A long-waited meeting of the board of the World Bank to consider a support package for Nigeria, will no longer hold tomorrow as the global lender has yet to be convinced that the government and Central Bank in Nigeria are serious about commitments to put in place credible mechanisms to enhance efficiency in allocation and use of public finance in Africa’s most populous nation.
The decision to cancel tomorrow’s meeting of the board which is rare at a time of this pandemic, relates to the $1.5bn budget support loan for Nigeria and sends a bad signal about Nigeria’s leadership.
“It is true the meeting for tomorrow will no longer be holding as you have said,” a senior World Bank official told BusinessDay Thursday. “We are still having discussions with the Nigerian government and are working on a comprehensive package of support for Nigeria and so we want to be sure everyone is on board.”
This delay means Nigerian businesses, especially SMEs struggling with no access to foreign exchange for their critical inputs would remain in dire straits and even now accelerate the rate at which they are culling badly needed jobs of Nigerians.
Nigeria’s foreign exchange market remains virtually frozen as the central bank which needs the $1.5bn to shore up the country’s foreign reserves, is taking its time in moving towards a rates unification on the one hand and the federal government is dithering on plans to implement full deregulation of the downstream petroleum industry and enthrone cost reflective electricity tariffs on the other.
Businessday understands that the World Bank wants to see Nigeria move quicker with plans to unify the country’s intriguing and inefficient exchange rates, enthrone service reflective electricity tariffs and completely halt the wasteful regime of petrol subsidy.nIn addition, there are also recommendations for improving tax revenues in a country where tax to GDP ratios are at about the lowest in the world.
The officials of the World Bank in Washington along with their colleagues in Abuja have been having a series of meetings with their Nigerian government counterparts and it would now seem that those meetings have failed to yield any significant fruits.
There is little wiggle room for Nigeria now and it would have to move urgently before the economy already on the ropes, will fall into a tailspin, one economist told Businessday. Nigeria got an IMF loan support of $3.4bn on mere commitments and now the World Bank seeing how slowly Nigeria has moved on those commitments, want to see reach action.
As BusinessDay reported Wednesday, the International Monetary Fund (IMF) has also urged the Central Bank of Nigeria to quickly come up with a clear strategy and timeline on how it intends to achieve full unification of the country’s multiple exchange rates.
According to the IMF, this would enhance foreign exchange availability for fx-strapped businesses, promote both domestic and foreign investment and create conditions for a boost in economic activity for Africa’s most populous country.
Speaking to members of the American Business Council, Jesmin Rahman, the IMF’s mission chief for Nigeria, said it was important for Nigeria to have a well-functioning foreign exchange market with uniform rules of engagement. ‘This will enhance confidence, improve business continuity and governance,” Rahman said.
“In addition, greater flexibility of the exchange rate is desired because of Nigeria’s low buffers.”
She is not the only one calling for the unification of Nigeria’s foreign exchange rates. Several leading economists in Nigeria as well as President Muhammadu Buhari’s economic council have long prescribed the measures as necessary for the country to exit the tough business climate in which it finds itself. At Wednesday’s breakfast meeting of the Lagos Business School, the issue was top of mind for the CEOs in attendance.
While Nigeria has vowed to merge its multiple exchange rates at the more market reflective Investors and Exporters window rate, the Central Bank has seemingly been reluctant, fearing that this could plunge the economy into further turmoil.
The apex bank has moved the official rate from N305 to the dollar first to N325, then N360 and now to N380 but the drip feed approach to the unification has occasioned more pain and confusion for investors.
IMF’s Rahman believes there is still a long way to go given the multiple windows, large parallel market premiums, and low turnover in the I&E window which many now hope will become the only market.
