Market News

Failure would set back the cause of reform across sub-Saharan Africa

The writer is chief economist and senior vice-president for development economics at the World Bank

You may scoff at the idea that Nigeria just might be on the cusp of turning its economic fortunes around. Since the 1980s, when oil prices collapsed, the country has been mired in one crisis after another. But now the largest economy in sub-Saharan Africa is at a turning point.

Over the past year or so, the Nigerian government has implemented major, politically difficult reforms. No large-scale reform process is ever perfect, but this one must be allowed to succeed — Africa’s future hinges on its success. An economic turnaround in a country with more people in poverty than almost any other would be a game-changer for market-orientated reforms across the continent.

Consider the scale of the reforms implemented so far. Nigeria now has a market-determined exchange rate, having unified official and parallel exchange rates. Previously, the government had been losing the equivalent of 38 cents for every $1 of government oil export proceeds. This benefited some local elites, who acquired dollars cheaply at the government’s expense. The unification also got rid of a hefty implicit tax on agricultural and manufactured exports.