The World Bank called on the Federal Government on Tuesday to reallocate a portion of the savings from the elimination of fuel subsidies to alleviate the suffering of Nigerians exacerbated by the policy’s negative impact.
Making this call in its latest Nigeria Development Update, NDU, released on Tuesday, the World Bank noted that an additional 7.1 million Nigerians would be pushed into poverty, especially if no measures were put in place to compensate for the negative impact of subsidy removal on the populace.
According to the World Bank, the removal of the gasoline subsidy and foreign exchange (FX) management reforms are critical measures to begin rebuilding fiscal space and restoring macroeconomic stability, and the opportunity should be taken to take additional, necessary policy reform steps.
It emphasised that the new administration had begun critical reforms to address macroeconomic imbalances.
The organisation specifically stated that the president should seize the opportunity to have a transformative impact on the lives of millions of Nigerians and lay a solid foundation for sustainable and inclusive growth.
The World Bank added in the NDU report, titled “Seizing the Opportunity,” that it is critical to implement a comprehensive reform package encompassing a variety of complementary measures, including a new social compact, to protect the poor and most vulnerable, and to maximise the collective impact on growth, job creation, and poverty reduction.
The report indicated that Nigeria’s economic growth slowed in the first quarter of 2023, with real Gross Domestic Product, or GDP, growth falling from 3.3% in 2022 to 2.4% year-over-year (y-o-y) in Q1 2023.
The challenging global economic environment has put pressure on Nigeria’s economy, it was further stated. However, Nigeria’s economic performance and susceptibility to additional external shocks are significantly influenced by domestic policies.
“The previous mix of fiscal, monetary, and exchange rate policies, including the naira redesign programme, did not deliver the desired improvements in growth, inflation, and economic resilience.
“The new government has recognised the need to chart a new course and has already made a start on critical reforms, such as the elimination of petrol subsidy and reforms in the FX market.
“With the removal of the petrol subsidy, the government is projected to achieve fiscal savings of approximately N2 trillion in 2023, equivalent to 0.9% of GDP. These savings are expected to reach over N11 trillion by the end of 2025.