Last week, the World Bank made three key and coordinated interventions about the economic reforms of the current administration. On Monday, the Bank’s chief economist and senior vice-president for development economics, Dr Indermit Gill, gave a special remark at the annual summit of the Nigerian Economic Summit Group (NESG); on Wednesday, the same Dr Gill had an opinion piece in the highly-regarded Financial Times; and on Thursday, the World Bank Group launched its latest Nigeria Development Update (NDU).

Well-synchronised, the three interventions echoed the same message: that the Tinubu economic reforms are necessary, that the reforms are beginning to yield positive results, but the reforms need to be sustained and supported to deliver the desired gains. The World Bank came across as offering a ringing and an unqualified endorsement of not just the reforms but also of the way they are being executed. Without a doubt, the Tinubu administration would crave and celebrate such a rosy affirmation. But most Nigerians, going through the worst cost-of-living crisis in recent memory, would have none of it.

I listened to the various speakers at the launch of the NDU (and it was a relief that Governor Bala Muhammed of Bauchi State was invited to provide some ground-level, even if somewhat political, reality check). Also, I have read the speech and the Op-Ed by Dr Gill and gone through the NDU report. I think World Bank’s position is more nuanced than it is coming across in the press and on social media.

However, the World Bank cannot be absolved of the charge of underplaying the mistakes in reform implementation, of over-simplifying the expanding opposition to the reforms and of minimising the danger of not acting quickly and concretely to reduce the concentrated pain spreading across the land. It can be argued that some of these things are not for the World Bank to say. But there is always a risk in not applying necessary caveats and in not reading the room well at a time when most citizens are struggling to make ends meet and there seems to be no reasonable timeframe for the stress to moderate.

In the three interventions, the Bank made a compelling case for the removal of petrol and foreign exchange subsidies. In 2022, the Bank stated, Nigeria lost $15 billion or 5% of GDP to explicit and implicit (and regressive) subsidies on petrol and forex and unwittingly imposed a tax on non-oil exports. This created a fiscal mess and dampened economic growth, and the country was just inches away from a cliff.

The two signature reforms of the Tinubu administration, the Bank submitted, have stemmed the bleeding and some vital signs of recovery are becoming noticeable. The positive signs include the following: fiscal deficit shrank from 6.2% of GDP in H1-2023 to 4.4% of GDP in H1-2024; federation revenues increased from 5.5% of GDP in H1-2023 to 8.7% of GDP in H1-2024; gross foreign reserves rose from $32.9 billion at the end of 2023 to $38.5 billion in early October 2024; arbitrage-inducing premium on multiple foreign exchange rates has been eliminated by ‘market determined’ unification of rates and forex turnover has doubled; debt service as a portion of revenue is projected to fall to 60% by end of 2024 compared to 100% in 2022 etc., etc.

All this is well and good, and Nigeria could use such cheery assessment. We will revert shortly on how much value an average Nigerian puts in such macro-level datapoints. Crucially, the Bank acknowledged the disruption and hardship brought by the reforms, especially in terms of higher energy costs and prices of other goods and services, and the implication for driving more Nigerians into poverty.

In the three interventions, the overarching message from the World Bank is that the country should not abandon the reforms. “Nigeria will need to stay the course for at least 10 to 15 years to transform its economy and become an engine of growth in Sub-Saharan Africa,” said Dr Gill at the NESG summit. “This is the lesson from the past 40 years, as well as from the experience of countries as diverse as India, Poland, South Korea and Norway. Nigeria’s reforms from 2003 through 2007 were exactly what was needed—but they were not sustained.”

The Bank came up with a list of things that should be done to deepen the reforms and as part of staying the course. The prescriptions revolve around creating meaningful jobs for Nigerians, with special emphasis on women and youth. The suggestions are in four broad areas: reducing trade barriers; improving infrastructure; improving business environment; and increasing support to households and businesses. 

I welcome the World Bank for being a strong advocate for reforms in Nigeria. I have written a number of times about how some of these institutions and countries are not doing enough to provide adequate support to Nigeria after the country took on board most of the difficult reforms that they routinely recommend. These institutions and countries need to put their money where their mouth is. What Nigeria needs now, more than anything else, is massive forex supply that the smaller and regular inflows from trade and investment can build on and sustain to ensure a fair value for the Naira and to provide relief to Nigerians across the board. We will also return to this shortly.

The World Bank might not have all the money, but it is a good institution to have in your corner. So, it goes a long way if the Bank is expressing so much confidence in and speaking up for ongoing reforms in Nigeria. But I have a few points of departure.

The first is about how you measure success. To be sure, the macro-level data shared by the World Bank is important. They show that difficult reforms can yield results, and that in this instance, the government is getting a better handle of its finances. But the statistics on external reserves, fiscal deficit, forex rate unification etc., means absolutely nothing to those who have had to endure the doubling, tripling and even quintupling of prices of basic items in the last year or so, and who have no idea of how soon this hardship will moderate or end. So, telling them the reform is yielding fruits with some cold data is asking them to deny the evidence of their eyes and the harsh reality of their lived experience. And urging their government to press on, without making adjustments, is likely to come off as insensitive. It should be understandable that the mass of Nigerians struggling to pay for food and medication will not measure success of reforms with some cold data on reserves and revenues.

My second issue is with the assumption that everyone criticising the reforms wants reversal or is a member of the elite that benefited from the old order. It is quite unfortunate that the World Bank will make this claim in its NDU: “With so many constituencies having benefited from the previous approach, especially the elite, there has been intense political pressure to regress to the previous policies, despite their unsustainable cost and the fact that they unfairly benefited mainly a lucky few at the expense of ordinary Nigerians.”

This is a reductionist and an unhelpful view. Reform design and implementation are a human enterprise. They can’t be perfect. Mistakes will be made. Some assumptions will not be met. Adjustments will be necessary in some instances. And truth be told, some fundamental mistakes have been made in implementing the twin reforms, especially in terms of strategic planning, sequencing and approach, provisioning for the vulnerable and picking up speed in making reliefs available to the needy.

I have said this repeatedly: it is possible to do the right thing in the wrong way or in the wrong order. Yes, there are those opposed to the reforms from the beginning and till now. There are also those who are against the reforms for ideological and political reasons. But there are also those who want the reforms to be more thoughtfully designed and better implemented. Lumping everyone together or dismissing those who want improvement to the reforms is not very useful, and not the kind of tendency the World Bank should be encouraging.

My third issue is that most of the options laid out by the Bank and the government will not address the immediate pain points of most Nigerians. Cash transfer is necessary, but how far can N75,000 shared in three tranches go for the poorest households (even when disbursed on time, which is not the case here)? Free or subsidised bags of rice and other grains can be helpful but how many people will such reach and for how long? More than doubling the minimum wage is a great idea, but this applies to largely the few who work in the formal sector or 7.3% of those in our labour force. Meanwhile, the hardship brought by the reform is widespread.  

The proposals about creating jobs, improving infrastructure and trade etc will provide a structural foundation for sustainable growth but they will not provide immediate relief to the growing number of Nigerians whose standard of living is being shredded daily by soaring costs of food and other essential items. With food inflation at 37.77% (Sokoto State is 50.47%), we should all be worried stiff. Meanwhile, suspension of taxes on some food items was announced with fanfare in July but discussion is still ongoing on implementation. That tells you all you need to know about the seriousness the government attaches to some issues.

My last point is about the song and dance being made of the unification of the exchange rate and how that ties to the central challenge of the moment. In his NESG speech, Dr Gill said that when the forex reform started in June 2023, the official exchange rate was N465/$1 while the parallel market rate was N700/$1, a spread of N235 on each dollar. Sixteen months into the forex reform, the rates have unified at around N1600/$1. Is that not an incredible feat? We have achieved unification, but at what cost?

Both the World Bank and the Central Bank of Nigeria (CBN) are crowing about how this major achievement that has eliminated arbitrage, has led to increase in dollar-denominated government revenues, and in investment flows, remittances and external reserves, and made Nigerian exports more competitive. Missing here is a thought for the Nigerians who do not earn dollars, who clearly constitute more than 90% of our population and are impacted in different ways by the massive loss in the value of the national currency.

But by all accounts, Naira has moved from being overvalued to being undervalued. Figure 1.8 in the NDU euphemistically says the real exchange rate has staged a large adjustment. Some REER calculation puts Naira at its lowest real value since 1999. This large adjustment arose from the disorderly devaluation of the Naira through a free float without a guarantee of adequate forex supply. The argument is not about retaining the forex subsidy but about how to devalue based on your context as a country. Also, a free float is not the only way to have a market-determined, competitive exchange rate. 

The World Bank, the CBN and even the Finance Ministry wax poetic about how the current ‘competitive’ value of the Naira should incentivise exports. But we all need to bear in mind that there will always be a time-lag for significant uptick in the quantity and quality of exports. Also, the benefits of increase in the Naira value of exports will not be as widespread as the immediate pains of an undervalued currency in a country that still imports a lot of final and intermediate goods. Clearly, the government is banking more revenue from exchange gains (which is now a major and regular FAAC item). Ordinarily, increased government revenues should translate to improved spending on the priorities of the people, but we know how that goes. Government’s spending priorities in the last 17 months tell us all we need to know.

We cannot normalise dollar at N1600 or afford further undervaluation under the convenient excuse that it is market determined especially when there is a consensus that the currency is undervalued. Ensuring that the Naira finds its fair value should be the priority of the government today because the price of most things, including that of locally refined petrol, is linked to the value of the Naira. Getting Naira to its fair value, and not those tokenistic handouts or those medium-term prescriptions, is what will provide immediate relief across the board.

It is also what will provide the best insurance for the difficult reforms and against social upheaval. Of course, we need to stay the course, as policy reversal has a heavy cost. But we also need to be practical and know that the human capacity to bear pain is not infinite. Reformers must constantly pay attention to the pulse of the operating environment, and make tactical adjustments where necessary.