Nigeria’s accelerated inflation growth has eroded the N30,000 minimum wage by 55 percent and widened the poverty net with an estimated five million people in 2022, the World Bank has said.
The multilateral lender said this on Thursday in Abuja at the launch of the Nigeria Development Update for December 2022, and the Country Economic Memorandum.
Nigeria’s inflation quickened for the 10th straight month to a new 17-year high of 21.47 percent, according to the National Bureau of Statistics.
“The cumulative inflation between 2019 and 2022 was 55 percent, households’ purchasing power has slumped and the real minimum wage in 2022 after discounting for inflation is N19,355 while in dollar value is $26 after discounting for both inflation and exchange rate depreciation,” Alex Sienaert, chief economist at World Bank, Nigeria said.
He said the minimum wage, which was $82 in 2019, had dropped to $26.
He said over the past decade, macroeconomic stability has steadily deteriorated, eroding growth potential and hindering poverty reduction goal.
Sienaert said inflation has been fuelled by a combination of shocks and policies particularly the war in Ukraine, recent flooding incident, suboptimal exchange rate management, import and foreign currency restrictions as well as monetary and fiscal policy settings.
He said Nigeria has the potential and resources to accelerate growth and reduce poverty but the current policy framework hinders the prospects for economic growth and job creation as issues around multiple exchange rates, protectionist policies, trading restrictions pose barriers.
“If structural reforms are not implemented, Nigeria’s future looks bleak, per capita income will plateau, and if the employment rate does not improve, 23 million more Nigerians will live in extreme poverty by 2030,” he said.
He stressed the need for reforms such as the adoption of a single and market-reflective exchange rate, and the elimination of petrol subsidy.
“Unlocking private investment can generate economic opportunities for Nigeria’s growing population, accelerating structural transformation and promoting the diversification of its economy,” Sienaert said.
Shubham Chaudhuri, World Bank’s country director for Nigeria, said over the years, Nigeria has been floating along and riding on the oil price movement and is now at a critical junction.
“Nigeria has a choice to implement critical macroeconomic and structural reforms that can reduce crisis vulnerabilities and increase growth. Doing so will lift per-capita incomes, sustainably reduce poverty and deliver better life outcomes for many Nigerians,” he said.
Zainab Ahmed, minister of finance, budget and national planning, said Nigeria needs help because the government at the national and subnational levels cannot provide all the financing required to meet the country’s investment to drive development and growth.
The minister, who was represented by Ben Akabueze, director-general of the Budget Office of the Federation, said Nigeria’s growth prospects have improved but pre-crisis challenges threaten the post-crisis recovery, with consequence for a continuous decline in GDP per capita which necessitates the need for drastic reforms.
“We need the private sector, foreign and domestic as integral partners in securing the much-needed financing required to fund both physical and social investments for Nigeria’s overall development,” she said.
She said the Nigerian economy has demonstrated considerable resilience in addressing the challenges, adding that through the implementation of the Strategic Revenue Growth Initiative, Nigeria would grow its revenue and alleviate the pressure on the debt service obligations.
Nasir El-Rufai, governor of Kaduna State, said subnational governments are also suffering, adding that many of them are under pressure and are falling behind in fulfilling their obligations.
Speaking on the impact of inflation on the minimum wage, he said ideally the current level of wages and salaries should be quadrupled but the revenue to achieve this is not available.
He flagged subsidy and exchange rate challenges as barriers to revenue and economic growth, saying an earlier agreed consensus to remove subsidy by state governors, in a meeting with the ministry of finance, ministry of petroleum, the central bank and other key policymakers has not been adhered to.
“I think Nigeria’s next president must be willing to take very difficult immediate and urgent decisions that will make the country go through three to five years of pain and reverse this trajectory,” he said.
Speaking on issues around insecurity, El-Rufai said Kaduna would have attracted more investments if the security situation was better but states do not control any security apparatus.
“The federal government is primarily responsible for security, subnational efforts to have state and community policing has been blocked; we are doing the best we can but the federal government should provide the security,” he said.
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Godwin Obaseki, governor of Edo State, said improving the economy is beyond addressing macroeconomic challenges and requires building a consensus on how to build the country.
“Until we have an alignment of interest to build the political and social consensus, the cycle will continue,” he said.
Speaking on the utilisation of available funds, he said that 70 percent of the budget focuses on servicing the government and its institutions while the provision of an enabling environment for businesses to thrive is neglected.
“The private sector provides jobs and contributes to the economy; why should policies not be directed at supporting their activities, so more jobs can be created?” he said.
Sarah Alade, special adviser to the President on finance and economy, said to prevent the worsening macroeconomic conditions, investor confidence in the economy must be restored through necessary reforms and macroeconomic stability.
“We must encourage the private sector to come and invest and we must have a monetary policy that is consistent with low inflation; our exchange rate must also avoid volatility,” she said.
