The World Bank has called on the Federal Government to conduct a thorough audit to reconcile the debts owed by the Nigerian National Petroleum Company Limited (NNPC) to the Federation, as part of a broader strategy to sustain and deepen ongoing economic reforms.

It also recommended improved transparency in the reporting of oil revenues to the Federation Account Allocation Committee (FAAC), along with maintaining market-reflective pricing for Premium Motor Spirit (PMS).

These recommendations were outlined in the latest Nigeria Development Update (NDU) report, launched by the World Bank in Abuja. The report, titled “Staying the Course: Progress Amid Pressing Challenges,” urged the Federal Government to ensure that the benefits from the removal of the PMS subsidy flow to the Federation and to reform the Value Added Tax (VAT) regime while rationalising tax expenditures.

The World Bank also advised that all foreign exchange transactions should occur at market-determined rates and recommended cutting non-essential expenditures, such as vehicle purchases and external training.

During the launch of the report, Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, confirmed that PMS is now fully deregulated after 40 years under a subsidy regime. He noted that deregulation was necessary for economic stabilisation and long-term growth.

Bauchi State Governor, Senator Bala Mohammed, however, expressed concerns about the impact of these reforms, noting that while they have stabilised the economy, they have also caused hardship for ordinary Nigerians. He called for a review of the reforms to alleviate the suffering of the people.

The NDU report highlighted Nigeria’s significant reforms since May 2023, which have contributed to modest economic growth, improved fiscal health, and an increase in foreign exchange reserves. However, the report acknowledged the short-term pressures on households and businesses and stressed the importance of sustaining these policies to address structural issues and promote long-term investment, growth, and job creation.

Since the implementation of these reforms, the federal government’s fiscal deficit has reduced from 6.2% of Gross Domestic Product (GDP) in the first half of 2023 to 4.4% by mid-2024. Foreign exchange reserves have also increased from $32.9 billion at the end of 2023 to over $38.8 billion by mid-October 2024.

However, inflation remains high, exacerbated by recent increases in fuel prices and flooding, and is expected to persist through 2024. The report recommended maintaining a tight monetary policy to combat inflation while addressing structural constraints to spur investment, growth, and job creation.

In his remarks, the World Bank’s Country Director for Nigeria, Dr Ndiame Diop, praised Nigeria’s “bold and courageous” economic reforms, stating that they were essential to avert a fiscal crisis and lay the groundwork for long-term economic stability.

He urged Nigerians to continue supporting the reforms, warning that reversing them could have severe negative consequences for the country. The report emphasised the need for targeted poverty alleviation measures, such as cash transfers and expanded social safety nets, to mitigate the impacts of the reforms on vulnerable populations.

During a panel discussion, Mr Alex Sienaert, the World Bank’s Lead Economist for Nigeria, projected a GDP growth rate of 3.3% in 2024, with inflation expected to peak at an average rate of 31.7%. He warned, however, that up to 12 million more Nigerians could slip into poverty due to the current reforms, despite the increase in the minimum wage for public sector workers.

Governor Bala Mohammed expressed scepticism about the effectiveness of the reforms, noting that they had exacerbated the hardship faced by ordinary Nigerians and urging a review. His concerns were countered by World Bank Chief Economist Indermit Gill, who maintained that while the reforms had short-term negative impacts, they were essential for Nigeria’s long-term prosperity and stability.