“Removal of petroleum subsidy is suspended because the government is looking for alternatives to ensure that Nigerians do not suffer’’ — Agba, the Minister of State for Budget and National Planning
As most Nigerians live below the poverty line, one index of the gravity of the economic situation in the country is mass poverty and diminished people’s disposable income and the purchasing power, a picture painted by the World Bank.
It said of the country’s population of more than 200 million, the total number of people classified as poor in the country is over 100 million.
It also cited skyrocketing food prices, rising inflation, heightened insecurity and stalled reforms of the government as the planks on which the increasing poverty rests.
The World Bank gave a GDP growth forecast for Nigeria of 1.9 per cent in 2021 and 2.1 per cent in 2022, compared with 3.4 per cent this year and 4.0 per cent in 2022 for sub-Saharan Africa in its half-yearly update on developments in Nigeria.
With the COVID-19 pandemic and untamed inflation, it noted that poverty is on the increase in Nigeria with at least 11 million people added to the growing population of the poor.
According to a World Bank Lead Economist for Nigeria, Mr Marco Hernandez, inflation especially in food prices was “exacerbating poverty and food insecurity’’.
“Food accounts for almost 70 per cent of Nigeria’s total increase in inflation in 2020,’’ he said, noting that although Nigerian economic growth has resumed after the ravages of COVID.
“COVID-induced crisis is expected to push over 11 million Nigerians into poverty by 2022, taking the total number of people classified as poor in the country to over 100 million,’’ Persecondnews quotes him as saying.
Hernandez predicted a decrease of about 13 per cent in per capita income in comparison with what would have been a situation without COVID-19 between 2020 and 2022.
The World Bank, however, predicted a plummet in the Nigerian inflation rate in 2021 to 16.5 per cent while the forecast for sub-Saharan Africa, excluding Nigeria, is put at 5.9 per cent.
Hernandez identified the “drag on growth and job creation’’ in Nigeria as increased insecurity across the nation — ranging from mass abductions at schools, kidnappings for ransom, armed conflict between herdsmen and farmers, armed robberies and various insurgencies.
Stressing the need for the Buhari administration to maintain reform momentum, he noted that some important reforms had been stalled, citing petroleum subsidy.
Petrol subsidies which have recently returned after the government had established a market-based pricing mechanism, and electricity tariff reform, an area where planned adjustments to bring prices in line with costs have been paused, the bank said.
On access to power, Hernandez said Nigeria had the largest number of people without access to electricity in the world, adding that electricity subsidies only benefit mainly richer households.
“Only 22% of the poorest households have access to electricity, while 82% of the richest are able to access power.’’
Also, Mr Shubham Chaudhuri, World Bank Country Director for Nigeria, said sustaining reform momentum in Nigeria was critical to ensuring robust economic recovery beyond 2021.
Describing Nigeria as being at a critical juncture, he said it however, had so much potential which had not been realized.
“The COVID-19 crisis and the pressures on the economy, the pressures on society had been heightened. Nigeria faced 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 realise its development potential,’’ he said.
According to him, the about N100 billion that is pumped into petrol subsidy monthly only benefits the rich.
He, however, suggested that a fraction could be used as cash transfers to support the poor at a time of rising prices or be geared towards primary health care or basic education.
“So that is part of the restructuring or policy reforms in a number of areas. What should the Federal Government be doing, what should the sub-national governments be doing and most importantly, what government should not be doing.’’
Inflation, he noted, had reduced the purchasing power of Nigerians and had been increasing not only constantly and at a very fast pace, but since August 2019 when the borders were closed.
He said exchange-rate management, monetary policy, trade policy, fiscal policy and social protection would help save lives, protect livelihoods and ensure faster and sustained recovery.
Contributing at the panel discussion, Mr Clem Agba, the Minister of State for Budget and National Planning, explained that removal of petroleum subsidy was suspended because the government was looking for alternatives to ensure that Nigerians do not suffer.
“In the past, oil used to be the main driver of the economy in terms of revenues, oils was giving us about 70 per cent of revenue and about 90 per cent of foreign exchange.
“Today oil is only contributing about 45 per cent while non-oil sector is contributing about 55 per cent. To follow up with these reforms, we are working on the strategic revenue initiatives and we are beginning to see some improvements in revenue.
“I dare say that the country is no longer so much of a mono dependent economy because of the reforms that are ongoing,’’ he said.