Macroeconomic and fiscal changes are urgently required, according to the World Bank, to improve Nigeria’s development outcomes, which are “severely restricted by the inefficient use of resources.”
A significant portion of Nigeria’s resources, according to the bank, have been used to pay ineffective and regressive subsidies for gasoline, power, and foreign exchange.
In a new Nigeria Public Finance assessment report that was released yesterday, the bank stated that “not all these subsidies are accounted for in the budget, which makes them difficult to follow and scrutinize.”
According to the World Bank, wealthy households are the primary beneficiaries of the subsidies, which in 2021 exceeded spending on social safety, health care, and education combined. They impede the social development of Nigeria by distorting incentives, discouraging investment, and crowding out spending on pro-poor programs.
Nigeria’s government struggles to provide better services since it has among the lowest levels of public spending and revenue in the entire world.
Nigeria’s total public spending between 2015 and 2021 was 12 percent of GDP on average, which is less than half the global average of 30 percent. Increasing resources is necessary to improve service delivery.
The world bank urged the government of Nigeria to act quickly to improve fiscal management, establish a standardized, stable market-based exchange rate, phase out its expensive, regressive fuel subsidy, and rationalize preferential trade restrictions and tax exemptions.
According to World Bank Group President David Malpass, they would establish the foundation for increases in public revenues and investment that are required to improve development results.