By Okafor Joseph

At the recent IMF/World Bank Annual Meetings in Washington, D.C., the World Bank underscored the critical role of electricity in advancing Nigeria’s productivity and industrialization. Ndame Diop, World Bank Country Director for Nigeria, noted that the nation’s economy will continue to underperform without significant improvements in electricity supply, which is essential for both large and small manufacturers working to expand their capacity and contribute to national development.

During an interview with Arise TV, Diop highlighted electricity shortages as a significant impediment to Nigeria’s economic growth, explaining how the problem affects firms’ productivity and erodes profitability. “At the micro level, firms struggle to increase productivity,” he explained. “For the smaller companies, the high cost of electricity erodes their already tight margins. Without addressing the electricity issue, Nigeria’s manufacturing sector will remain stifled, and the economy won’t achieve its full potential.”

The Case for a Diversified Energy Mix

Diop emphasized that Nigeria’s path to economic transformation hinges on reforming its power sector. He advocated for a diversified energy mix that can reliably meet the demands of the manufacturing sector and other economic drivers. “Achieving regular and affordable power is vital for industrialization,” Diop stated. “The solution lies in diversifying Nigeria’s energy sources and implementing well-established reforms within the power sector.”

The World Bank, Diop added, has been supporting Nigeria through various initiatives aimed at revamping the electricity sector. Key areas include stabilizing the distribution companies (DisCos), which are essential for delivering electricity to end users, and enhancing their operational and financial viability. “To ensure DisCos can pay their bills, they must become economically viable through adequate revenue collection systems, particularly by investing in metering to accurately track electricity consumption,” he said. Diop stressed the need for metering, which would ensure consumers pay for electricity used, while also preventing revenue losses for the distributors, fostering a more stable and financially sustainable power sector.

IMF: Prioritize Social Measures to Alleviate Reform-Driven Economic Hardships

In addition to the power supply issue, the International Monetary Fund (IMF) addressed Nigeria’s slow rollout of social measures to cushion citizens from the immediate impact of major economic reforms. The country recently unified its foreign exchange rates and removed petrol subsidies as part of broader reforms, but these actions have driven up the cost of living for the average Nigerian, leading to inflationary pressures that burden households.

Abebe Aemro Selassie, IMF’s African Department Director, expressed concern over the government’s slow implementation of social protection measures, stressing that without adequate support, vulnerable communities bear the brunt of these changes. “We welcome these structural reforms, but we also recognize that they involve high internal adjustment costs,” Selassie stated at a Washington press conference. “The shock of food price increases over recent years, compounded by fuel price hikes, adds pressure to already strained household budgets.”

Selassie urged Nigerian authorities to accelerate social protection programs to ensure vulnerable populations are supported during this transition. “It’s crucial to put in place measures that protect low-income families,” he added. According to Selassie, although reforms such as subsidy removal are necessary for sustainable development, they can lead to temporary dislocation and hardship, making it crucial for the government to provide timely support to ease these burdens on citizens.

CBN Targets $1 Billion Monthly in Remittance Inflows

Nigeria’s Central Bank Governor, Olayemi Cardoso, shared positive news on the nation’s foreign exchange front, reporting a considerable increase in remittances from the Nigerian diaspora. According to Cardoso, remittances rose from $250 million in April 2024 to $600 million in September 2024. The CBN, he noted, aims to push monthly remittance inflows to $1 billion, a target expected to boost foreign reserves and contribute to economic stability.

In his statement, Cardoso outlined the steps the CBN is taking to achieve this goal, including continuous engagement with the diaspora community to ensure sustained inflows. “Through consistent engagement and tailored banking products, we aim to drive remittance inflows to $1 billion per month,” he stated. He expressed confidence that the goal is within reach, particularly with the support of Nigerian financial institutions offering diaspora-friendly banking services.

Efforts to Remove Nigeria from FATF’s Gray List

Cardoso also touched on Nigeria’s efforts to address issues raised by the Financial Action Task Force (FATF), an international body established in 1995 to combat money laundering, terrorism financing, and other illicit financial activities. Nigeria currently remains on FATF’s gray list due to deficiencies in anti-money laundering controls and risks associated with terrorism financing.

Cardoso confirmed that discussions are ongoing to address FATF’s concerns and have Nigeria removed from the gray list. “We’re actively consulting with international partners and stakeholders at the highest levels,” he said. Cardoso explained that resolving these issues is crucial to fostering confidence in Nigeria’s financial systems, ultimately improving Nigeria’s access to international markets and easing capital inflows to support the economy.

4o