Onome Amuge
The World Bank has urged the federal government to undertake an audit to accurately determine the debts owed by the Nigerian National Petroleum Company (NNPC) Limited to the nation.
This call to action, as outlined in the latest Nigeria Development Update (NDU) report launched recently in Abuja by the international financial institution, is seen as a key step in sustaining and deepening ongoing economic reforms.
Building on its call for greater accountability in the oil and gas sector, the World Bank also urged the federal government to improve the reporting of oil revenues to the Federation Account Allocation Committee (FAAC).
It noted that this measure, coupled with the maintenance of market-reflective pricing for petrol, would ensure that the benefits of the recent removal of petrol subsidy are fully realised by the country.
The report,titled “Staying the Course: Progress Amid Pressing Challenges”, further called for reform of the Value Added Tax (VAT) regime and a rationalisation of 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.
While the NDU report acknowledged the significant strides taken by Nigeria since May 2023 to stabilise its economy, resulting in modest economic growth, improved fiscal health, and increased foreign exchange reserves, it also drew attention to the short-term difficulties these measures have imposed on households and businesses.
According to the report, the country’s economic reforms, while vital in averting a fiscal crisis and positioning Nigeria for long-term growth, have inevitably caused some short-term challenges for individuals and businesses.
The World Bank’s NDU report highlighted the importance of persevering with these economic reforms while addressing the underlying structural issues that have exacerbated inflation and hindered long-term investment, growth, and job creation.
The report observed that while the initial results of these reforms have been encouraging, as evidenced by positive trends at the macroeconomic level, it was still premature to draw definitive conclusions about the reforms’ long-term effectiveness.
The report argued: While it is still early, the report says that positive results from these reforms are starting to show at the macroeconomic level. For example, output growth has remained modest overall, but inched higher through mid-2024 as oil sector output has stabilized and activity in some services has been robust.
“The fiscal position is also improving, with the Federal Government’s fiscal deficit narrowing to 4.4% of GDP in the first half of 2024 from 6.2% 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.”
In light of the positive developments, the NDU report advocated for the maintenance of the current macroeconomic policy direction, including the Central Bank of Nigeria’s (CBN) tight monetary policy stance.
It noted that these policies, coupled with structural reforms targeting longstanding constraints, would provide a solid foundation for accelerated progress in the fight against inflation and the promotion of investment, growth, and job creation.
The report also highlighted the counterproductive nature of previous policies that distorted market forces, undermined fiscal stability, and hindered Nigeria from realising its full potential.
Ndiame Diop, World Bank country director for Nigeria, asserted; “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, Diop suggested that 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, which he considered most urgent and crucial.
