• 14m Nigerians became poor in 2023 – World Bank
•We’re on track to stabilise economy, says Edun
Millions of Nigerians have been tipped into poverty in recent years despite efforts to tame it by the federal government, which has been controlled by the All Progressives Congress (APC) for over eight years.
The APC has been in power since May 29, 2015, when Muhammadu Buhari took office after he became the first to oust an incumbent in an election. Eight years later, he handed over to Bola Tinubu, a former governor of Lagos State, the country’s commercial capital.
In 2021, Buhari established the Steering Committee of the National Poverty Reduction with Growth Strategy with the goal of uplifting 100 million Nigerians from poverty within a decade. Last year, the National Bureau of Statistics (NBS) said about 133 million Nigerians were suffering from multidimensional poverty.
The World Bank said on Wednesday that sluggish growth and rising inflation in Africa’s biggest economy has pushed an additional 24 million Nigerians into poverty in the last five years.
Data from the bank showed that 14.2 million Nigerians have become poor this year.
“Sluggish growth and rising inflation have increased poverty from 40 percent in 2018 to 46 percent in 2023, pushing an additional 24 million people below the national poverty line,” it said in its latest Nigeria Development Update report.
It said the number of poor Nigerians rose from 79 million in 2018 to 104 million in 2023, with urban poor — more exposed to inflation — increasing from 13 million to 20 million, while the number of poor people in rural areas increased from 67 million to 84 million.
“In the medium term, the recent reforms 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 percent in 2026,” the report said.
According to the World Bank, reforms are expected to undo the increases in poverty seen in recent years from 2024 onward, albeit only marginally and slowly.
Tinubu had in May scrapped a costly but popular petrol subsidy and lifted currency controls in June, which he said was to save the country from going under.
But his actions have worsened inflation currently in double-digits and at the highest level in 18 years. The rising inflationary pressures have weakened the purchasing power of consumers, even as businesses grapple with higher operating costs.
The removal of the petrol subsidy tripled the petrol price to N617 from N184, causing public transportation providers such as buses, tricycles and motorcycles to raise transportation fares.
The naira has plunged to record lows across markets since the central bank allowed it to weaken by as much as 40 percent against the dollar in June.
According to the NBS, the country’s inflation rate rose to 27.33 percent in October from 26.72 percent in the previous month.
“The impact of this inflation is especially hard on the poor and vulnerable. The government has initiated targeted cash transfers to mitigate some of the impact on the most vulnerable households. In addition, a holistic approach to reducing inflation, including through tighter fiscal and monetary policies, is also needed,” the World Bank said.
The multilateral lender said Nigeria took several critical decisions and reforms earlier this year to avoid a fiscal cliff and regain macroeconomic stability. “But there is a need to fully implement and broaden them to switch onto a higher growth path.”
It said the government should safeguard the benefits to the federation of the petrol subsidy reform, increase non-oil revenues, reduce inflation and rebuild confidence through a consistent overall mix of monetary, foreign exchange and fiscal policies to restore conditions for private investment and growth, and ultimately benefit Nigerians.
“Recent World Bank estimates show that removing import restrictions could lower the prices of affected items by 4.7 percent. This would lead to an overall increase in purchasing power which, in turn, would lift about 1.3 million people (around 0.6 percent of the population) out of poverty,” it added.
“The petrol subsidy and FX management reforms are critical steps in the right direction towards improving Nigeria’s economic outlook. Now is the time to truly turn the corner by ensuring coordinated fiscal and monetary policy actions in the short to medium term”, said Shubham Chaudhuri, World Bank Country Director for Nigeria.
He said continued reform implementation can ensure that Nigeria benefits from the difficult adjustments underway. “This includes ensuring that improved oil revenues following the sharply increased PMS price accrue to the Federation.”
He said that in the medium-term, the economy will then begin to benefit from increasing fiscal space for development spending, including on power and transport infrastructure, as well as on human capital.
“In 2024, Nigeria has an opportunity to turn the corner to a more stable and predictable macroeconomic environment, and easier access to foreign exchange and imported inputs, which is critical to creating new jobs and lifting people out of poverty,” said Alex Sienaert, World Bank Lead Economist for Nigeria and co-author of the report.
We’re on track to stabilise economy, says Edun
Wale Edun, minister of finance and coordinating minister of the economy, said that alongside the reforms to stabilise the economy, there have been interventions aimed to boost the living standards of the poor and the most vulnerable in the country, including the introduction of a new upward wage structure.
He said: “And the key is to stabilise the economy; what we want is resilience or sustained and rapid, in fact, inclusive economic growth. To achieve that, we first of all have to stabilise the economy. So in a nutshell, you don’t have to get a growth above the rate of population growth but we do have to stabilise prices, inflation and the exchange rate.
“The World Bank itself is a lender, but much more important, I think, is the tough leadership and the ability to respond and interact on issues of the day. So going into the major reforms that have been made, the World Bank was a source of research that led to a lot of what has been done, and we are on the right track, you can see the ratings agencies around the world, the major institutions, the major bilateral organisations and even governments are saying it. However, there is more to be done.”
Edun said that there was a need to address issues of import dependence so as to boost foreign exchange into the economy.
According to him, the two major areas that drive importation in Nigeria are spending on fuel and food, and efforts are ongoing to address them with the coming on board of the Dangote refinery, which has taken its first shipment of crude, and other refineries.
He said to boost revenues, plans were underway to review the waivers and tax incentives being granted to companies.
He noted the pressure on government finances which has resulted in borrowing and increased fiscal deficit, but said the government needs to spend even more than it currently does, considering the size of the economy.
Edun said: “But if we are going to do that, we need revenue and the first source of revenue is oil revenue; so we can expect serious scrutiny of oil production and revenues and insistence on raising oil production at this time when oil prices are high and similarly that the revenues are brought into the federation account in accordance with the constitution.
“I think there will be hardened scrutiny and I’m sure the NNPC is ready for that. Similarly, there is a robust plan in place to raise tax revenue not by increasing tax rate but by efficiency, digitalisation and improved collection. These are the initiatives aimed at increasing revenues and part of it is that it is important to retain the public trust by spending monies efficiently and transparently and accountably.”
He said the system of waivers and tax incentives would be scrutinised “with a view to revamping it and saving revenue, blocking leakages among government ministries and agencies”.
