World Bank says Nigeria’s economic trend positive, but risks weigh

The World Bank on Tuesday said Nigeria’s short term macroeconomic outlook, especially in poverty reduction, improved in the first half of 2014, noting, however, that a few risks remain due to uncertainty about future oil output and prices, as well as short term capital flows.

In its new Nigeria Economic Report (NER) launched on Tuesday in Abuja, the World Bank noted that revenues to the federation have increased, foreign reserves have stabilised, the Excess Crude Account (ECA) has been augmented, and prospects for growth remained stronger than last year. But the oil sector remains a primary source of macroeconomic uncertainty, the World Bank observed.

The bank noted that Nigeria has faced recent challenges to macroeconomic management related to weakening oil revenues and volatile short-term capital flows.

It also cited the re-based GDP estimates which reveal a larger, more dynamic and complex economy than did previous statistics.

“Macroeconomic risks remain due to uncertainty about future oil output, oil prices, and short term capital flows,” the report stressed, adding, “Despite remaining risks, the prospects for macroeconomic stability are generally good.”

The NER analyses new data from household surveys in 2010/2011 and 2012/2013 to reassess poverty and living standards in Nigeria and concludes that poverty rates in Nigeria are likely significantly lower than previously believed, and progress toward poverty reduction may be stronger.

The report noted that poverty reduction in Nigeria appears to be primarily an urban phenomenon, with poverty rates in rural areas higher, and poverty reduction slower.

It further noted that while recent panel surveys indicate that the per capita national poverty rate based on the official poverty line may now be as low as 33.1 percent, a large share of the Nigerian population is still not far above the poverty line, indicating vulnerability.

“The combination of the new GDP and poverty estimates are valuable in giving us what we believe to be a clearer picture of development and poverty reduction in Nigeria,” said John Litwack, lead economist and acting country manager of the World Bank. “Both sets of numbers indicate the prime importance of urban areas for growth and poverty reduction.”

The NER also highlights continuing differences between Nigeria’s regions in poverty reduction. The South and North Central regions show progress in poverty reduction between 2010 and 2013, while the North West witnessed little change, and the North East experienced an increase in the poverty rate along with a general decline in living standards.

“Improvements in public services, key infrastructure to better connect markets, and measures to increase productivity in agriculture could help put Northern region on a strong path toward poverty reduction”, said Litwack, lead author of the report, whilst also noting the critical role of security.