Why the World Bank celebrates failure

The recent World Bank praise, “Nigeria’s reforms are on the right path,” is not new. They have a culture of rewarding policy direction, but not so much for social outcomes. It is also not surprising to see The Economist pre-empting its view with an article titled, “Nigeria’s economy may be back from the brink.” Nigerians disagree with these compliments because reality differs from the promises.

These statements are nothing more than a method the Bretton Woods institution uses to score its clients by comparing them against a checklist rather than looking at actual outcomes. The World Bank and IMF have recommended removing fuel subsidy, unifying the exchange rate, adopting market pricing, and tightening fiscal policy. The Tinubu administration has complied and ticked those boxes. Subsidy was scrapped. The naira was liberalised. Taxes and tariffs were raised.

From Washington, they think this is enough to praise the administration, as poverty keeps widening. Nigeria is currently facing an affordability crisis due to these harsh policies. The World Bank does not want to know how difficult it is for the ordinary man in Lagos and Sokoto. They will use a traditional economics textbook to justify the pain as acceptable. They will tell you it will only be for the “short run.” Yet no one can say how long it will last.

Similarly, they forecast the benefits and say it will come in the “long run.” But they can never tell you when that will happen. It is another textbook technique called standard adjustment theory. This is not new. We have seen this before. Many will recall the IMF programmes of the 1980s.

Compared with the last four decades, there is no denying that there has been improvement, but overall, the evidence since then has been mixed at best. Nobel laureate Joseph Stiglitz once said these policies from international institutions have often been based on a mistaken analysis that has underestimated the costs and overestimated the benefits.

The Bretton Woods institutions are more concerned with pushing their ideology than with assessing whether the policies they advocate are appropriate for the countries concerned. Whenever you read their policy prescription, it is always monotonous: Tight fiscal policy; Tight monetary policy; Liberalisation; Privatisation; Remove subsidies. For a layperson looking back in history, one might wonder whether they think all economies are the same. And frustratingly, the bank keeps pushing for these policies without sufficient regard for their consequences.

The present issue caught my attention when The Economist published an article. The title itself is speculative, with many inaccurate predictions presented as facts. To be fair, the article used two facts: a 15.2 per cent disinflation rate and rising foreign reserves of $46 billion. Needless to say, these would have been achieved if the administration had not introduced the harmful economic policies.

Nigerians have yet to see the tangible benefits of the savings from removing the fuel subsidy. After 32 months, the country is still asking how long this “short-run pain” is going to last.

The devaluation of the naira harms an import-dependent economy by raising prices and cutting real incomes. Firms face higher costs and pass them on to consumers. Public finances suffer as foreign-currency debt becomes more expensive. Debt servicing consumes a third of the budget, thereby reducing capital expenditure allocation. In 2025, despite reported periods of dollar weakness, the naira was devalued to match its dollar value rather than appreciate. This behaviour casts doubt on the claim of a clean float and points to shallow markets and weak confidence. The weaker currency feeds straight into inflation.

Headline inflation rose sharply after subsidy removal and exchange-rate liberalisation. Inflation rose from around 22 per cent in early 2023 to above 34 per cent by 2024. Food inflation rose to over 40 per cent. This was not a surprise. The World Bank itself engaged in counterfactual reasoning, arguing that subsidy removal would push prices up in the short run, and conditions would be worse without protection.

Due to the removal of subsidies and the foreign exchange reform, poverty followed exactly as predicted, making their earlier predictions contrary to fact. By 2024, real household consumption had fallen, especially in urban areas. World Bank’s own modelling shows a clear rise in poverty headcount under high-inflation scenarios. The World Bank projected that more Nigerians would live in poverty in 2025. They proposed that cash transfers be scaled quickly.

Other inaccuracies in the article include the claim that oil production is rising. It is not. Crude oil production averaged 1.6 million barrels per day from 2023 to 2025. It falls short of the 2.1 million-barrel-per-day budget assumptions and OPEC quotas. Brent prices also fell from their 2022 highs. Government revenue did not surge because oil output stayed low and prices softened. The result was weak oil receipts, despite subsidy removal. With a hit to the country’s main source of revenue, the fiscal pain hit the economy hard without any fiscal payoff.

Another inaccuracy is the claim that foreign direct investment has risen. This is not correct. FDI inflows remain far below earlier peaks. Nigeria attracted around US$1–2 billion per year in 2023–2024, compared with US$6–8 billion annually in the early 2010s. The World Bank’s and IMF’s liberalisation did not restore investor confidence. We must accept that insecurity remains a huge concern. But macroeconomic instability and weak institutions still dominate decisions. They also claimed local businesses are supporting the reforms. This is debatable as many producers are relocating to neighbouring countries, and the policies have yet to bear fruit for SMEs to flourish.

We may want to blame our leaders. True. All responsibilities stop at Tinubu’s table. He has been credited as the master strategist who knows all the solutions to our problems. But does he?

Likewise, we must also remember that these international institutions apply these policies all across poor countries. They claim to be the planners of economic policies; they know all the answers, but not the questions. And in all cases, it is the poor people in poor countries who are often left to bear the pains of these reforms, while the benefits, if they arrive at all, come much later.

It is even more frustrating to see these institutions defending their policy frameworks even when outcomes deteriorate. They always use the tagline, “Without reform, things would be worse.” But they never allow the theory to be tested or challenged. Again, their economic idea goes against their other idea of democracy. A policy that lacks public support and visible results is not reform. It should be left to the people to choose whether to remove fuel subsidy, float exchange rates, practise economic liberalisation, or adopt alternatives: restoring fuel subsidy, adopting a managed floating exchange rate, or state ownership of public utilities.

After all, policies that create an affordability crisis, drive up prices, poverty, weaken revenues, and fail to attract investment should never be celebrated. Going forward, we need to start questioning these reforms that do not raise living standards. After all, these are textbook economics ideas, not a religion. We must also accept that economic policies are optional tools, not commandments.

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