World Bank remains cautiously optimistic on Nigeria’s growth

The World Bank has projected a cautiously optimistic outlook for Nigeria’s economy, predicting a modest acceleration in growth from 4.2% in 2025 to 4.4% by 2027. This optimism is largely driven by the expansion of the services sector, supported by gains in agriculture and the non-oil industry sectors, as indicated by the World Bank’s recent Nigerian Development Update. Despite this encouraging growth forecast, the report highlights the challenges posed by persistent inflation, necessitating strong monetary discipline and structural reforms to mitigate the high cost of food.

In a recent interview, Tirawadebajo, CEO of CFG Advisory, shared insights on these projections and the Nigerian government’s economic agenda. He expressed a positive view on the Finance Minister’s efforts in stabilizing the economy over the past two years, particularly commending the move away from ways and means financing to market-based instruments. This strategic shift, he noted, is critical for achieving economic stability and accomplishing the first rate cut seen in five years.

Mr. Adebajo further emphasized the significance of aligning monetary and fiscal policies to bolster economic growth. Such synchronization, he suggested, is instrumental in maintaining Nigeria’s growth trajectory, thereby dismissing concerns around stagflation. CFG Advisory’s research indicates that reducing inflation to below 12% can potentially stimulate an 8% to 10% growth rate, a target within reach with sustained policy efforts.

A notable development in Nigeria’s fiscal landscape, as discussed by Adebajo, is the cessation of subsidy payments, saving approximately $15 billion annually. These savings are now impacting positively on revenue streams and debt metrics, enhancing the country’s financial stability. He expressed optimism that the Finance Minister’s strategies could lead Nigeria to meet its revenue targets for the first time in several years. However, he acknowledged that more needs to be done to ensure that economic reforms translate into broad-based benefits for the population, echoing the World Bank’s sentiments.

Attention has also been drawn to the Nigerian government’s strategy of empowering local entrepreneurs through ward-level programs. The ongoing social intervention programs are positioned to act as economic stimuli, supporting industrial growth and job creation. However, Adebajo highlighted the need for further alignment across trade, industrial, and investment policies to stimulate growth, productivity, and employment comprehensively.

The financial expert noted concerns regarding recent tax policies, such as the hikes on foreign investors’ capital gains taxes, which could impede growth by deterring foreign investments. The suspension of duties initiated by the Finance Minister is seen as a necessary step to prevent stagnation and manage inflation.

The World Bank report also suggests that improving public spending efficiency and reinforcing social protection are critical for sustainable economic health. Although revenue mobilization is gradually improving, there is an ongoing need for structuring policies that are conducive to long-term growth. Despite an encouraging environment for portfolio investments and steady remittances, foreign direct investment (FDI) remains sluggish. For 2023, Nigeria is on track to attract only $500 million in FDI, a figure dwarfed by the $16 billion in portfolio investments reported thus far.

Mr. Adebajo concluded by emphasizing the importance of stabilizing the economy to foster a conducive environment for sustainable investments. This, he insists, is vital to enhance investor confidence and catalyze growth in productive economic sectors.

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