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World Bank report reveals Nigeria loses trillions to Forex subsidy

According to a recent World Bank report, The Federal Government incurred a significant loss of N13.2 trillion to forex subsidy

The World Bank reports that Nigeria lost N13.2 trillion in revenue due to its foreign exchange subsidy policy. The World Bank disclosed the significant loss in its latest Nigeria Development Update (NDU) report.

The bank described Nigeria's monetary and foreign exchange policies as "increasingly opaque, distortive, and inconsistent with maintaining price stability," citing multiple managed and overvalued official exchange rates as crucial issues.

Although the Central Bank of Nigeria (CBN) announced the termination of the foreign exchange policy in July 2023, the World Bank notes that it was fully implemented in February 2024. This delay prolonged the negative effects on the country's economy.

The policy initially intended to support importers of food and essential services by providing subsidized forex. However, the World Bank argues that this benefit was limited to certain groups at the expense of the entire country.

With the removal of the subsidy, the exchange rate is now subject to market forces of supply and demand. This change is expected to stabilize the foreign exchange market long-term and encourage local production, reducing Nigeria's reliance on imports.

Finance Minister Wale Edun confirmed the government's stance on ending fuel and foreign exchange subsidies, stating that these policies had significantly impeded Nigeria's financial standing, costing over N10 trillion, or about 5% of the country's GDP.

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