Economists are projecting that an additional 7 million Nigerians will fall into a widening poverty pit by the end of 2020 with 5 million expected to come from the impact of the COVID-19 pandemic while 2 million people are expected to be impoverished by the more familiar problem of weak economic growth.
Some 82.7 million Nigerians are already in living in extreme poverty according to data by state-funded data agency, National Bureau of Statistics (NBS).
The new projection means that approximately 90 million Nigerians will be in poverty by the end of 2020, thereby surpassing the entire populations of Spain (46.8 million), Canada (37.6 million) and Singapore (5.6 million) combined.
This poverty index implies that an average of 4 out of 10 Nigerians have real per capita expenditures below N137,430 annually and this translates into almost N11,500 monthly and about N382 daily, assuming 30 days monthly.
Poverty is made worse by rising unemployment and inflation.
Unemployment rate in Nigeria is currently at a six-year high of 27.1 percent as at the second quarter of 2020, meaning that about 21.7 million out of the total population of over 200 million people are unemployed.
Several Nigerians have lost their jobs while others are faced with salary cuts or no pay at all as a result of the negative impact of the coronavirus pandemic on companies and economic growth that is slower than population growth.
In addition, inflation has remained a pertinent issue for Africa’s largest economy as it hit its highest point in 29 months at 13.2 percent in August 2020 from 11.08 percent in August 2019, according to the most recent inflation report by the NBS.
Read also; World Bank says Sub-Saharan Africa to see 3.3% economic contraction on Covid-19 pandemic
Food inflation, as measured by the composite food index, makes up the bulk of Nigeria’s inflation and also reached its peak at 16 percent in August 2020 up from 13.17 percent in August 2019.
The major drivers of the rise in Nigeria’s food index are meat, oil, potatoes, fish, yam and other tubers as well as bread and cereal.
To make matters worse, the current inflation reading may not even provide the full extent of Nigerians sufferings.
However, in the monthly review of Steve Hanke, a Professor of Applied Economics at the Johns Hopkins University, United States, Nigeria’s August 2020 inflation rate was put at 31 percent, ranking Nigeria as 9th out of 12 countries with the highest inflation rates in the world.
The economist said his annual inflation rates are measured based on a purchasing power parity (PPP) model that he developed when he measured Zimbabwe’s 2007-08 episode of hyperinflation as PPP represents the “gold standard” for measuring inflation for countries experiencing elevated/hyperinflation rates.
What makes Hanke’s PPP model different from NBS’s CPI model is that the PPP model uses black market exchange rate data collated on the last day of the month while CPI makes use of the average change in the data over time.
Also, while the CPI model uses average change in the price of a basket of selected goods, PPP model covers a wider basket of goods and services.
In addition, to determine changes in the price of items, the PPP model uses changes in exchange rate between the Nigerian naira and the U.S dollar, while CPI model adopts just changes in the Nigerian naira as the methodology.
What rising inflation and unemployment means for Nigerians
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The persistent rise in inflation and unemployment indicates worsening living standards for Nigerians as the hike in the prices of goods and services is unmatched by declining incomes, thus crippling the purchasing power of Nigerians and pulling more persons below the poverty line.
Inflation and unemployment rates are known to constitute the misery index of an economy and using the CPI model, Nigeria’s misery index is reported to be the sixth highest in the world at 40.32 percent, according to BusinessDay analysis.
In contrast, if Hanke’s PPP model is adopted, Nigeria will be the fourth miserable country worldwide with misery index of 58.1 percent, which is even worse than Nigeria’s official statistics.
Nigeria’s misery index reflects how bad the average citizen is faring and the severe economic and social costs of living in one of the most miserable countries in the world.
It appears that the living standard of Nigerians will only get worse if inflation and unemployment continue to escalate given the recent downturn in economic growth which saw GDP contract by 6.1 percent in Q2 2020 and is projected to further contract in Q3 2020, thus pulling Nigeria into the second recession in four years.
The way forward
In tackling rising inflation levels, analysts have suggested that the right polices need to be put in place as inflation is a response to prevailing economic situations.
“Inflation is basically a function of whether the government is doing the right things which then translates into whether we would be faced with a cost or demand-pull inflation,” said Wale Olusi, Head of Research, United Capital.
To combat the issue of unemployment in Nigeria, especially in the face of the pandemic, the government plans to create over 700 thousand jobs for the youths, according to President Muhammadu Buhari in a nationwide broadcast in June 2020.
“As part of the strategy to create jobs in reducing the effect of COVID-19 on our youths, I directed the employment of 774,000 Nigerians across 774 Local Government Areas (LGAs), and I am pleased to report that this program has commenced,” Buhari said.
Questions surrounding the efficiency of the government’s job creation plan arise considering that creating employment for 774 thousand Nigerians is less than 1 percent of Nigeria’s total populace of over 200 million people which is expected to double by 2050 at 3.2 percent yearly growth rate according to the most recent statistics by the World Bank.
As a sustainable way forward, experts have said that Nigeria needs to create 20million jobs for Nigerians to reach at least 10 percent of Nigeria’s total population.
“Also, if sectoral issues can be fixed in the economy, more jobs would be created in each sector which would help reduce unemployment and subsequently minimise poverty levels,” said Olusi.
On the issue of poverty reduction, the President has given his assurance of the government’s commitment to pull 100 million Nigerians out of poverty over the next 10 years.
“It is for this reason that in May 2019, on my inauguration for a second term in office, our government committed itself to starting a new programme of lifting 100 million Nigerians out of poverty within a 10-year period,” said Buhari.
To achieve this goal, he identified human capital development, efficient management of resources, greater financial inclusion, and transformation of the agricultural sector for food security as strategies.
“The achievement of this national goal depends on a 3-step model: create right policies, implement, and see to the success of implemented policies,” said Olusi.
“If average GDP growth rate can reach a minimum of 6 percent over the next 10 years, then we can say that these policies have succeeded,” he said.
Nonetheless, the Federal government cannot effectively reduce poverty level alone and greater synergy between public and private sector is needed, according to Ete Ogun, MD, Anchoria Asset Management.
