The World Bank announced on Tuesday that Nigeria has the potential to save up to 3.9 trillion naira ($5.10bn) this year alone, thanks to reforms implemented in its foreign exchange market and the removal of the petrol subsidy. These measures, part of President Bola Tinubu’s ambitious reform agenda, aim to address various challenges, including a high debt burden, and have garnered international attention.
Upon assuming office last month, President Tinubu made the significant decision to scrap the popular but costly petrol subsidy. In parallel, the central bank has unified the country’s exchange rates, rectifying a long-standing issue that has hindered Africa’s largest economy for years.
During a presentation in the capital city of Abuja, Alex Sienaert, the World Bank’s lead economist for Nigeria, highlighted the potential impact of these reforms. Sienaert said the savings resulting from the removal of the petrol subsidy and the foreign exchange market reforms should not be seen as a windfall, but rather as a crucial step towards placing Nigeria on an upward trajectory in terms of its development path.
‘They stop Nigeria from going over what you might call the fiscal cliff. They really set the stage for a new and an upward trajectory in terms of Nigeria’s development path,’ stated Sienaert.
For years, both the World Bank and the IMF had urged Nigeria to eliminate the petrol subsidy, which amounted to $10 billion last year, and to liberalize its exchange rate.
To further deepen foreign exchange reforms, Sienaert suggested that Nigeria should lift forex restrictions on 43 items, including sugar and flour, which the central bank currently deems ineligible for funding through official dollar sales.
Sienaert also highlighted the concerning rise in inflation, which reached 22.41 percent in May, potentially leading to an additional four million Nigerians falling into poverty during the first five months of this year.
Meanwhile, labour unions are pressing the Tinubu administration to significantly raise the monthly minimum wage to mitigate the impact of the fuel subsidy removal on workers.
According to the World Bank, Nigeria has experienced uneven growth over the past two decades, resulting in the country having the second-largest population of poor people globally and ranking among the least developed nations in the world.
