World Bank says Nigeria will save $5.1bn from Tinubu reforms in the 2023 fiscal year but analysts say many Nigerians will be tipped into poverty
The World Bank in a statement on Tuesday said Nigeria will save $5.1bn about 3.9 trillion Naira in the 2023 fiscal year. The savings are attributed to the reforms to its currency exchange market and the removal of fuel subsidy.
World Bank lead economist for Nigeria Alex Sienaert said during a presentation in the capital Abuja that savings from the reforms did not amount to a fiscal windfall.
“They stop Nigeria from going over what you might call the fiscal cliff. They really set the stage for a new and an upward trajectory in terms of Nigeria’s development path,” Sienaert said.
Inflation, which hit 22.41% in May, would rise further following the reforms, Siernaet said, adding that some four million more Nigerians may have been driven into poverty in the first five months of this year due to high prices.
Labour unions are pressing Tinubu’s government to raise the monthly minimum wage more than sixfold to cushion workers against the impact of the fuel subsidy removal.
Nigeria’s economy was expected to grow 3.3% this year and 3.7% next year, he said.
The World Bank and International Monetary Fund had for years called on Nigeria to remove the petrol subsidy, which cost $10 billion last year, and free its exchange rate.
The global financial institution also warned that there is the danger of runaway inflation.
President Bola Tinubu had initiated a raft of reforms scrapping the popular but expensive petrol subsidy and unifying the country’s multiple exchange rates.
Investors are happy that the full potential of Africa’s economic potential will be unleashed with the reforms but challenges await the 71 year old leader.
Analysts, observers and business executives warn that bigger challenges await and question whether Tinubu has the fortitude to take them on based on the fact that corruption, tribal and religious patronage brought him to power.
Nigeria today faces record debt, high unemployment, and power shortages have contributed to decades of anaemic growth. Oil output is shrinking. And the government has no control over the rural areas where there is rampant insecurity.
“The path to political power in Nigeria, over time, has always been through these vested interests,” said Bismarck Rewane, CEO at Financial Derivatives Company in Lagos.
“When you deny them of their source of livelihood, then they will fight back.”
Tinubu’s job is made harder by the fact that he becomes the first president elected with far fewer votes, since the end of military rule in 1999, his electoral victory, which is being challenged at the Presidential Elections Petition Tribunal( PEPT) by two opposition parties has polarised the country.
“Nigeria was already hurting, so he needs to build consensus around the reforms. He has a legitimacy deficit,” said Nnamdi Obasi, senior Nigeria advisor for the International Crisis Group think-tank.
“He has never been known to be a great fighter of corruption,” said Obasi. “He hasn’t said anything memorable about it and his body language doesn’t suggest anything revolutionary will be done.”
Akowe with reports from Lagos