World Bank urges Nigeria to ease trade barriers, diversify economy

.As IMF takes steps to enhance debt sustainability assessment

By Clara Nwachukwu, Washington DC

The World Bank, yesterday, urged Nigeria to ease trade restrictions that block market development and diversify the economy by investing more in agriculture and other non-oil sectors.

The Bank also sought improvement in basic infrastructure provision especially electricity and clean water to take more Nigerians out of poverty.

President of the World Bank Group, David Malpass, said these are the surest ways to achieve shared prosperity and sustainable growth in keeping with the lender’s economic projection of 2.8% for Nigeria in 2023.

Malpass’ advice came as the Managing Director, the International Monetary Fund (IMF), Kristalina Georgieva, said the multilateral institution is taking steps to ensure debt sustainability assessment.

This, she said, would help to improve the debt restructuring process and ease the debt burden for countries.

The two Bretton Woods institutions chiefs spoke during separate press briefings at the on-going IMF/World Bank Spring Meetings in Washington DC.

Malpass said: “Nigeria has trade protection that blocks market development. They have a dual exchange rate that is very expensive for the people of Nigeria to maintain that dual exchange rate system.

“They have high inflation and not enough diversification of the economy to really make sufficient progress.”

In terms of growth, he said: “For Nigeria, the growth was 3.3 per cent in 2022 and 2.8 per cent in 2023, within our forecast, and our high priority for the World Bank is shared prosperity in a sustainable way.

“And so, as we think about Nigeria, there are many changes that are needed in order to allow that process to proceed. Nigeria has a big chunk of its GDP is oil and it means that a lot of people in Nigeria are facing poverty and that needs to be redirected.

“And they also face insecurity across the northern and western regions and it is very challenging. And so, the World Bank is working hard within Nigeria, but also working to have an economic system that can be more productive.”

Malpass also advised Nigeria and other Sub-Saharan African countries to focus on policies that would enhance inclusive growth similar to India, which has recorded improved electricity supply, investments in agriculture and investments in infrastructure.

He reiterated that the World Bank’s major concern is: “First, restoring price stability and safeguarding financial stability as prerequisites for a return to robust growth.” 

He added that “So long as financial pressures remain limited, we expect central banks to stay the course in the fight against inflation, holding a tight stance to prevent re-aggravated inflation expectations.

“Further efforts to reduce budget deficits are critical to support the fight against inflation and reduce debt. But this is not an easy task. We still have to care about the most vulnerable segments of our societies.

This is because, “fighting inflation and safeguarding financial stability have become more complex with recent banking sector pressures,” he noted.

Nigeria has trade protection that blocks market development. They have a dual exchange rate that is very expensive for the people of Nigeria to maintain that dual exchange rate system.

Debt, financial system sustainability

For the IMF, Georgieva said the intension is to help countries “resolve crushing debt burdens.”

She warned that the Fund will “not hesitate to use our policy, even when we think that there is absolutely no chance to reach the desired goal, which is to restructure the debt of these countries.”

According to her, the Global Sovereign Debt Roundtable (GSDR) held on Tuesday, has already recorded progress, as this is expected to ensure that countries with high debt profiles have their debt restructured in a manner that gives room for growth.

She said: “We have to be mindful of our duties to them and I want to make a double plea on their behalf. Help them resolve crushing debt burdens and help ensure that the IMF can continue to support them going forward.

“On the first, we now have the global sovereign debt roundtable. It is making tangible progress co-chaired by the World Bank, IMF in India as G20 chair.

“We can group together public and private creditors as well as borrowers first time all of them sitting around the table to accelerate restructuring cases, including those that are covered in the G20 common framework but also those that are not covered by the framework and are pressing.

“We met yesterday; I was very encouraged by the positive outcomes. Firstly, we agreed to improve information sharing of macroeconomic projections and debt sustainability assessment at an early stage of the debt restructuring process.

“This is a breakthrough in bringing together everyone who has to be at the table and find areas where we can reach consensus now and areas of future work.

“Secondly, we reached a common understanding on the role that can be played. Thirdly, we now have a clear work stream, including the workshop in the next weeks on how to assess any false compatibility of treatment. The main purpose is to accelerate and restructure.”

She however added: “We could not reach an agreement yesterday, although the aim was not to reach an agreement. So, what we have concluded was that we have to identify principles for how timelines have been set.

“We have agreed that there would be a case-by-case decision, but this case-by-case decision will need to be within defined timelines and parameters and that will be the next agenda for us in the next round of our engagement.”

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