The World Bank has issued a stark warning regarding Nigeria’s economic stability, cautioning that any additional increase in the price of Premium Motor Spirit (PMS), commonly known as petrol, could severely hinder the country’s fragile recovery following the removal of fuel subsidies.
This concern was highlighted in the latest edition of the bank’s Africa’s Pulse report, released in October 2024.
The report noted the significant inflationary impact that followed President Bola Tinubu’s removal of petrol subsidies in May 2023, which saw petrol prices soar from N175 per litre to over N1,000.
“While the inflationary effects stemming from a weakened naira and the removal of the gasoline subsidy seemed to be subsiding, a further 40-45% increase in gasoline prices in September could reverse this disinflationary trend,” the report warned.
Despite ongoing macroeconomic reforms, Nigeria’s economic growth is projected at 3.3 percent in 2024, with expectations for further growth in 2025 and 2026. Inflation, which peaked at 34.2 percent in June 2024, has slightly decelerated to 32.2 percent by August.
The World Bank emphasized that sustaining fiscal reforms will be crucial to achieving higher growth rates by 2025.
However, the report also highlighted the significant depreciation of the naira in 2024, making it one of the worst-performing currencies in Sub-Saharan Africa. By August, the naira had depreciated by 43 percent year-to-date, trailing behind only the Ethiopian birr and South Sudanese pound.
This devaluation was attributed to increased demand for U.S. dollars in the parallel market and delays in foreign exchange disbursements by Nigeria’s central bank.
Tinubu Responds to World Bank’s Economic Outlook
In response to the World Bank’s warning, President Bola Tinubu, speaking through Minister of Budget and Economic Planning Senator Atiku Bagudu at the 30th Nigerian Economic Summit Group (NESG) celebration, acknowledged the World Bank’s insights but refrained from detailing specific plans for implementing the recommendations.
“Our engagements in the last three days have been enriching and rewarding, particularly with the speech of the Vice President of the World Bank Group, Mr. Indermit Gill,” Tinubu noted.
He added that the discussions at the summit were candid and provided valuable feedback from various stakeholders, including state governors, ministers, civil society organizations, and private sector leaders.
“This summit has facilitated deep and meaningful conversations among public, private, and civil society leaders,” he said, underscoring the importance of partnerships in driving Nigeria’s economic growth.
Nigeria Needs 10-15 Years for Recovery, World Bank Says
Earlier in the week, the World Bank painted a grim picture of Nigeria’s economic outlook, stating that it would take 10 to 15 years of consistent policy implementation and transparency before the country’s economy could fully recover.
The bank called for strict adherence to reforms and warned of the painful but necessary adjustments required to set the economy on a sustainable growth path.
