Inflation, unemployment, bad policies widen income inequality in Nigeria
The World Bank Nigeria‘s Development Update for June 2022 predicts an additional 7 million Nigerians to fall below the poverty line of $1.9 per day. This will add to the already existing 83 million extremely poor Nigerians, bringing the total figure to 90 million misery-living, squalor-busted and economically hopeless citizens by the end of 2022.
If these figures come by, they will represent over 45 percent of the Nigerian population and create an economic atmosphere of crisis, hunger, starvation and potentially worsening existing insecurity.
Economic planners and drivers have lost touch with the economy. The economic compass of Nigeria is missing, and the country is regressing at a record speed. Even though global economies are experiencing challenging times in a post-COVID-19 era that caused several supply chain disruptions, rising inflation and the recent Ukraine-Russia war, Nigeria’s challenges are unique and self-inflicting. Inflation at 17.7 percent, record unemployment rate of 33.3 percent and poorly implemented and misconstrued economic policies are clear proof of an ailing economy.
Nigeria’s present economic reality threatens to erase the middle class from its economic structure. Inflation has drastically reduced household income and purchasing power to an abysmally low level. The market prices for food items, household items and consumables increase weekly.
Families with larger sizes will find it more challenging to maintain a food routine than a year ago. The minimum wage of N30,000, which nearly 70 per cent of the thirty-six states have struggled to pay, remains the same. There are rising job losses due to disinvestment in the petroleum sector, higher production and operating cost for firms in Nigeria and a risky investment climate due to poor business policies from the government.
This will reduce household consumption and saving, potentially posing a huge threat to business survival and creating an economic distortion in Nigeria’s business environment. This would lead to an expanded income gap between the rich who can afford and survive the present economic reality and those who will struggle to fend for themselves. These indicators are not healthy for an economy that is greatly hoping for rapid economic growth and development.
Subsidy payments for petroleum products would have been removed if Nigerians had faith in the government re-investing these funds into real sectors, infrastructural development and social welfare programmes.
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Still, proven examples of corruption and looting have made Nigerians resist several calls and appeals by the government and development institutions like the World Bank and IMF for fuel subsidy removal, even as it appears unsustainable at the moment, given Nigeria’s present economic state and outlook. The Nigeria social investment programme is another good policy with a terrible implementation, monitoring and evaluation model.
Unfortunately, the programme created in 2015 to reduce poverty, and unemployment, increase school enrollment, assist SMEs’ growth, and access to funding has become a conduit pipe for corruption. There is no available and verifiable data on the number of beneficiaries, how they were selected, who they are and an assessment of the impact on the supposed beneficiaries. There have been cases of school feeding for children during the lookdown, even when schools closed down due to COVID-19.
There is evidence of non-payment for N-power stipends to beneficiaries and loans for agricultural programmes. The conditional cash transfer has continued to generate questions on the process and sustainability of the project, even though more than N3 trillion has been spent on this programme in the last six years with no tangible outcome. While the government is investing heavily in these programmes, more Nigerians are getting poorer, implying an underlying problem.
Nigerians are spending more as government impact is hardly felt in nearly all sectors of the economy. Citizens provide private sources of power for themselves, pay more indirect taxes, provide private security, and use private health care services and schools (for those who can afford it), as government-owned infrastructures and facilities are deplorable and underfunded mainly due to corruption.
The income gap between the poor and rich has widened in Nigeria, especially with general elections billed for next year; governance has been abandoned in pursuit of personal political ambitions, while some have resorted to looting and maladministration in anticipation of a change in leadership by 2023.
According to W.W Rostow’s five stages of growth, where Nigeria is believed to be in stage two (pre-conditions to take-off), Nigeria might revert to stage one (traditional society) before the end of 2023. Therefore, an urgent and serious effort must be channelled to improve the living standard of the ordinary Nigerian through purposeful and inclusive policies and political will to see a new Nigeria.
Alikor Victor is a development economist & policy analyst at the Nextier Group.