcement and simplifying rules to lower 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.
