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HOW BUHARI REVERSED NIGERIA’S 16-YEAR ECONOMIC GAINS BY WORLD BANK
Between 2015 and 2022, Nigeria witnessed a reversal of economic gains, as recorded by Presidents Olusegun Obasanjo, Umaru Yar’Adua, and Goodluck Jonathan between 1999 and mid-2015.
The World Bank disclosed this in its latest Nigeria Development Update (NDU), themed, ‘Staying the course: Progress amid pressing challenges’. It painted a grim picture of how policy inconsistency and contracting the oil sector conspired to lower the gross domestic product (GDP) per capita by about one-third between 2015 and 2022.
“Income gains from 2000-2014 were partially reversed from 2015. Inconsistent macroeconomic policies, the contracting oil sector and external shocks lowered GDP per capita by about one-third between 2015 and 2022, while comparator countries continued to prosper,” it explained.
The report noted that an unorthodox monetary and foreign exchange policy crisis contributed to the inflation surge witnessed during the period, saying the CBN maintained heavy-handed foreign exchange management and loose monetary policies, including monetary financing of the fiscal deficit and development finance interventions while parallel market exchange rate premium and inflation soared.
Also, during the Mohammadu Buhari era, the report said fiscal deficits widened and Ways and Means of financing by the Central Bank of Nigeria (CBN) skyrocketed, forcing a rapid increase in debt pressures.
While the Bank acknowledged the economic and social hardship attributable to President Bola Tinubu’s reforms, it stated that the policies are beginning to bear positive fruits. It added: “Major policy reforms are starting to yield positive results. Despite the very large adjustments, GDP growth has been resilient and is being driven by services and slightly edged up in the first quarter of 2024, which is largely helped.
It observed that the foreign exchange reforms have achieved a market-reflective exchange rate in the official market while the foreign reserve buffer is growing with the parallel exchange rate premium closed. It added that foreign exchange turnover has nearly doubled just as foreign reserves are almost $39 billion.
CBN’s renewed focus on achieving price stability, tightened monetary policy and improved transmission mechanisms anchored on market rates have excite the global financial institution.
While sacrificing an affordable lending rate, the CBN has increased the Monetary Policy Rate (MPR) by a cumulative 850 basis points since February 2024. It also substantially increased and standardised the cash reserve ratio and conducted large and market-priced open market operations (OMOs). The apex bank has also normalised standing facilities, made frantic efforts to halt new development finance loans and phased out ways and means of financing to redirect its attention to market-based debt instruments.
Whereas a revenue-driven fiscal consolidation is on course, the government fiscal deficit shrunk, thanks to contained expenditures and a surge in revenues, the report noticed. Against popular belief that fuel subsidy claims the largest chunk of government revenues, the report has a contrary opinion. It revealed that the surge in revenues believes there is still more job to be done going forward. It charged the Tinubu-led administration to maintain a unified, market-reflective exchange rate and implement a comprehensive, systematic framework for CBN foreign exchange interventions to provide clarity to market participants as to when and how CBN may buy or sell foreign exchange. Focusing on transparently supporting market liquidity and price discovery is also crucial while measures to build liquidity in the NAFEM, including easing remaining restrictions, and channelling oil-related inflows to the market should be prioritised as well, it advised.
The report also stressed that efforts should be geared towards maintaining a market-reflective petrol price and ensuring that the gains from the removal of subsidy flow to the federation. It urged the Federal Government to strengthen non-oil revenues, reform the value-added tax (VAT) regime, rationalise tax expenditures and improve tax administration by adopting an e-invoicing system while strengthening tax audits
