The World Bank yesterday urged the federal government to carry out an audit to reconcile what the Nigerian National Petroleum Company Limited (NNPC) is owing the Federation as part of overall measures to sustain and deepen the current economic reforms.
It also called for improved reporting of oil revenues to the Federation Account Allocation Committee ((FAAC) as well as the maintenance of a market-reflective price on Premium Motor Spirit (PMS).
These were contained in the latest Nigeria Development Update (NDU) report, which was launched by the World Bank in Abuja.
In the report titled: "Staying the Course: Progress Amid Pressing Challenges," the bank also urged the federal government to ensure that the gains from the removal of PMS subsidy were flowing to the Federation as well as reform the Value Added Tax (VAT) regime and rationalise tax expenditures.
The bank equally urged the federal government to ensure that all FX-related transactions occur at the market determined exchange rate, cut wasteful expenditures that are not essential, including purchase of vehicles, and external training, among others.
At the NDU launch, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun also confirmed that PMS is now fully deregulated after 40 years of a tumultuous subsidy regime.
Also, the Governor of Bauchi State, Senator Bala Mohammed lamented that the economic reforms introduced by the federal removal which led to the removal of subsidy on PMS and the floating of the exchange rate of the naira had unleashed untold hardship on the people and needed to be revisited.
According to the NDU report, since May 2023, Nigeria implemented significant reforms to stabilise its economy, resulting in modest growth, improved fiscal health, and rising foreign exchange reserves.
However, it observed that while these measures were necessary to urgently avert a fiscal crisis and place Nigeria on a stronger development path, they have imposed short-term pressures on households and businesses.
The report underscored the need to sustain these policies while addressing structural issues to combat inflation and promote long-term investment, growth, and job creation.
While it is still early, the report stated that positive results from these reforms were beginning to show at the macroeconomic level, citing output growth which has remained modest overall, but inched higher through mid-2024 as oil sector output has stabilized and activity in some services has been robust.
It noted that the fiscal position is also improving, with the federal government's fiscal deficit narrowing to 4.4 per cent of Gross Domestic Product (GDP) in the first half of 2024 from 6.2 per cent in the first half of 2023, helping to mitigate debt-related risks.
"Foreign exchange reserves - a buffer against external shocks - have risen from $32.9 billion at the end of 2023 to more than $38.8 billion by mid-October 2024.
"However, inflation remains high, and inched up again in September 2024, mainly due to the most recent gasoline price increases and recent floods," the report said.
Given what it described as the promising results, the report argued that the new direction of macroeconomic policies should be sustained, including the Central Bank of Nigeria's appropriately tight monetary policy stance.
The report stated that complementing them with measures to address long-standing structural constraints will enable faster progress in the fight against inflation, and spur the investment, growth, and jobs which Nigeria urgently needs.
It explained that previous distortionary and unsustainable policies were hindering Nigeria from achieving its immense potential, adding that a series of macroeconomic policy missteps between 2015 and 2023 contributed to an inflation surge in Nigeria
In his address at the launch, the World Bank Country Director in Nigeria, Dr. Ndiame Diop noted: "Nigeria took the bold and courageous move to undertake difficult but critical reforms. This against the backdrop of an already fragile economic position, high food and transport inflation, and other heightened uncertainties.
"If these reforms were not done, Nigeria would have fallen into a serious fiscal crisis that would have made it difficult for government to meet its obligations to citizens.
"Going forward, it will be important to consolidate the improving fiscal outlook and scale up the support for the poorest households to cope with purchasing power losses and hardships, while expanding opportunities for growth and productive jobs, especially for young Nigerians is most urgent and crucial."
Diop urged Nigerians to support the current economic reforms, adding that reversing them could pose serious negative consequences for the country.
The NDU report offered key recommendations on policy priorities to build upon Nigeria's macro-critical reforms, and ignite growth and job creation.
It called for the maintenance of a tight monetary policy until a sustained disinflation path is achieved and continue improving policy effectiveness.
It also urged monetary authorities to ensure the exchange rate is unified and reflects market conditions, while expanding the foreign exchange market.
To reduce debt risks and create room for development and poverty-focused spending, it advised that there should be focus on four key areas.
These, it said, include continued removal of the fuel subsidy and increasing transparency in the oil sector, increase non-oil revenues through better tax policies, cutting government waste and direct spending to targeted poverty programmes, and stick to realistic budgets to avoid unplanned spending.
The report also recommended that the government should protect vulnerable groups by expanding cash transfer programs and strengthening social safety nets, as well as continue addressing long-standing structural constraints.
While presenting the report, the Lead Economist of the World Bank for Nigeria, Alex Sienaert said: "Recent reforms are starting to restore macroeconomic stability. GDP is projected to grow by 3.3 per cent in 2024, rising to an annual average of 3.7 per cent over 2025-2027; headline inflation is anticipated to peak at an average annual rate of 31.7 per cent in 2024, largely driven by the previous depreciation of the naira and increased gasoline prices.
"Yet, in the medium term, staying the course with implementation of the current policy mix will reduce inflation, expected to fall to 14.3 by 2027 in the base case," he said.
He, however, warned that 12 million more Nigerians risk slipping into poverty due to the current reforms, and the attendant job losses.
Sienaert noted that the N70,000 Minimum Wage increase was only for about 4 per cent of public sector workers, adding that only rewarding jobs can actually pull people out of poverty.
During a panel discussion, the Minister of Finance and Coordinating Minister of the Economy, Edun confirmed that subsidy on PMS had been finally "extinguished" with the full deregulation to pave the way for "market pricing."
Edun who had consistently been reluctant to admit in the past as to whether or not subsidy was fully removed, said the subsidy regime cost Nigeria about 5 per cent of its gross domestic product GDP.
"For the first time in 40 years, the vexed issue of fuel subsidy and linked to it, the foreign exchange subsidy, costing 5 per cent of GDP, have gone. It takes time to do reform. So what started on May 29, 2023, taken from one place, tried to re-exit in another place, and it was finally extinguished.
"We have market pricing of PMS and with that, there's huge benefit not only to NNPC, which was bearing the brunt, but to the economy as a whole, including the state governments and the local governments.
"In the same regard, market pricing of foreign exchange. And it's a difficult step, apart from all the other things that you do to ameliorate the pain generally of macroeconomic reform.
"In this case, we sat down with the unions yesterday. We explained the economic trajectory the country was on, and we explained the opportunity which we all needed to ensure that we do not miss," he said during a panel discussion, " he said.
Also in response to a question, the Bauchi State Govenor, Mohammed said the economic reforms were not working but inflicting pain on the people, calling for a revisit.
Mohammed who lamented the negative impact of the reforms on the masses, called for a reversal, adding that the governors risked being lynched by the people
He said: "I listened with rapt attention to the presentation of the World Bank, and I think the World Bank is very, very generous; very diplomatic as it is on the issue.
"Coming from the sub-national, I know we are part of the Federation, and macroeconomic policies are normally under the auspices or the purview of the federal government.
"We don't determine policies. We are just players and partners in governance. But certainly, it is good, and I appreciate that I'm invited here so that you will know the other side of the story.
"Yes, when the reform was started, the sub-nationals supported the president and the presidency, because we knew that we had to do something. And there were two things, subsidy removal and deregulation which would bring more revenues, which would make us move away from the obnoxious policy of patronage, of arbitrariness and so on and so forth.
"Governor Cardoso (CBN governor) has spoken about the orthodox system. Yes, we can go through the orthodox system to achieve economic growth. Are we achieving them? Yes, he spoke about inflation. That means the macroeconomic policies that are creating inflation should be looked into.
"I want to say with humility that there is a lot of pain, a lot of hardship that is beyond the sub-nationals.
"We didn't bring these policies, the revenues that are coming are not enough to address the cost of infrastructure, to develop or improve livelihood. There is hunger, and the policies on agriculture, on manufacturing and so on and so forth are not yielding the required fruits.
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"And I believe we should not be dogmatic and stand on the files of policy and academics. I find the report too academic. We should go back to the basics.
"Nigerians are not enjoying the regime across the board, not only the federal government, including the states and local governments.
"Therefore, the onus rests on you, Minister of Finance, and the managers of the economy come up with a budget programme, with economic policies that will reduce hardship."
In response to a question what the states were doing with increased FAAC allocations since the removal of subsidy Mohammed said the money was not enough for recurrent expenditure and provide infrastructure at the same time.
"The money that we are sharing is not enough. How much were we getting before? We spoke about the past, and the use of Ways and Means. Yes, it's good to exit from that policy. But then what are you doing to make sure there is less hunger.
"The report (NDU) spoke about employment and wages, how many percentage of Nigerians are even employed? Most of our people live in the informal sector. We should look at how we can make them employed. The purchasing power has dwindled beyond your imagination.
" Yes, we need the reform. One of the lead economists said that there is this perception of compromise or conspiracy, yes, that is it. But you have to do your job. I agree with you, with all the numbers, and all the data you doled out.
"These policies are not working, review them, and let us have food on the table. I know you have the capacity and the knowledge; we look up to you. States are loyal. We'll follow you, but please, let us not go into blackmail, where we seem to be collecting money and doing nothing.
"Yes, we will implement the minimum wage, which you agreed. But what is the volume of revenue we are getting? Can we do it, and if we do it, do we have anything left for infrastructure?
"What about power, the tariff is beyond the reach of the common man. We are living with these people. We are at the risk of being lynched. Let us not stay in Abuja and say how the reforms are working. With all humility and modesty, they're not."
Mohammed's position on Nigeria's economic reforms not working was however, countered by the Chief Economist of the World Bank, Indermit Gill, who said despite the negative impacts, the reforms would launch Nigeria into economic prosperity and stability in the long run.
