Emmanuel OchayiIn a fresh perspective on Nigeria’s economic landscape, the World Bank has raised concerns over the country’s macroeconomic management, emphasizing the urgent need for structural reforms.
The institution stressed the importance of these reforms to improve revenue mobilization and financial management, ultimately creating an enabling business environment to attract investment and foster sustainable economic growth.
Speaking on the matter, a representative from the World Bank stated, “Nigeria needs to reevaluate its macroeconomic policies and embark on structural reforms promptly. We see this as imperative for achieving the necessary conditions to spur investment and ensure long-term economic stability.”
The World Bank’s assessment comes from its recently released Country Policy and Institutional Assessment (CPIA) for 2022, in which Nigeria received a score of 3.2 points, the same as in the previous year’s assessment.
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Highlighting Nigeria’s performance, the World Bank report identified key areas of concern, stating that “Overall macroeconomic management weakened due to an inconsistent monetary policy framework, which failed to effectively curb inflation. Additionally, the absence of a more predictable, transparent, and flexible exchange rate management system deterred private investment. The weak fiscal position is exacerbated by low revenue generation and limited progress in diversifying the economy away from oil dependency, resulting in a high debt service-to-revenue ratio.”
The CPIA serves as an annual diagnostic tool for Sub-Saharan African countries eligible for financing from the International Development Association (IDA). The report assesses the quality of policies and institutions in all 39 IDA-eligible countries in Sub-Saharan Africa for the calendar year.
Despite this stagnation, the World Bank noted that the average overall CPIA score for Sub-Saharan Africa remained unchanged at 3.1 points in 2022. The scores for Nigeria were determined through assessments of four economic indicators: Policy for Social Inclusion and Equity, Public Sector Management and Institutions, Economic Management, and Structural Policies.
Nigeria’s highest-performing cluster was Policy for Social Inclusion and Equity, with 3.5 points, while its lowest-performing cluster was Public Sector Management and Institutions, scoring 2.8 points.
Commenting on the broader regional trend, the World Bank said: “Despite global economic challenges, more countries in Sub-Saharan Africa saw improvements in their overall CPIA scores compared to the previous year.”
The bank pointed out that countries showing improvements primarily excelled in economic management, policies for social inclusion, and governance clusters. Conversely, countries with declining scores faced challenges in economic management and governance.
Furthermore, the World Bank’s call for Nigeria to rethink its macroeconomic strategies reflects a growing divergence in economic performance across the African continent, underscoring the importance of proactive reforms to ensure a more stable and investor-friendly environment.
The World Bank’s concerns add to the ongoing dialogue on Nigeria’s economic trajectory and the imperative for meaningful reforms in the country’s financial management and economic policies.
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