World Bank outlines key reforms for Nigeria’s economic recovery from 2025

…May take Nigeria 10-15 years to transform its economy

… Nigeria’s world poverty capital status is unacceptable

The World Bank has outlined key reforms Nigeria must implement in 2025 to ensure a sustainable economic recovery.

Addressing attendees at the ongoing Nigeria Economic Summit, Indermit Gill, senior vice president of the World Bank Group, identified three pivotal reforms crucial for Nigeria’s economic trajectory.

First, he emphasised the need to prioritise non-oil imports, which requires a competitive exchange rate, noting that Nigeria currently enjoys one of its most competitive real exchange rates in 20 years, presenting a significant opportunity for the private sector.

The second, he urged the country’s reform to focus on alleviating the burden of inflation on vulnerable households, while acknowledging that the Nigerian government’s implementation of a large-scale, targeted cash transfer program has aided between four and five million households.

“This program should quickly extend to 10 million households, or more if necessary,” Gill stated.

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He added that over the coming years, Nigeria must establish a cost-effective safety net for its most vulnerable citizens, which could be funded by savings from ending fuel subsidies and resolving exchange rate distortions.

To maintain competitiveness and safeguard the poor, Gill urged the Central Bank to keep inflation in check.

He advised against the temptation of short-term capital inflows that could artificially boost the Naira’s value, potentially stifling non-oil growth. Instead, he suggested focusing on rebuilding foreign exchange reserves to buffer against oil price fluctuations.

Also, he urged the government to ensure that every vulnerable household could cope with higher inflation, noting that the Nigerian government is rolling out a large-scale targeted temporary cash transfer program that has already reached between four and five million households.

“It should quickly extend to 10 million households, perhaps more if necessary. Over the next few years, it should also install a cost-effective safety net to protect its most vulnerable citizens, financing it with some of the savings from the ending of fuel subsidies and exchange rate distortions.”

To protect the poor and maintain competitiveness, he said the central bank must stay focused on inflation, and resist the lure of short-term capital inflows that might push up the Naira’s value too quickly and crimp non-oil growth. It should rebuild foreign exchange reserves instead as a cushion against oil price volatility.

Finally, Gill stressed the necessity of making the economy more conducive to business. He pointed out that over the next decade, more than 12 million young Nigerians will enter the workforce, and creating jobs for them will rely heavily on private sector growth.

“It will only be facilitated by the private sector, and it will be facilitated by large-scale domestic and foreign private investment in the non-oil sector,” he said.

“Attracting such investment means boosting the national power grid, improving transportation, improving security, and improving the rules and regulations and enforcing them for private enterprise,” he explained.

“Failure would set back reform efforts across the continent, besides ruining the future of yet another generation,” he added. “During the coming year, Nigeria’s policymakers have to do these three things,” he said.

Gill urged Nigeria’s elites, gathered at the summit, to unite in supporting these reforms, noting that doing so would foster a prosperous and stable future for generations to come.

In the oil sector, the World Bank senior vice president highlighted the

urgent need for Nigeria to implement reforms the country had earlier implemented from 2003 to 2007 which were regretted not sustained.

He said Nigeria must adopt oil price-based fiscal rules; make accounting and allocation of oil revenues fully, completely, painfully transparent; devise a public investment program that promotes the diversification of the economy; and keep public debt at a sustainable level.

He said Nigeria should continue to let markets determine exchange and learn from its past policy mistakes.

“Nigeria’s reforms from 2003 to 2007 were exactly what was needed but they were not sustained. Today’s fiscal monitoring and exchange reforms are hurting everyone, especially ordinary Nigerians who are struggling with high prices of food and transport,” he said.

He noted that within the period., Nigeria managed its oil wealth well, saying the country adopted an oil price fiscal rule that not only insulated the non-oil trade input sector against oil price volatility but also helped to build a cushion of foreign exchange reserves,

In contrast, Gill pointed to Norway as a peer country that took a similar approach to oil wealth management but with a clear distinction as Norway has stayed on the course of implementing the reforms for much longer.

“The basic principles that guided the Norway reform and the Nigeria reform are the same as above. This is the difference between the Norwegian experience and the Nigerian experience,” he said.

“It might take a decade to reap the dividends. But if you stay the course, you will surely reap the dividends. Nigeria will survive. It’s a great nation. But great nations also thrive, and I hope that Nigeria will thrive, and soon,” he said.

“Nigeria will need to stay the course for at least another 10 or 15 years to transform this economy. And it will become an engine of growth in sub-Saharan Africa and it will have to transform sub-Saharan Africa,” Gill remarked.

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He urged Nigeria to learn from its past mistakes, noting that many of today’s economic challenges can be traced back to missteps from over 40 years ago, particularly during the oil boom of the 1970s. “Poor fiscal and exchange rate policies led to amplified oil price volatility and increased vulnerability for ordinary Nigerians,” he explained.

Gill outlined how the government’s actions—tightening foreign exchange controls and imposing import licensing—set the stage for a parallel exchange rate market, resulting in ordinary citizens facing inflated costs compared to the elites.

Consequently, he said, oil wealth that should be used for the welfare of all Nigerians, has for too long been used to benefit just the elites. “The ordinary Nigerians are being hurt even more, and they were hurt much more by the policies of the past”, he added.

The World Bank senior vice president further acknowledged that the President’s signature reforms are essential steps to break from the past and forge a more hopeful future for all Nigerians.

He noted that the combination of implicit subsidies from the exchange rate and explicit subsidies on Premium Motor Spirit (PMS) cost the government aN10 annually by 2022, equivalent to about $15 billion at free market rates.

However, Gill also pointed out that removal of subsidies has led to a doubling of PMS prices, imposing significant hardship on Nigerians across the socioeconomic spectrum.