The new spate of inflationary trend in Nigeria is driving 18 million persons into unemployment and poverty, according to a report released by the World Bank. The bank’s lead economist for Nigeria, Macro Hernandez, stated this yesterday during a presentation of Nigeria’s Development Report for the first six months of 2021, in Abuja.
Breaking the figure down, Hernandez said inflation is set to push 7 million Nigerians into poverty due to falling purchasing power, while over 11 million more Nigerians are expected to lose their jobs.
The Bretton Wood Institution said in its report that Nigeria’s inflation rate is expected to rise to 5th highest in Sub-Saharan Africa by the end of 2021, behind only Zimbabwe, Zambia, South Sudan and Angola.
According to him, insecurity and conflict as well as the COVID-19 pandemic are responsible for the challenges.
The latest World Bank Nigeria Development update reveals rising inflation has pushed an estimated 7 million Nigerians below the poverty line in 2020 alone.
According to the report, the rise in inflationary pressure has been driven primarily by surging food prices, as Nigeria’s rate of inflation rose steadily throughout 2020 and reached a four-year high in March 2021.
Nigeria’s headline inflation rate rose from 11.98% as of December 2019 to 15.75% at the end of 2020, and currently stands at 18.12% as of April 2021, while food inflation stood at 22.72%.
The report titled “Resilience through Reforms” however, noted that the Nigerian economy experienced a shallower contraction of 1.8% than the projected contraction of 3.2% at the beginning of the pandemic.
Hernandez also said, “Given the urgency to reduce inflation amidst the pandemic, a policy consensus and expedited reform implementation on exchange-rate management, monetary policy, trade policy, fiscal policy, and social protection would help save lives, protect livelihoods, and ensure a faster and sustained recovery.”
Notably, food prices accounted for over 60% of the total increase in inflation, as stated in the report. Despite the recovery in the economy from the recession witnessed in 2020, prices are increasing rapidly and this is impacting Nigerian households.
According to the World Bank Country Director for Nigeria, Shubham Chaudhuri, “Nigeria faces interlinked challenges in relation to inflation, limited job opportunities, and insecurity.
“While the government has made efforts to reduce the effect of these by advancing long-delayed policy reforms, it is clear that these reforms will have to be sustained and deepened for Nigeria to realize its development potential.”
The report, however, acknowledged notable policy reforms by the government aimed at mitigating the impact of the crisis and supporting the recovery; including steps taken towards reducing gasoline subsidies and adjusting electricity tariffs towards more cost-reflective levels, both aimed at expanding the fiscal space for pro-poor spending.
In addition, the report highlights that both the federal and state governments cut nonessential spending and redirected resources towards the COVID-19 response. At the same time, public-sector transparency has improved, in particular around the operations of the oil and gas sector.
The report proposed three priority objectives that would help to reduce inflation and boost economic recovery namely: reduce inflation by implementing policies that support macroeconomic stability, inclusive growth, and job creation; protect poor households from the impacts of inflation; and facilitate access to financing for small and medium enterprises in key sectors to mitigate the effects of inflation and accelerate the recovery.
The Washington-based lender projects economic growth of 1.8% this year, compared with a previous estimate of 1.2%. But it warned that without deep reforms, the economy will continue to grow slower than the pace of population expansion of about 2.6% a year.
That, coupled with rising unemployment and inflation, is leading more Nigerians into criminal enterprises to make up for lost earnings in the continent’s top oil producer. A surge in insecurity over the past two years has further slowed economic activity and left more people unemployed, fueling a vicious cycle of violence and criminality, the lender said.
“While you have many people going into the informal sector and hustling, criminal activity has become one of the options to get by,” the World Bank’s country director for Nigeria, Shubham Chaudhuri, said in an interview. “In the context of rising inflation, that means a further deterioration of the purchasing power and livelihood of many Nigerians.”
Chaudhuri reiterated that the government must develop a sustainable economic-recovery plan before the bank can release a $1.5 billion loan initially discussed more than a year ago.
While inflation eased slightly for the second straight month to 17.9% in May, it remains at near four-year highs with food-price growth at more than 20% year-on-year. The World Bank sees inflation at an average of 16.5% this year and remaining above the 9% top of the target band until at least 2023.
The World Bank challenged the central bank’s position that high inflation stems primarily from supply constraints, citing tight exchange-rate controls and expansive monetary policy as key drivers of price growth.
“Policy decisions related to exchange rate, trade and monetary and fiscal factors are driving inflation, especially during 2021, more so than exogenous factors related to conflict and weather shocks,” said Hernandez.
In a telephone conversation with NATIONAL ECONOMY, Dr. Bongo Adi of the Department of Economics, Lagos Business School, said the reasons for the rising inflation can be put squarely on too much money chasing few goods. He said the allegation of the CBN printing money a few months ago to distribute to state governments has some merit, which is chasing few goods considering the fact that not much is being produced in the country at the moment due to widespread insecurity.
He also alluded to the widespread insecurity preventing farmers and artisans from engaging in productive activities as another reason. He said the joblessness caused by insecurity is causing poverty, which is making people seek criminal means of making a living, causing more criminal activities.
He said crude oil export is the only thing keeping Nigeria afloat at the moment because it has not been affected by the spate of insecurity.
Also, Dr. Emeka Okengwu of Ant Hill Concepts, in a conversation with NATIONAL ECONOMY Nigerians need to come together as individual stakeholders to get the country out of the current economic quagmire. He said on the part of government, there is a need to appeal to landlords, transporters and other stakeholders to reduce the prices of their services to relieve Nigerians of the pains they are currently suffering.