World Bank expects growth, less inflation in Nigeria
The World Bank in its new Nigeria Economic Report (NER) released May 13, 2013 says, Nigeria’s short term macroeconomic outlook looks generally strong, with the likelihood of higher growth, lower inflation and reserve accumulation.
According to the report, this will present the Nigerian government with an opportunity to make progress in key reforms and public investments associated with the Transformation Agenda for job creation, diversification and more effective governance.
However, sounding a cautionary note, the NER said Nigeria’s economic growth has not automatically translated into better economic and social welfare for Nigerians. As the NER notes, “poverty reduction and job creation have not kept pace with population growth, implying social distress for an increasing number of Nigerians.”
The report suggests that Nigeria will need to build up its fiscal reserve to protect the country from oil price volatility and will need to increase internally generated revenue to compensate for what will likely be declining oil revenues relative to the size of the economy.
It noted that the size of the country’s oil revenues relative to GDP “should decline” even in event that oil prices increase despite significant inflation at a stable exchange rate.
This was already the case in 2012, as government oil revenues fell from an estimated 23.6% to 19.7% of GDP. This decline may increase budgetary pressures and justifies a prudent fiscal stance, the World Bank added.
Lead economist at World Bank and author of the report, Mr. John Litwack, said, “For effective macroeconomic management, the key task is to establish an institutional framework that can effectively separate and buffer Government expenditures from oil prices and International experience demonstrates that countercyclical fiscal policy is essential to conquer the “oil curse” of boom-bust cycles and slow economic development.”
The NER indicated that the Nigerian Federalist System has the potential to support Nigeria’s takeoff into rapid diversified growth and job creation, but the Federal and State Governments need to improve cooperation and policy coordination in a few key areas namely macroeconomic management, coordinated policies to enhance market connectivity and improve public services, and the realization of national standards in public financial management and disclosure.
By Dorcas Appiah