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Monday, September 26, 2022

World Bank seeks more currency reforms as Nigeria awaits $1.5 bln loan

Nigeria needs to strengthen its currency reforms before it can access a $1.5 billion loan from the World Bank, the country director of the International Bank for Reconstruction has said.

“We recognize how much Nigeria has done,” Shubham Chaudhuri, the World Bank’s Nigeria country director, said during a webinar with journalists. “There needs to be a little bit more.”

The outset of the COVID-19 crisis has made the task much more challenging and urgent because of the severity of the economic downturn and the decline in fiscal resources.

“By 2023, in our baseline scenario, Nigeria’s GDP per capita is expected to be roughly similar to that of 2010. This means that Nigeria would lose 14 years in per capita incomes.

“By contrast, if we compare Nigeria with the average of middle-income economies worldwide, we find that other countries are expected to lose around 7 years.

“In other words, while COVID-19 will hit incomes across all countries, Nigeria is expected to suffer twice as much.

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“Because Nigeria’s growth has been uneven and volatile, once we adjust for inflation, we find that for Nigeria going back to 2010 is equivalent to going back to the 1980s,” the World Bank Country Director said.

Nigeria had requested the facility to help it plug the gap in the 2020 revised budget estimate in the face of economic downturn brought about by the collapse in global crude oil prices and demand in the wake of the Coronavirus pandemic.

The West African country had obtained $3.4 billion facilities from the International Monetary Fund (IMF) by June as the global oil prices collapsed, leading to a sharp decline in Nigeria’s earnings from oil exports.

World Bank loans come with strings of conditions, including requirements for currency reforms, removal of subsidy on domestic consumption of fuel and deregulation of electricity tariff by the government.

The bank had recommended a more unified, flexible exchange rate by the Central Bank of Nigeria (CBN).

The regulatory bank had devalued the local currency thrice this year along, but the gap between the official rate and the parallel markets remains large.

The naira traded at N480 to the dollar on the parallel market on Friday, N379 to the dollar on the CBN window and N394 on the Investors and Exporters’ (I&E) forex window.

The situation is pressuring the economy and making it difficult for private companies to get the dollars they need to import into Nigeria.

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