Nigeria needs to sell some of its assets, including its oil company, the Nigeria National Petroleum Corporation (NNPC), to enable efficient management and more revenues, Ekiti State Governor Kayode Fayemi canvassed on Tuesday.
Fayemi was speaking at the launch of the World Bank’s Nigeria Development Update (NDU) launched both virtually and physically in Abuja.
The World Bank report recommended that for Nigeria to wriggle out of its numerous challenges, critical reforms are needed to cut down high inflation levels and accelerate economic recovery.
During discussions on the report, Fayemi admitted the failure of governance to check anomalies in the system which have held down the country’s developmental quest, including petroleum subsidies which gulp as much as N100bn monthly and N1.2 trillion annually.
“This is not sustainable and does not benefit the poor, including my state, which is grossly short-changed,” Fayemi stated, advocating the need for a partnership between the federal government and the sub-nationals.
He also said while subsidy removal has become quite critical, the government must ensure a direct correlation between the subsidies removed and the impact on the citizens.
“It’s almost midnight in our country. We are almost on the precipice,” Fayemi stated.
“Some of the country’s assets which we keep hugging need to be sold. NNPC, for instance, needs to go,” he said.
In the latest Nigeria Development Update titled “Resilience through Reforms”, the World Bank acknowledged the government’s measures to protect the economy against a much deeper recession but said such must set policy foundations for a strong recovery.
In this year’s edition of the report, the World Bank proposes near-term policy option organized around three priority objectives which include reducing inflation by implementing policies that support macroeconomic stability, inclusive growth, and job creation; protecting poor households from the impacts of inflation, and access to financing for small and medium enterprises in key sectors to mitigate the effects of inflation and accelerate recovery.
In addition to assessing Nigeria’s economic situation, this edition of the NDU also discusses how the COVID-19 crisis has affected employment; how inflation is exacerbating poverty in Nigeria; how reforming the power sector can ignite economic growth; and how Nigeria can mobilize revenues in a time of crisis.
In 2020, the Nigerian economy experienced a shallower contraction of -1.8% than the -3.2% which had been projected at the beginning of the Covid-19 pandemic.
Although the economy has returned to growth, albeit weak, prices are increasing rapidly, severely impacting Nigerian households.
April 2021 inflation rate showed the highest numbers in four years as food prices accounted for over 60% of the total increase in inflation, and have pushed an estimated 7 million Nigerians below the poverty line in 2020 alone.
The report acknowledges notable government’s policy reforms aimed at mitigating the impact of the crisis and supporting the recovery, including steps taken towards reducing fuel subsidies and adjusting electricity tariffs towards more cost-reflective levels, both aimed at expanding the fiscal space for pro-poor spending.
In addition, the report highlights that both the federal and state governments cut nonessential spending and redirected resources towards the COVID-19 response.
The report further observed that public-sector transparency has improved, in particular around the operations of the oil and gas sector.
But despite the more favourable external environment, with recovering oil prices and growth in advanced economies, the World Bank believes that a failure to sustain and deepen reforms would threaten both macroeconomic sustainability and policy credibility, thereby limiting the government’s ability to address gaps in human and physical capital which is needed to attract private investment.
“Nigeria faces interlinked challenges in relation to inflation, limited job opportunities, and insecurity,” Shubham Chaudhuri, the World Bank Country Director for Nigeria, said.
“While the government has made efforts to reduce the effect of these by advancing long-delayed policy reforms, it is clear that these reforms will have to be sustained and deepened for Nigeria to realize its development potential.”
Presenting the report, Marco Hernandez, the World Bank Lead Economist for Nigeria and co-author of the report, said, “Given the urgency to reduce inflation amidst the pandemic, a policy consensus and expedite reform implementation on exchange-rate management, monetary policy, trade policy, fiscal policy, and social protection would help save lives, protect livelihoods, and ensure a faster and sustained recovery.”