According to a new report by the World Bank, Nigeria incurred a staggering loss of N13 trillion due to foreign exchange (FX) subsidies over the past three years. The report emphasizes the importance of maintaining a unified exchange rate to correct the economic distortions caused by the previous administration’s multiple FX rates.
The report reveals that Nigeria suffered N2 trillion in losses in 2021, N6.2 trillion in 2022, and N5 trillion in 2023. These losses were attributed to the wide disparity between the official and parallel FX market rates, which resulted in significantly reduced naira-denominated revenues from FX-linked sources such as oil and customs.
The World Bank explained that prior to the full unification of the FX rate in February 2024, Nigeria faced substantial fiscal costs due to the multiple exchange rate system. “FX revenue inflows—such as oil and customs revenues—were transferred to the treasury at the official exchange rate, causing the nation to lose out on significant revenue,” the report noted.
In 2022, when Nigeria spent N4.5 trillion on petroleum subsidies, the country also lost N6.2 trillion in forgone FX revenues. The unification of the exchange rate has now eliminated these losses, bringing substantial fiscal benefits to the economy.
The World Bank stressed that maintaining the unified FX rate is crucial for Nigeria’s economic stability, as it prevents distortions, boosts export competitiveness, and curbs rent-seeking and illicit activities that thrived under the previous FX regime. The FX reform is expected to help restore fiscal space and promote sustainable economic growth.
