Nigeria Loses $8 Billion in Foreign Exchange Subsidies: World Bank Urges Continued Economic Reforms

The World Bank recently reported that Nigeria incurred over $8 billion in losses between 2021 and 2023 due to the Central Bank of Nigeria (CBN)’s foreign exchange policy, which prevented the naira from floating freely. This policy, deemed a “foreign exchange subsidy,” alongside the nation’s fuel subsidy, significantly limited government revenue, affecting economic stability.

Since May 2023, however, Nigeria has adopted market-based fuel pricing and introduced a floating exchange rate, leading to a dramatic shift in the naira’s value—from under NGN450 per dollar earlier in 2023 to around NGN1,600 per dollar today. Although these reforms have been lauded by the World Bank, they have intensified financial pressure on Nigerian households, prompting widespread public protests, particularly among the youth.

World Bank’s Call for Persistence in Economic Reforms

In its Nigeria Development Update, the World Bank recognized the hardships these policies impose on citizens, noting that while short-term impacts are challenging, they are essential for long-term stability and economic growth. “The new policy direction is critical,” the report stated, adding that early indications of macroeconomic improvement are promising but require continued supportive policies.

The World Bank also recommended that the CBN stay committed to its current monetary approach until inflation stabilizes. The shift to a unified exchange rate, the Bank argues, could yield substantial economic benefits, providing a more balanced economic environment and opening up avenues for sustainable growth.