The World Bank Group has caution Nigeria to reduce federal government borrowing by Ways and Means from the Central Bank to reduce inflationary pressures on the economy. Alex Sienaert, the World Bank’s Lead Economist in Nigeria, gave the advice on Thursday during an economic review session held at the Lagos Business School. He commended the Nigerian government for the recent economic reforms, but called for the sustenance of the reforms as the only way to facilitate economic recovery and achieve substantial growth in the near future. Sienaert identified the increase in petrol prices as one of the major impacts of the reforms that had placed pressure on the economy.
He suggested several strategies such as reducing the subsidised Central Bank lending to medium and large firms as well as reducing government borrowing from the Central Bank. Sienaert also suggested reduction of imports by foreign exchange restrictions through tariffs. “The whole agenda of tackling inflation is obviously a huge one. Some ideas include reducing subsidised CBN lending to medium and large firms and the government borrowing from the CBN. All of these things increase the money supply, and reducing that will be helpful to reduce inflation, and then replacing imports with FX restrictions with tariffs,” he said.
Sienaert expressed optimism that this cash transfer could positively impact approximately 50 percent of Nigerians by increasing their available earnings and income by around 10 percent. He said this extra financial support would help many households avoid difficult decisions like skipping meals, pulling children out of school or forgoing medical treatment. Sienaert compared the proposed cash transfer scheme to the savings government would realise from the subsidy removal. He said the expenditure on cash transfers would be relatively small in comparison to the resources freed up, but said that the benefits for vulnerable households outweigh the costs. “The other thing we often hear is that N5,000 or N8,000 is a trivial amount of money. I think people will be shocked to know that for a huge number of Nigerian households, it is a very significant amount of money. I believe the statistics are that about 50 percent of Nigerian households are on less than N60,000 a month. So, if you are giving them N5,000 or N8,000 extra for six months to help tie them over, you are increasing their earnings and available incomes by on the order of 10 percent. For many households, it would be meaningful,” he said.
