Subsidy removal, Forex unification painful but Key necessary step to rebuilding Nigeria’s economy – World Bank

The World Bank has weighed in on the withdrawal of federal government subsidies and the harmonisation of exchange rates.

This comes just weeks after President Bola Tinubu’s inaugural speech, which focused on the elimination of subsidies and the need to unify Nigeria’s exchange rate.

Speaking at a World Bank event on Tuesday to examine the nation’s economy over the last six months, Country Director Dr Subham Chadhuri highlighted that the policy, while difficult, remains critical to restoring the nation’s economy.

Mr Chadhuri, however, advocated measures that will reduce the impact on the people going forward.

He further stated that the World Bank’s concessionary funding to Nigeria currently stands at over ten billion dollars.

Also speaking, a lead economist at the World Bank, Alex Seinart, said the removal of the fuel subsidy is projected to achieve estimated fiscal gains of about 3.9 trillion Naira in 2023.

The gains according to him are expected to reach over 21 trillion naira between 2023 to 2025.

The economist further projects that the petroleum subsidy removal is likely to lead to an increase in inflation in the upcoming months before contributing to disinflation in the medium term.

On the exchange rate, the senior economist at the world bank said that the previous foreign exchange management approach impeded investment and growth, contributed to inflation and undermined the efficacy of the monetary and fiscal policies.