World Bank
W’Bank predicts inflation’ll further push 2.8m Nigerians into poverty
Chris Uba
The World Bank has predicted that Nigeria’s low economic growth and rising inflation will cause an additional 2.8 million people to live in poverty by the end of 2023.
The global institution said that Nigeria faced several economic challenges inH1 2023,including a growth deceleration in the first quarter and rising inflation, which pushed more people into poverty.
Recognizing the need to change course ,the new administration undertook crucial reforms to restore macroeconomic stability by removing the fuel subsidy and liberalizing the exchange rate.
If sustained, these reforms will yield large fiscal savings and lift Nigeria’s growth prospects. Risks to the outlook include policy reversals, protracted decline in oil production, insecurity, and climate shocks
The ‘Macro Poverty Outlook: Country-by-country Analysis and Projections for the Developing World’ report, which was just published, served as the basis for this.
It was reported that in July 2023, Nigeria’s high inflation hit a 17-year high of 24.1 percent year-on-year, in part due to rising food prices and the short-term effects of the fuel subsidy’s removal.
It claimed that despite a 725 basis point increase in the monetary policy rate since May 2022, the on-going monetization of the fiscal deficit and congested transmission channels, which are further weakened by the central bank’s direct credit allocation, have had little effect on controlling inflation.
The global bank further declared that federal fiscal deficit has risen to 63 per cent higher between January and May 2023 than in the same period in 2022, due to increasing interest payments, higher capital spending ahead of the elections, and the continuous large cost of the fuel subsidy.
The impact of this is set to spike public debt to 45 per cent of GDP and keep debt service above total revenue in 2023. It said “The fiscal financing need and the devaluation of the naira are expected to push the public debt to 45 per cent of GDP and keep the debt service above total revenues in 2023.
According to the World Bank, “As inflation declines and economic growth accelerates, the proportion of Nigerians living below the international poverty line is expected to peak in 2024 at 38.8% before gradually declining.”
Said the World Bank: “To rise to its potential and reverse its increasing trend in poverty, Nigeria needs to grow faster and create more quality jobs, which is predicated on a stable macro-economy and a conducive business environment.
“ Macroeconomic stability in Nigeria has steadily deteriorated over the past decade due to several factors. First, overreliance on volatile oil exports, which account for more than 90 percent of total exports. Second, limited fiscal space that stemmed from very costly petrol subsidies, low tax rates, and weak tax administration hindered the government’s ability to deliver quality public services.
“Third, restrictive trade policies, weaknesses in exchange rate management, monetization of the fiscal deficit by the Central Bank of Nigeria (CBN), and surging food prices led to double-digit inflation. Other external shocks—including the lingering effects of the COVID-19 pandemic, and Russia’s invasion of Ukraine—contributed to the macroeconomic deterioration.”
