By Godfrey AKON
The World Bank has said Nigeria’s inflation and sluggish growth have increased poverty from 40 per cent in 2018 to 46 per cent in 2023, pushing an additional 24 million of its citizens below the national poverty line.
The bank made this known in its December edition of “Nigeria Development Update,” titled “Turning the corner: From Reforms & Renewed Hope, to Result.”
It also disclosed that the number of poor Nigerians rose from 79 million in 2018 to 104 million in 2023, stating that urban poor are more exposed to inflation and increased from 13 to 20 million, while the number of poor people in rural areas increased from 67 to 84 million.
The report comes on the heels of a flurry of economic reforms and poverty alleviation programmes undertaken by successive administrations.
According to the World Bank, in the medium term, the reforms initiated by the present administration “will reverse this trend through higher growth and lower inflation, but to a limited extent, with poverty rates decreasing from 46 percent in 2024 to 44 per cent in 2026.”
The bank however projected that with current reforms, the country’s economy will grow by 3.3 per cent from 2.9 projected in 2023 and its yearly average of inflation could slow to 18.8 per cent from 24.5 per cent in 2023.
It said, “Continuing on the difficult reform path is necessary to improve Nigeria’s growth prospects and reduce poverty.
“Important reform decisions have been taken for Nigeria to avoid a fiscal cliff, and temporary compensation is being provided to help the poorest and most vulnerable households In May and June 2023, the incoming administration undertook two critical policy decisions, which have resulted in price and exchange rate adjustments in the second half of the year.
“While the reforms were essential for Nigeria to avoid a fiscal cliff and enable faster growth, they have brought difficult economic adjustments.
“Since May, retail gasoline prices have increased by an average of 163 percent and the Nigerian naira (N) has depreciated against the US dollar by 41 percent in the official market and by 30 percent in the parallel market.
“The sharply higher price of gasoline and other imported goods has contributed to inflation, which increased from already elevated levels to 27.3 percent year-on-year (yoy) in October,” the report said.
On curbing inflation, the bank said while government has initiated targeted cash transfers to mitigate some of the impact on the most vulnerable households, a holistic approach to reducing inflation, including through tighter fiscal and monetary policies, is also needed.
“The near-term priority is to enhance the reform effort with a closely coordinated mix of fiscal, monetary, and FX policies to reduce inflation and achieve macroeconomic stabilization. On the fiscal front, it will be crucial to sustain the savings from the PMS subsidy reform.
“On the monetary front, the policy stance has begun to tighten, but significantly stronger action is still needed to curb inflation. The new management at the CBN has implemented some tightening measures, including narrowing the asymmetric corridor in the SDF, removing the cap on banks’ SDF deposits, and increasing the volume and rates of OMOs.
“While these are welcome measures, further tightening is likely required to effectively control inflation. The MPR remains negative in real terms (-1.0 as of October 2023 in the baseline inflation projection), broad money supply (M2) growth is still elevated (34.6 percent yoy in September 2023), and monetary policy transmission is still hindered by the CBN’s development finance schemes and ongoing financing of fiscal deficits through Ways and Means.
“The CBN has signaled clearly its intention to end quasi-fiscal activities, and refocus on targeting lower and stable inflation and, moving into 2024, the effective implementation of the new approach will be key,” it said.
The World Bank also called for additional measures to be taken to increase market stability on the country’s foreign exchange market, stating that “Further monetary policy tightening is expected to help underpin the value of the naira. However, there is also a need to increase FX supply in the market.”
“A well-articulated policy direction and strategy can help build market confidence and allow the economy to stabilize more quickly. The policy direction can articulate the short-term objectives that would help coordinate all the key economic actors and accelerate implementation.
“The economic outlook for Nigeria in the short to medium term hinges on the continuation and effectiveness of its macroeconomic stabilization agenda. Successful implementation of the initiated reforms will be the first step toward improving Nigeria’s growth prospects.
“With implementation of these first macroeconomic stabilization reforms, the economy is expected to grow at an average annual rate of 3.5 percent during 2023–2026, or 0.5 of a percentage point higher than in a scenario in which the reforms had not been implemented.”
