The World Bank says Nigeria’s government lost N13.2 trillion because of how it managed foreign exchange between 2021 and 2023.
The losses broke down like this: N2 trillion in 2021, N6.2 trillion in 2022, and N5 trillion in 2023.
This huge loss happened because the government kept two different exchange rates: an official rate (where they controlled the price) and a parallel market rate (where the price was decided by supply and demand). The difference between these rates costs the government a lot of money.
This policy was meant to keep the naira stable and help certain parts of the economy, but it became a huge expense.
In the new report, the World Bank says Nigeria lost N13.2 trillion which could have helped everyone in the country but only helped certain groups. Of this amount, N3.9 trillion was lost from non-oil sector taxes.
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“Quantifying the fiscal cost, through forgone revenue of multiple exchange rates: Prior to the full FX unification in February 2024, the presence of a parallel FX premium generated enormous fiscal costs, in the form of forgone revenues.”
“This situation emerged because FX revenue inflows such as oil and customs revenues, as well as a portion of domestic VAT and CIT which are paid in FX were transferred to the treasury at the official exchange rate.”
However, the World Bank explains that between 2021 and 2023, 44.3% of net VAT revenue came from imported goods in foreign currency, and 40% of total company tax was paid in foreign currency.
The World Bank further advises Nigeria to keep using a single exchange rate to help the economy.
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