ABUJA, June 27 – The World Bank stated on Tuesday that Nigeria has the potential to save up to 3.9 trillion naira ($5.10 billion) this year alone through its foreign exchange market reforms and the elimination of a petrol subsidy. However, the bank also cautioned about the short-term inflationary pressures that may arise as a result.
President Bola Tinubu of Nigeria is initiating some of the country’s most significant reforms in decades, which include the removal of the popular but costly petrol subsidy and the unification of the nation’s multiple exchange rates. During a presentation in the capital city of Abuja, Alex Sienaert, the World Bank’s lead economist for Nigeria, emphasized that the savings generated by these reforms should not be viewed as a sudden influx of funds.
“They prevent Nigeria from reaching what you might call a fiscal cliff. They truly establish a new and upward trajectory for Nigeria’s development path,” stated Sienaert.
He also projected that Nigeria’s economy would grow by 3.3% this year and 3.7% next year.
The World Bank and the International Monetary Fund have long urged Nigeria to eliminate the petrol subsidy, which cost $10 billion last year, and to free its exchange rate.
To further deepen foreign exchange reforms, Sienaert suggested that Nigeria should lift restrictions on a list of 43 items, including sugar and flour, that the central bank currently prohibits from being funded by official dollar sales. Wale Edun, Tinubu’s monetary policy advisor, stated that the naira, which has experienced record lows following the removal of forex restrictions, is expected to stabilize just below 700 to the dollar.
Sienaert cautioned that inflation, which reached 22.41% in May, would continue to rise as a result of the reforms. He also highlighted that due to high prices, an additional four million Nigerians may have fallen into poverty in the first five months of this year.
Labor unions are urging Tinubu’s government to increase the monthly minimum wage by over six times to mitigate the impact of the fuel subsidy removal on workers.
According to the World Bank, Nigeria has the world’s second-largest population of impoverished individuals and ranks among the least developed countries globally.