Many rich Nigerians one shock away from poverty – W/Bank

The World Bank has said in a new report that many rich Nigerians are only one small shock away from falling into poverty.

The multilateral lender, in its ‘Nigeria Poverty Assessment 2022’ report, said the COVID-19 crisis was driving up Nigeria’s poverty rate, pushing more than five million additional people into poverty by 2022.

“With real per capita GDP growth being negative in all sectors in 2020, poverty is projected to have deepened for the current poor, while those households that were just above the poverty line prior to the COVID-19 crisis would be likely to fall into poverty,” it said.

According to the report, given the effects of the crisis, the country’s poverty headcount rate is projected to jump from 40.1 percent in 2018/19 to 42.0 percent in 2020 and 42.6 percent in 2022, implying that the number of poor people was 89.0 million in 2020 and would be 95.1 million in 2022.

It said compounding macroeconomic frailties, shocks and uncertainty might blight Nigeria’s progress on poverty reduction, adding that climate change could intensify shocks, further limiting opportunities to spread the proceeds of growth.

“Many non-poor Nigerians are only one small shock away from falling into poverty, while those who are already poor could be pushed into even deeper deprivation,” the World Bank said.

According to the report, climate-related shocks – such as floods and droughts – are particularly harmful because they threaten the rain-fed agricultural and pastoral activities that are common among households living below or just above the poverty line.

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It said, “Uncertainty about when such shocks may hit, combined with a lack of coping or insurance mechanisms, can trap households in poverty by discouraging the adoption of high-risk, high-reward technologies or investment in human and physical capital.

“This problem may currently be getting worse: climate change threatens to make floods and droughts more frequent and more severe, compounding this challenge for poverty reduction in Nigeria.

“Given the influence of shocks on income generation, it becomes even harder for any growth to percolate to Nigerian households and raise their living standards. Alongside increasing climate shocks, conflict events have proliferated, displacing populations, disrupting markets, and interrupting Nigerians’ livelihoods.”

The World Bank noted that fatal conflict events had become more widespread across Nigeria in the past two decades, especially in the country’s north.

It said, “Nigeria’s dependence on oil exports is one of the leading causes of its frail growth prospects; it may also prevent any growth from being broad-based.

“Low revenue mobilisation also leaves Nigeria fiscally constrained, making it more difficult for the government to invest in the infrastructure, human capital, and social protection needed to promote inclusive growth.”

The World Bank said other distortionary policies, especially on exchange rates and trade, could further weaken Nigeria’s prospects for inclusive growth and poverty reduction.

It said, “Nigeria’s multiple exchange rates for different types of transactions and the country’s trade restrictions including bans on certain goods and the 2019 border closure may reduce investor confidence.

“This, in turn, could limit foreign direct investment and competition, factors required to support firms and the job creation needed for broad based growth.”

The report said such policies could also have immediate negative effects on poverty reduction through the price channel, as trade restrictions could make the goods that poor households consume, especially food items more expensive, reducing people’s purchasing power and welfare in turn.

“The pro-poor government spending that could broaden the base of growth is currently lacking in Nigeria,” the World Bank added.