ONE of the sobering commentaries that emerged from the recent International Monetary Fund (IMF), World Bank Spring meeting in Washington DC, USA, was a detailed assessment of President Bola Tinubu’s economic reforms and its impact on Nigerians. A statement signed by Mr. Axel Schimmelpfenning, IMF’s Mission Chief in Nigeria, noted that though some of the reforms represent “important steps towards stabilising the economy, enhance resilience and support growth”, they are yet to translate into tangible benefits for the average citizen in the country, as poverty and food insecurity remain very high.
Key among the policies referred to by the global lenders; include the removal of petrol subsidy, liberalisation of the foreign exchange regime, the floatation of the naira, and the stoppage of financing fiscal deficits by the Central Bank of Nigeria (CBN). Two years ago, these policies were regarded by both the IMF and the World Bank Group, as necessary corrections for Nigeria’s economy grappling with serious revenue shortfalls and spiralling debt that now stands at over N145trillion. Yet, the implementation of these reforms have sparked the most extreme cost-of-living crisis in decades.
As President Tinubu’ administration is approaching two years in office, it should see the IMF, World Bank statement as a subtle indictment and a wake-up call for a holistic review of its economic policies. For instance, the World Bank, in its latest Nigeria’s Development update, noted that an estimated 216 million people could slide into poverty in 2027, stressing that poverty has increased disturbingly by as high as 3.6 percentage points. Undoubtedly, the pang of poverty is already here, and could be much worse by 2027. This is despite huge borrowings from multilateral lenders, some of them ostensibly to alleviate poverty. In 2024, Nigeria’s combined debt to the World Bank and IMF totaled $18.61billion, accounting for 83.4 per cent of its total multilateral debt. The World Bank’s share was $17.81billion, while the IMF’s share was about $306.8 million. These figures represent 38.9 per cent and 1.7 per cent of Nigeria’s total external debt, respectively.
Nigeria’s surge in debt profile has the potential to derail economic growth, especially as debt servicing gulped over 58 per cent of total government’s revenue in 2024. Government should heed the IMF, World Bank’s timely advice and steer the economy in the right direction, and avoid a poverty-induced meltdown. Instructively, among the highlights of the meeting in Washington DC, USA, was the downgrading of Nigeria’s economic growth forecast to 3 per cent this year, from a previous estimate of 3.2 percent announced in October 2024.
In its forecast, IMF expects Nigeria’s economic growth to further slow down to 2.7 per cent in 2026 owing to lower global oil prices. All of this, including inflationary pressures, is an indication that Nigeria’s policy reforms have been largely ineffective in addressing inclusive growth and poverty. Going forward, government’s reforms should be rooted in fiscal and monetary discipline, efficient public spending and regulatory clarity. These measures are necessary to correct systemic inefficiencies and reposition the economy for sustainable inclusion growth.
Also, there is need for increased transparency and accountability in public sector spending, particularly as it relates to addressing structural weaknesses in productivity, revenue generation and human capital dependency. Besides, there is need to deepen diversification of the economy away from the present over-reliance on oil revenue. This must go hand in hand with improved tax collection framework and huge investments in key sectors like manufacturing, agriculture and digital services, among others.
Rising poverty and food insecurity are causing anger and hunger among the people. Nigerians are living on the edge. Government should be careful about the prescriptions of global financial institutions and put in place macroeconomic corrections that will strengthen finance management. It is time to overhaul some of the economic reforms and find solutions to the myriad of socioeconomic challenges facing the people, especially the vulnerable in the country.
Above all, what Nigeria requires now is good leadership and imaginative thinking by policymakers to formulate economic policies that will see the country navigate out of the present storms. Creating an enabling environment for both local and foreign investors to invest in the economy is crucial. Ease of doing business should receive priority attention, while insecurity should be tackled frontally. The partnership between the public and private sectors is also very relevant at this time to salvage the economy and make life better for the people.