Still smarting from the woes brought on by the COVID-19 pandemic and the Russia-Ukraine war, millions of Nigerians risk getting poorer as they are being buffeted by a double whammy of petrol scarcity and cash crisis.
In the past few years, Nigeria has suffered several major shocks, both internal and external, blighting the government’s efforts to reduce poverty in the country.
Africa’s biggest economy has remained vulnerable to external shocks for many years as it continues to rely on crude oil exports as its major source of revenue, even as it spends a chunk of its foreign earnings on petroleum products imports.
The country is being roiled by internal crises. Households and businesses are being whipsawed by a severe petrol scarcity that has lingered since November and a chronic shortage of cash occasioned by the naira redesign policy of the Central Bank of Nigeria (CBN).
“The people at the bottom of the pyramid of society live their lives more on a cash basis, even though it is not a significant amount of cash. So, the N500, N1,000, N2,000 and N5,000 notes mean a lot to them,” Abiodun Keripe, managing director of Afrinvest Consulting Limited, said.
He said the poor need access to cash regularly to support their survival. “But when they now have to pay N1,000 to access N5,000, it makes their cost of living a bit more expensive, which could affect poverty levels.”
In 2020, the Nigerian economy slid into its second recession in five years amid the COVID-19 crisis and the Saudi Arabia-Russia oil war, which led to a sharp drop in oil prices.
The World Bank said in its ‘Nigeria Poverty Assessment 2022’ report that many non-poor Nigerians “are only one small shock away from falling into poverty,” while those already poor could be pushed into even deeper deprivation.
It said the COVID-19 crisis drove up the country’s poverty rate, pushing more than five million additional people into poverty by 2022.
Damilola Adewale, a Lagos-based economic analyst, said there would most likely be a considerable increase in the number of poor people, especially in the rural areas but only for a short-term period.
“I believe as the CBN policy normalises and there is growth in the circulation of new naira notes, there will be moderation,” he said.
The current crises have taken a heavy toll on the finances of workers, homes and businesses. Petrol prices have jumped by more than 50 percent in many parts of the country while many Nigerians are spending more to get cash from Point of Sale agents.
“The high cost of the product (petrol) is translating to increasing cost of transportation, services, and dwindling household incomes. Commuters have witnessed at least a 200 percent hike in the cost of transportation, and this continues to deplete the income of low-wage earners,” analysts at CSL Stockbrokers Limited said in a recent report.
The cost of doing business has also increased significantly. “Given the poor state of power in the country, many businesses are forced to run on alternative power and the scarcity of petrol causes a huge challenge for them,” the analysts said.
President Muhammadu Buhari had said in June 2019 that his government could lift 100 million Nigerians out of poverty in 10 years.
“For the next four years, we will remain committed to improving the lives of people by consolidating efforts to address these key issues as well as emerging challenges of climate change, resettling displaced communities and dealing decisively with the new flashes of insecurity across the country, and the impacts on food scarcity and regional stability,” he said during the inaugural June 12 Democracy Day celebration.
In June 2021, Buhari inaugurated the National Steering Committee of the National Poverty Reduction with Growth Strategy, reiterating his commitment to lift 100 million Nigerians out of poverty in 10 years.
Read also: How tribe, poverty will influence 2023 elections
“If India can lift 271 million people out of poverty between 2006 and 2016, Nigeria can surely lift 100 million out of poverty in 10 years,” he said. “The performance of our economy despite COVID-19 gives me comfort that we can achieve our goal, but we need to seriously scale up and work more with state and local governments.”
Last year, the National Bureau of Statistics put the number of Nigerians living in multidimensional poverty at 133 million, compared to 82.9 million considered poor in 2019 by national standards.
“For an economy that is tottering on the brink, the capacity to absorb shocks and disruptions is severely constrained,” said Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise.
“With 133 million Nigerians in poverty, inflicting additional hardship on the citizens would be unfair, insensitive and inconsiderate,” he added.
The World Bank had warned in a recent report that the timing of and short transition period for the naira redesign “may have negative impacts on economic activity, in particular for the poorest households”.
According to the multilateral lender, international experience suggests that rapid demonetisations can generate significant short-term costs, with small-scale businesses, and poor and vulnerable households, potentially being particularly affected due to being liquidity-constrained and heavily reliant on day-to-day cash transactions.
“At present, households and firms already face elevated financial pressures from prolonged, high inflation, recently compounded by external food and fuel price shocks, and the severe floods, and phasing out existing naira notes over a short time period may add to their challenges,” it said.
