.Nigeria misses out on $4.4bn World Bank COVID-19 vaccine rollout package earmarked for 51 countries

…sustains pressure for fuel subsidy removal

…calls for reduced deficit financing by CBN

Emma Ujah, Abuja Bureau Chief

The World Bank has tasked President Muhammadu Buhari administration to remove fuel subsidies, reduce deficit financing by the Central Bank of Nigeria (CBN) and reduce fiscal pressure through domestic revenue mobilization.

The bank said in its Nigeria Development Update (NDU) titled, “Time for Business Unusual,” which was released yesterday, that the approach was critical to addressing inflation, Foreign Exchange management, and fiscal pressures currently facing the nation’s economy.

According to the bank, the Nigerian government took bold measures to mitigate the effects of the COVID-19 pandemic in 2020 through reforms, but that “the momentum of the reform agenda has waned, undermining Nigeria’s long-term growth prospects.”

 The report claimed, “the insufficient supply of foreign exchange (FX) issues related to the predictability of exchange rate management, the unsustainable subsidy on the premium motor spirit (PMS), burdensome trade restrictions, and the sizeable fiscal deficit financing by the Central Bank of Nigeria (CBN) are undermining the business environment, compounding underlying constraints on domestic revenue mobilization, foreign investment, human capital development, and the delivery of public services.”

 It indicated that despite a strong initial recovery and resurgent global oil prices, Nigeria’s pre-crisis challenges were threatening the post-crisis recovery, highlighting the need to depart from business-as-usual policies.

The report noted mounting fiscal pressures due to lower-than-expected revenues in 2021 and the rising cost of the premium motor spirit (PMS) subsidy.

It added that in contrast to past periods of high oil prices, this time, the government has not been able to fully benefit from the oil boom because oil production has fallen below Nigeria’s estimated capacity and the OPEC+ quota due in part to rising insecurity and the higher cost of the PMS subsidy.

Commenting on the report, the World Bank Country Director for Nigeria, Mr. Shubham Chaudhuri, said, “Even though Nigeria’s economy exited a pandemic-induced recession, several challenges persist including double-digit inflation, declining incomes, and rising insecurity.

“While the government took bold policy measures to mitigate the impacts of the COVID-19 crisis, the reform momentum has slowed which hinders Nigeria’s ability to reach its growth potential,” said, “In 2022 the Federal government plans to spend about 3,000 naira (US$7) per person for health, while the cost of the PMS subsidy for next year could reach 13,000 naira (US$32) per person.”

Similarly, the bank’s Lead Economist for Nigeria and co-author of the report, Mr Marco Hernandez, said, “Not only is the PMS subsidy costly, but it mainly benefits richer households. Nigeria has the opportunity to establish a ‘compact’ with citizens that eliminate the subsidy and uses the savings to provide targeted cash transfers to lower-income households, invest in job-creating programs, and improve its fiscal position.”

According to the NDP, under a business-as-usual scenario, GDP per capita would continue to decline, but reforms could accelerate growth.

Vanguard News Nigeria

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