Nigeria’s economic growth still far from reducing poverty
Nigeria’s GDP per capita income or what economists interpret as economic growth per head is projected to rise in 2022, after seven years of decline following a growth forecast of three percent by the Economic Intelligence Unit (EIU), the world leader in global business intelligence.
But the rise in Africa’s biggest economy’s per capita income or average income may not translate to an improvement in the standard of living of its citizens which has worsened over the last few years as it is due to low base effect.
The World Bank said in its latest report that Nigeria’s economy in 2021 will be the same size as it was in 2010, which translates to a decade of lost growth.
“I don’t think it will have any significant impact on Nigerians because of the equitable distribution of that income. Yes, GDP per capita may increase but that is average for the whole country but not everybody operates on that level,” Ayorinde Akinloye, a consumer analyst at United Capital Plc said.
He also said that an increase in GDP per capita does not necessarily imply that standard of living will increase if the improvement will only be felt in the upper segment of class, while neglecting those in the middle and lower class. “So per capita may improve but it is how well that income is distributed across the various classes of the economy.”
Similarly, Moses Ojo, a Lagos-based Economic Analyst noted that the rise in prices may affect the impact of the projected rise in income which is meant to lead to an improvement in welfare of people.
A country’s per capita GDP shows how much economic production value can be attributed to each individual citizen. It breaks down a country’s economic output per person and is calculated by dividing the GDP of a country by its population. If a country’s population is higher than its GDP, then GDP per capita will be negative for the economy but if it is lower, then it will be positive.
Nigeria has been facing declining incomes since 2016 as its annual population growth rate of 2.6 percent has been higher than its GDP growth rate of -1.58 percent, 0.83 percent, 1.98 percent, 2.27 percent and -1.92 percent in 2016, 2017, 2018, 2019 and 2020 respectively, data from National Bureau of Statistic (NBS) shows.
“If we can manage over three percent next year, it will be the best growth performance we have had since 2015. Although the potential of the economy is much higher than that level, at least it will be a departure from the sub 3 percent growth that we have been having,” Omotola Abimbola, an investment analyst at Lagos-based Chapel Hill Denham.
He further added that despite the projected three percent growths, we are still far away from our potential. “To make a major dent in the major unemployment that we are having and partly solve our social issues, we should be aiming for close to 10 percent or higher.
Nigeria has slummed into two recessions in the past five years owing to the collapse in oil prices and disruptions caused by the Covid-19 pandemic. The contractions have weakened consumers’ purchasing power.
According to data from the NBS, headline inflation, which serves as a measure of consumer prices, rose by 17.75 percent in June 2021 while Nigeria’s unemployment rate came to 33.3 percent in 2020, as more and more were rendered jobless from the impact of the pandemic.
Also, the World Bank stated in a Development Update report that the country’s surging inflation rate has pushed seven million Nigerians into poverty. According to the report, before inflation started rising steadily, there were 82.9 million poor Nigerians but the number has risen to 90.1 million as a result of the price shock.
EIU is not the only one that is optimistic on Nigeria’s economy; the International Monetary Fund (IMF) is also on that same optimism as it has revised upward its growth forecast for the Nigerian economy in 2022 from 2.5 percent to 2.6 percent. While the World Bank is expecting it to end at 2.1 percent
The IMF stated that the improvement of trade and oil production is expected to increase lift growth for 2022. “It is also predicated on continued external financial conditions which recently have been very supportive of growth and it is important that continues in order for this growth forecast to pan out.”