The World Bank Group President David Malpass has advised Nigerian government to have a rethink on the fuel subsidy and also run a single exchange rate that is market-based.
Malpass who spoke on Wednesday at a virtual news conference and reported by The Nation newspaper, encouraged Nigerian government to rethink its subsidy effort because of its significant negatives on the economy.
He noted that Nigeria has huge opportunity ranging from natural to human resources that could accelerate her policy improvement
World Bank had been advising Nigeria to end the petrol subsidy, but recently, the National Assembly raised fuel subsidy to N4tn on the request of President Mohammadu Buhari.
The World Bank President said, "Generalized subsidies have significant negatives. One is, they are expensive because they go to everyone, and they’re often taken–more used by people with upper incomes than by people with lower incomes; they’re not targeted.
"So, we encourage, when there needs to be a subsidy for either food or for fuel, that it be carefully targeted, well targeted for those most in need. And we have encouraged Nigeria to rethink its subsidy effort.
" Also, two other things that I’ll mention on Nigeria that are important. It runs a multiple exchange rate system, which is complicated and is not as effective as it would be if there were a single exchange rate. The most useful thing for development is to have a single exchange rate that’s market-based, that stable over long periods of time and that attracts investment and it also means that there is discipline within the country’s fiscal policies. That would help.
"And then, Nigeria also has trade barriers that distort trade flows, and that could be improved substantially in order to help the people in Nigeria move forward. I do take note of the complicated situation that they face. There are weapons flowing in through northern Africa that find their way to non-Nigerians that create violence in Nigeria. This is a very challenging situation that the government faces. And I think we, all over the world, people should have an understanding of the fragility that’s facing several parts of the world, but in particular the Sahel and the Sub-Saharan African area where the weapons flow from outside of Africa is putting a grave burden on governments around the continent.
"The food problem is severe. I mentioned the rise year-over-year in prices; that’s one aspect of it. It's worse than that in a way because the prices crowd out the poorest. And so, it hits people in poor countries and especially in rural areas the hardest.
"There’s also the tendency to move towards less nutritious food. If other food is not available in the diet, people turn to rice, which often doesn’t have the nutrition that’s needed. This is clearly a severe crisis and it’s added to, or compounded by, the shortage of fertilizer that makes it hard to have a strong growing cycle," Malpass stated.
very interesting
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