Nigeria’s growth not strong enough to reduce poverty – MPC members

Nigeria’s projected real GDP growth is not strong enough to support poverty reduction and reduce unemployment rates in the economy, Festus Adenikinju, member of the Monetary Policy Committee (MPC) said in his personal statement at the last meeting in March 2022.

The Central Bank Nigeria (CBN)’s staff forecast that real GDP would rise by 3.24 percent in 2022 at an assumed oil price of $80/bpd. The World Bank and the International Monetary Fund (IMF) projected 2.50 percent and 2.70 percent respectively. The federal ministry of finance, budget and national planning, forecasted growth of 4.20 percent for 2022.

According to the National Bureau of Statistics (NBS), Real Gross Domestic Product (GDP) grew by 3.98 percent (year-on-year) in the fourth quarter (Q4) of 2021, compared with 4.03 percent in the third quarter (Q3) of 2021 and 0.11 percent in the corresponding period of 2020. This represents the fifth consecutive quarter of real output expansion, following the exit from recession in Q4 of 2020.

Aisha Ahmad, deputy governor of the CBN in charge of financial services stability, said the positive performance was driven largely by growth in the non-oil sector by 12.36 percent in Q4 2021 from 10.99 percent in Q3 2021. Quarrying, transportation and storage; education; financial and insurance services; information and communication; as well as a steady rebound in manufacturing and mining activities were key to the growth of the non-oil sector.

“There is no doubt that current recovery is fragile. Projected real GDP growth is not strong enough to support poverty reduction and reduce unemployment rates in the economy. The uncertainty and downside risks to the economy are also quite high. This is compounded by the huge insecurity across the country. However, I do not believe that we can totally take our eyes away from the rising and persistent inflation build-up in the economy,” Adenikinju said.

Nigeria’s unemployment rate reached a record high of 33.3 percent in fourth quarter (Q4) 2020 from 27.1 percent recorded in second quarter (Q2) 2020, data from the NBS indicated.

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The World Bank estimates that Nigeria’s poor people will hit 95.1 million by the end of 2022. That’s an additional 5 million people compared to the level in 2021.

Although growth in real GDP has been sustained for five consecutive quarters since the exit from recession in Q4 2020, the recovery, albeit strong, remains fragile on account of new headwinds that constitute downside risks to the indicator, Aliyu Ahmed, member of the MPC said in his personal statement.

The headwinds include pressure points arising from the Russian-Ukraine war as evidenced in the disruption of the global supply of commodities; the pass-through of rising international prices to domestic inflation, as well as the lingering global pandemic.

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“There is a need to calibrate policy responses to achieve an optimum mix of policies that will address the Bank’s mandate of price stability conducive to economic growth. I am cautious of the impact of inflation on the economy, and therefore, remain committed to a declining inflationary trend,” Ahmed said.

Robert Asogwa, member of the MPC said real GDP estimates for the first quarter of 2022 may still take some time before it is released but on balance, growth is still expected around the previously forecast range as the impact of the ongoing Russia-Ukraine war may likely be limited in the first quarter. Available high frequency real sector indicators for 2022 already point to the direction of growth momentum in the first quarter of 2022.

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