Nigeria is starting to experience the positive effects of key policy reforms implemented after a near fiscal crisis in 2020, but it must continue on this path, according to the World Bank. President Bola Tinubu has introduced significant measures, such as ending a long-standing petrol subsidy and devaluing the naira, to address sluggish economic performance over the past decade.
Alex Sienaert, the World Bank’s lead economist for Nigeria, highlighted these developments during a presentation in Abuja. He noted that the country’s fiscal deficit had improved markedly, dropping from 6.2 percent of Gross Domestic Product (GDP) in the first half of 2022 to 4.4 percent in the same period this year. He attributed this progress to the reforms, which have spurred growth in services, stabilised the oil sector, and enhanced the foreign exchange market.
‘We are seeing fiscal consolidation underway, with the fiscal deficit shrinking, driven by steady expenditure in real terms and a surge in revenues,’ Sienaert said. He further explained that the increase in revenue is largely due to the removal of the implicit foreign exchange subsidy, which was even more costly than the widely discussed petrol subsidy.
The World Bank expects Nigeria’s economy to grow by 3.3 percent in 2024, rising to 3.6 percent by 2025. These figures reflect an improved outlook following two economic recessions in the past eight years, which were caused by a combination of economic mismanagement and policy challenges.
Recent reforms, including the central bank’s focus on price stability and the implementation of a unified, market-driven exchange rate, have helped prevent a deeper economic downturn. However, these changes have also led to rising inflation, posing a challenge to the government’s efforts to stabilise the economy.
‘The ultimate goal of these reforms is to create jobs and opportunities,’ Sienaert concluded.
