World Bank Group
Rising Inflation Sends 10m Nigerians into Poverty – World Bank
The World Bank in its Macro Poverty Outlook for Nigeria: April 2024 has stated that rising inflation and weak earnings have pushed 10 million Nigerians into poverty in 2023.
Presenting a grim reality where earnings have drastically lagged behind surging inflation, rendering the economic growth of the country insufficient to improve living standards, the report noted: “Nominal earnings have not kept up with inflation, pushing another 10 million Nigerians into poverty in 2023.”
According to the World Bank’s statistics, poverty rates in Nigeria have escalated to concerning levels across various economic thresholds. The international poverty rate, which is pegged at $2.15 per day, stands at 30.9 per cent.
“More distressingly, the lower middle-income poverty threshold of $3.65 per day shows that 63.5 per cent of the population lives in poverty, while a staggering 90.8 per cent fall below the upper middle-income poverty line of $6.85 per day.”
The report attributed this dire situation to a combination of weak macroeconomic fundamentals and deep-seated structural constraints. A significant overreliance on the oil sector has been identified as a major factor. With the deteriorating performance of this sector, there has been a consequent erosion in macroeconomic stability.
The challenges are compounded by low state revenues exacerbated by an expensive petrol subsidy, ineffective tax rates, and inadequate tax administration, which collectively hamper the government’s capacity to provide essential public services.
Further exacerbating the economic strain are the high levels of inflation, which have persisted and escalated due to loose monetary policies and depreciating exchange rates.
The country further faces substantial hurdles such as inadequate energy and transport infrastructure, high costs of domestic and foreign trade, widespread insecurity, weak institutional frameworks, and low levels of human capital development.
“Nigeria’s economic growth has been insufficient to raise living standards, weighed down by weak macroeconomic fundamentals and several structural constraints. Overreliance on the oil sector for fiscal revenues, exports, and FX inflows led macro stability to erode with the sector’s deteriorating performance in recent years. Low revenues—including due to a costly petrol subsidy, low tax rates, and weak tax administration—have limited state capacity and public service delivery.
“Inflation has remained high and escalating on the back of a relatively loose monetary policy and exchange rate depreciation. Structural factors holding back the country’s growth potential include lack of adequate energy and transport infrastructure, high domestic trade costs and foreign trade protectionism, widespread insecurity, weak institutions, and low levels of human capital development,” the report noted.
The World Bank emphasised the critical need for continued ambitious reforms centered around macroeconomic stabilization as the economic forecast projects an average growth of 3.5 per cent between 2024 and 2026, which marginally outpaces the population growth rate by 0.9 percentage points. This growth is expected to be driven by the stabilisation of macroeconomic conditions and a gradual recovery in the non-oil sectors, even as the oil sector might see some stabilisation and recovery in production levels.
Despite these projections, the report noted that “poverty rates are expected to increase in 2024 and 2025 before stabilising in 2026 due to the initial impact of ongoing reforms and the prevailing high inflation rate, estimated to average 24.8 per cent in 2024.”
However, the Minister of Finance and coordinating minister of the economy, Wale Edun, has assured international financial institutions of the positive trajectory of the Nigerian economy. Mohammed Manga, the director of press of the ministry in a statement yesterday said the minister emphasised the government’s commitment to attracting foreign investment and improving the lives of Nigerians.
Edun underscored the “bold, courageous and strategic reforms” implemented by President Bola Tinubu-led administration. These reforms, he explained, aim to achieve a dual objective: stabilising the national economy to attract foreign investment and foster job creation and poverty reduction.
The minister expressed optimism about the direction of the Nigerian economy. He pointed to government policies successfully “slowing down food inflation” as evidence of positive progress.
Edun’s visit to Washington D.C. for the World Bank Springs meeting is part of a larger effort to showcase the economic advancements achieved under the current administration.
He, alongside the Permanent Secretary of the Ministry of Finance, Mrs. Lydia Shehu Jafiya, the governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, and other key officials, aim to collaborate with international institutions like the World Bank and the IMF.
Edun said: “The economic team of President Bola Tinubu is here to showcase the progress so far made of his bold, courageous, and strategic reforms for the Nigerian economy to get it stabilised to attract foreign investment, create jobs for our people, reduce poverty and enhance our economic growth and development in line with the Renewed Hope Agenda of the administration.”
He further highlighted positive economic indicators, including a stabilising exchange rate and signs of declining food inflation. While acknowledging that oil revenues haven’t reached their full potential, Edun expressed confidence in Nigeria’s resilience and its ability to achieve economic goals.
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