Nigerian Government Policies are Harmful to the Business Environment, says World Bank

According to the World Bank, the Central Bank of Nigeria's numerous currency rates, restrictions on trade, and public deficit financing continue to harm the business environment.

The World Bank stated that the CBN's continued interference will result in deficiencies in economic growth, foreign investment, human capital, investments in infrastructure, and governance.

This was released in a document titled ‘Nigeria Development Update (June 2022): The Continuing Urgency of Business Unusual‘.

According to the World Bank, despite increased risks, the government has maintained a "business-as-usual" policy attitude that impedes growth in the economy.

“Multiple exchange rates, trade restrictions, and financing of the public deficit by the Central Bank of Nigeria (CBN) continue to undermine the business environment. These policies augment long-standing weaknesses in revenue mobilization, foreign investment, human capital development, infrastructure investment, and governance,” the World Bank said.

Nigeria also missed an opportunity to eliminate subsidies at a crucial time, according to the report. Specifically, during the years 2020 and 2021, when oil and gas prices were relatively low, the government missed the opportunity to resolve one of the main sources of economic and financial vulnerability by opting to keep the premium motor spirit, or gasoline, subsidy, which is "unique, opaque, costly, unsustainable, harmful, and unfair."

The World Bank said more than one million Nigerians have become poor due to the Ukraine conflict — a challenging issue that is tackling macroeconomic threats as elections promote increased spending, high inflation, and higher "global interest rates deter private investment." This is on top of the 6 million Nigerians who are expected to slip into poverty this year as a result of rising costs, notably in food. According to the analysis, inflationary pressures would be exacerbated by budgetary challenges that Nigeria will experience this year as a result of the rising cost of fuel subsidies at a time when oil output is declining.

Also, foreign exchange issues, high inflation, and budgetary constraints caused by fuel subsidies skew the advantages of a developing non-oil industry and high oil prices.

Concerning restrictions on trade, the CBN has prohibited 44 import commodities from gaining access to foreign exchange. Rice, cement, margarine, fertilizer, milk and dairy products, maize/corn, palm kernel/palm oil goods/vegetable oils, meat and processed meat products, vegetables/processed vegetable products, and poultry fowl are some of the commodities on the list.

Nigeria went into its biggest recession in 40 years in 2020, but recovery rebounded in the fourth quarter when pandemic restrictions were removed, price of oil recovered, and the government launched plans to counteract the economic impact. As a result, the Nigerian economy contracted less (-1.8 percent) in 2020 than had been predicted when the epidemic began (-3.2 percent), according to the World Bank. As part of its reaction, the government implemented a number of long-awaited policy measures, frequently in the face of strong resistance.

In 2021, Nigeria's GDP was predicted to rise by 1.8 percent. Despite the positive surrounding environment, which includes rising oil prices and growth in advanced nations, reform slippages would impede Nigeria's economic expansion and thwart progress toward its development goals.