World Bank Issues Serious Warning to Central Bank of Nigeria

The World Bank has warned the central banks of Nigeria, Uganda and Ethiopia to stop direct lending, untargeted subsidy programs and foreign exchange controls.

This means that the central banks should avoid taking any actions that might conflict with their monetary policies.

The World Bank mentioned the weighty problem of inflation which monetary authorities in the region faced.

Most especially in nations that dealt with “underdeveloped financial systems, a sizable informal sector, and a lack of coordination between monetary and fiscal policies.”

The World Bank termed these measures as “monetizing the fiscal deficit, direct lending interventions, untargeted subsidy programs, and foreign exchange controls.”

“If monetary and fiscal actions are not adequately coordinated to bring down inflation, the risk of de-anchoring inflation expectations would fuel further inflation, accelerate interest rate increases, and exacerbate the deceleration of economic activity,” it stated.

“Eighteen countries continue to struggle with double-digit inflation despite a projected drop to 7.3 percent in 2023 from 9.3 percent in 2022,” the 2023 report stated.

The inflationary issues were attributed by the 2023 report to a number of factors, including;

“A global demand slowdown, eased supply chain disruptions, lower commodity prices, and stricter monetary policies.”

The report focused on the effects on households of, especially the poor, who spend a large portion of their income on food.

This is due to the rising food and fuel prices and depreciating domestic currencies.

Prior to the pandemic in 2023, nearly two-thirds of the countries in the region still have fiscal deficits that are higher than they were.

The report expressed its concern on the slow progress of some countries’ efforts to consolidate their fiscal policies.

In order to make room for development expenditures, to stop inflation, and to reduce the risks accompanied with fiscal and debt sustainability, the World Bank emphasized the need for domestic mobilization was emphasized.

The World Bank address this issues and the necessity of “domestic resource mobilization and efficient spending.”