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World Bank worries over Nigeria’s macroeconomic management

Published

1 year ago

September 13, 2023

Multilateral lender, the World Bank is worried about Nigeria’s macroeconomic management, and has asked for structural changes to enhance financial management and tax collection, among other reforms.

The bank maintained that Nigeria “needed enabling business environment to attract investment and foster sustainable economic growth” amid its current economic reality.

This position was made in the Bank’s Country Policy and Institutional Assessment (CPIA) for 2022, which gave Nigeria 3.2 out of a possible 40 points, matching its score from the 2021 assessment. The CPIA, which is an annual diagnostic tool for Sub-Saharan African nations qualifying for funding from the International Development Association (IDA), is used throughout Africa.

In its highlights on the country’s performance, the World Bank stated: “Overall macroeconomic management weakened due to an inconsistent monetary policy framework which did not effectively curb inflation, as well as the absence of a more predictable, transparent, and flexible exchange rate management system, which was a deterrent to private investment.

“The weak fiscal position is exacerbated by low revenue generation, and limited progress in diversifying the economy away from oil dependency, contributing to a high debt service-to-revenue ratio”.

Some experts have argued that the recent petrol subsidy and the foreign exchange (FX) management reforms have the potential to lay the groundwork for sustained growth, addressing long-standing macroeconomic imbalances.

According to the World Bank, Nigeria’s highest-performing cluster was Policy for Social Inclusion and Equity with 3.5 points, while its lowest-performing cluster was Public Sector Management and Institutions with 2.8 points.

On the scoring trend, the World Bank said: “Despite global economic challenges, more countries in Sub-Saharan Africa saw improvements in their overall CPIA scores compared to the previous year. In Western and Central Africa (AFW), the overall score increased for eight countries— Benin, Cape Verde, Côte d’Ivoire, The Gambia, Guinea, Guinea-Bissau, the Republic of Congo, and Togo.

“The overall score increased for four countries in Eastern and Southern Africa (AFE)— Burundi, the Democratic Republic of Congo, Mozambique, and Zambia. In contrast, the overall score decreased for eight countries—Chad, the Comoros, Eritrea, Ethiopia, Ghana, Malawi, São Tomé and Príncipe, and Sudan”.

Nigeria can take advantage of the no-subsidy regime and FX float to implement a comprehensive reform package that includes a variety of complementary fiscal, monetary, trade, and structural policy measures.

Related Topics:Featured Macro economics Nigeria World Bank

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IMF mission concludes 4th loan program assessment in Egypt

Published

2 hours ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.