The World Bank has stated that inflationary pressure in Nigeria has pushed about seven million Nigerians below the poverty line in 2020 alone.
The World Bank gave the data in its latest Nigeria Development Update (NDU), released yesterday, a few days after President Muhammadu Buhari in his Democracy Day broadcast claimed on Saturday that his administration had lifted 10.5 million Nigerians out of poverty in the past two years.
The bank's Country Director for Nigeria, Mr. Shubham Chaudhuri, while speaking on 'The Arise Xchange,' a programme of ARISE NEWS Channel, the broadcast arm of THISDAY Newspapers, also said lack of economic opportunities was contributing to the rising crime cases and insecurity in Nigeria.
The multilateral institution also reiterated the need for the federal government to set policy foundations for a strong recovery as well as to tame inflation.
The report was released on a day the National Bureau of Statistics (NBS) announced that Nigeria's Consumer Price Index (CPI), which measures inflation dropped to 17.93 per cent (year-on-year) in May compared to 18.12 per cent in the preceding month.
Besides, the World Bank also attributed the deteriorating security situation in Nigeria and rising criminality to a lack of economic opportunities in the country.
The NDU, titled: "Resilience through Reforms," stated that in 2020, the Nigerian economy experienced a shallower contraction of 1.8 per cent than had been projected at the beginning of the pandemic (3.2 per cent).
It said: "Although the economy started to grow again, prices are increasing rapidly, severely impacting Nigerian households. As of April 2021, the inflation rate was the highest in four years. Food prices accounted for over 60 per cent of the total increase in inflation. Rising prices have pushed an estimated seven million Nigerians below the poverty line in 2020 alone."
The report acknowledged notable government's policy reforms 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 highlighted that both the federal and state governments cut non-essential 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," it added.
The report, however, said despite the more favourable external environment, with recovering oil prices and growth in advanced economies, a failure to sustain and deepen reforms would threaten both macroeconomic sustainability and policy credibility, thereby limiting the government's ability to address gaps in human and physical capital, which is needed to attract private investment.
"Nigeria faces interlinked challenges in relation to inflation, limited job opportunities, and insecurity," Chaudhuri, said during the virtual presentation of the NDU.
"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 realise its development potential," he added.
The latest Nigeria Development Update proposed a near-term policy option organised around three priority objectives: 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.
"Given the urgency to reduce inflation amidst the pandemic, a policy consensus and expedite 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," World Bank Lead Economist for Nigeria and co-author of the report, Marco Hernandez said.
In addition to assessing Nigeria's economic situation, the NDU discussed how the COVID-19 crisis has affected employment, how inflation is exacerbating poverty in Nigeria, how reforming the power sector can ignite economic growth and how Nigeria can mobilise revenues in a time of crisis.
Lack of Economic Opportunities Fuelling Insecurity, Criminality in Nigeria, Says W'Bank
While speaking on 'The Arise Xchange,' a programme of ARISE NEWS Channel, Chaudhuri said lack of economic opportunities was contributing to the rising crime cases and insecurity in Nigeria.
According to him, due to the level of poverty, many people will try to find a way to getting by however they can, and if criminality offers an option, then they will embrace it.
This, he stated, in turn, makes it difficult for businesses to operate and has a multiplier effect on the country's economic growth potential.
Responding to a question on at what point he thinks the country would begin to lift its citizens out of poverty, he said: "The simple and complicated answer to that question is as soon as Nigeria chooses to. It really is Nigeria's choice. The potential is there and the resources can be directed towards that effort.
"Ultimately, it would be the private sector that would create the jobs by investing and it is the government that invests in the people by making sure that every Nigerian child has education and the right healthcare. So, these are the things that lead to sustained poverty reduction. In any way, these are simple things in terms of what needs to be done and what is often complicated is generating the consensus around them and actually implementing it.
"So, we believe Nigeria has the potential to lift 100 million of its citizens out of poverty by 2030 as President Buhari has said. But that decision has to be Nigeria's choice right now."
He, however, commended Nigeria's fiscal and monetary authorities for undertaking "bold reforms in the face of vocal opposition."
He cited the reforms to include the central bank's recent adoption of the NAFEX rate, which is the rate at the Investors and Exporters' Window.
"We believe that would help to boost investor's confidence, boost the competitiveness of the economy and if combined with other measures, would add more flexibility on the rate. That I think would set the foundation for a strong economic recovery.
"In collaboration with everything, the fiscal authorities are doing both in terms of mobilising domestic revenue and rationalising expenditure at a time when much-needed resources are needed to combat the pandemic, that coordination would be critical," he said.
Chaudhuri also stressed the need for establishing a more systematic coordination mechanism between fiscal and monetary policy managers, as is being done in a range of countries around the world.
He stated that in such coordination, communication would be critical.
"We are in a situation that is unprecedented across the world and it would require support from all members of the society. That is why we believe that communication is essential in anything that the government does," he added.
In his contribution, World Bank Lead Economist for Nigeria and co-author of the NDU, Marco Hernandez said: "To achieve Nigeria's potential is not up to one government."
This, according to the economist, will require sustained action from subsequent governments.
"So, it is important that the citizens take part so that they can monitor progress and make suggestion going forward," he added.
Moderation in Food Prices Slows Inflation to 17.93%
Meanwhile, the CPI, which measures inflation, dropped to 17.93 per cent (year-on-year) in May compared to 18.12 per cent in the preceding month, according to the NBS.
The 0.19 per cent decline in the headline index, makes it the second consecutive month that the rate has sustained its downward trajectory after 18 months of inflationary pressures on the economy.
According to the CPI figures for May, food inflation dropped to 22.28 per cent from 22.72 per cent in April.
Price moderation was recorded in bread, cereals, milk, cheese, eggs, fish, soft drinks, coffee, tea and cocoa, fruits, meat, oils and fats and vegetables.
On a month-on-month basis, the food sub-index declined to 1.05 per cent in May from 0.99 per cent recorded in the preceding month.
On the other hand, core inflation, which excludes the prices of volatile agricultural produce rose to 13.15 per cent from 12.72 per cent in the review period.
On a month-on-month basis, the core sub-index increased by 1.24 per cent, the NBS stated.
The highest increases were recorded in prices of pharmaceutical products, garments, shoes and other footwear, hairdressing salons and personal grooming establishments.
Others are furniture and furnishing, carpet and other floor covering, motor cars, hospital services, fuels and lubricants for personal transport equipment, cleaning, repair and hire of clothing, other services in respect of personal transport equipment, gas, household textile and non-durable household goods.
The NBS said core inflation was highest in Kogi with 25.13 per cent; Bauchi, 23.02 per cent and Sokoto 20.11 per cent. Katsina, with 15.69 per cent; Imo, 15.52 per cent and Delta, 14.85 per cent recorded the slowest rise in headline year-on-year inflation.
Similarly, food inflation was highest in Kogi 32.82 per cent, Kwara 26.02 per cent and Enugu 25.43 per cent. Akwa Ibom, at 20.06 per cent; Bauchi, 18.65 per cent and Abuja 16.91 per cent recorded the slowest rise in year-on-year inflation.