On Tuesday, the World Bank predicted Nigeria might save 3.9 trillion nairas ($5.10 billion) this year after foreign exchange market changes and the abolition of a petrol subsidy but warned of rising inflation.
President Bola Tinubu is implementing Nigeria’s largest changes in decades, including eliminating the costly petrol subsidy and harmonizing the country’s exchange rates.
During a presentation in Abuja, World Bank Nigeria head economist Alex Sienaert claimed reform savings were not a fiscal bonanza.
They prevent Nigeria from crossing the fiscal cliff. “They set Nigeria’s development path on a new and upward trajectory,” Sienaert added.
He predicted 3.3% growth this year and 3.7% for Nigeria’s economy next year.
The World Bank and IMF had long urged Nigeria to eliminate its $10 billion petrol subsidy and liberate its exchange rate.
Siernaet that Nigeria eases limitations on 43 products, including sugar and flour, that the central bank says cannot be supported via official dollar sales to expand foreign exchange reforms.
Tinubu’s monetary policy advisor Wale Edun claimed the naira, which fell to historic lows when currency restrictions eased, will stabilize below 700 to the dollar.
Siernaet said the measures would increase inflation, which reached 22.41% in May, and that four million more Nigerians may have fallen into poverty in the first five months of this year due to high costs.
To offset the fuel subsidy reduction, labor groups want Tinubu’s government to boost the monthly minimum salary sixfold.
The World Bank states Nigeria has the second-largest poor population and is one of the least developed countries.
