According to the World Bank, Nigeria’s condition is getting worse, with worse economic performance due to ongoing inflation.
This was stated by the Washington-based bank in its recently issued Nigeria Development Update, which was unveiled with the Nigeria Country Economic Memorandum on Thursday in Abuja.
According to the NDU report “Nigeria is in a challenging and deteriorating economic situation. Nigeria’s economic performance has weakened since the previous Nigeria Development Update was published in June 2022 under the title of ‘The Continuing Urgency of Business Unusual’.”
In addition, the banking institution reduced Nigeria’s projected growth for 2022 from 3.8% to 3.1%.
The modest economic growth in the third quarter compared to a year earlier, slowed by the oil sector and dismal performance in other economic sectors, was cited as the cause of the modification.
The bank also predicted that growth would drop by 2.9% in 2023.
“Nigeria’s economic output growth has slowed and the World Bank is lowering its growth projections. Real gross domestic product at market prices growth in the third quarter of 2022 was 2.4 percent year-on-year, on the back of a continued contraction in oil output (-22.7 per cent y-o-y) and slowing non-oil growth (4.3 per cent y-o-y, down from 4.8 per cent y-o-y in Q2 2022). The World Bank now projects that real GDP will grow by 3.1 per cent in 2022 and 2.9 per cent in 2023–24, 0.3 of a percentage point lower than the previous projections at the time of the June 2022 NDU,” the report read.
While presentating his reports, the World Bank Lead Economist for Nigeria, Alex Sienaert, said that the Nigerian minimum wage, which was worth N30,000 in 2019, could be valued at N19,355 today.
This goes to say that there had been a loss of 35.48 per cent value between 2019 and 2022 as inflation erodes Nigerians’ purchasing power.
“The cumulative inflation between 2019 and 2022 was 55 per cent,” Sienaert noted.
He said that Nigeria’s buying power has fallen as a result of growing inflation.
According to the NDU research, consumer price inflation has increased and is now among the highest in the world.
The report observed that although the CBN was attempting to reduce the rising inflation by raising interest rates, it had found it difficult due to its support of the fiscal deficit through technological developments.
The report further read, “The rate of consumer price inflation has surged and is currently one of the highest globally. The consumer price index, already increasing at a high rate, accelerated in 2022 through October, to be up 21.1 per cent y-o-y, a 17-year high.
“High inflation has been persistent in Nigeria for the past two decades, but since 2019 inflation has increased substantially, driven by the multiple exchange rates and exchange rate depreciation in the parallel market, intensified trade restrictions, and the monetization of the public deficit by the Central Bank of Nigeria.
“In 2022, this has been exacerbated by the spike in global food and energy prices due to the war in Ukraine and global supply disruptions. Since May 2020, the CBN has responded by tightening monetary policy, increasing the policy rate by 500 basis points and increasing the cash reserve requirement by 500 bps. However, the disinflationary impact of these measures has been weakened by continuing monetization of the fiscal deficit, sector-specific subsidized credit provisions, and imported food and energy cost increases.”
The research also observed that Nigeria’s exchange rate policy settings are increasing macroeconomic risks and inhibiting business activity, investment, and growth.
The World Bank also reported that between January and October of this year, inflation drove five million Nigerians into poverty.
“As many as 5 million Nigerians have been pushed into poverty as a result of inflation in 2022. The World Bank estimates that between 2020 and 2021, inflation pushed about eight million more Nigerians below the poverty line, increasing the total number of poor people to about 90 million. Higher inflation in 2022 is estimated to have pushed an additional five million Nigerians into poverty between January and September 2022, mainly through higher prices of local staples, such as rice, bread, yam, and wheat, especially in non-rural areas”, the report said.
The Nigerian economy, according to the Washington-based bank, is extremely susceptible to shocks.
It issued a warning that the level of insecurity in the nation would increase if inflation and unemployment kept rising.
“Nigeria’s economy will remain highly vulnerable to both external and domestic shocks, and shocks will be exacerbated in the absence of urgently needed policy reforms to reduce inflation, increase fiscal revenues, and shift toward a market-responsive exchange rate.
“If inflation and unemployment remain high, this will exacerbate domestic security risks, which in turn could further reduce economic growth,” the report read further.
It said high inflation had deteriorated in Nigeria since 2020, corroding citizens’ purchasing power and increasing poverty.
It added, “Nigeria’s chronic, high inflation has worsened since 2020, eroding the purchasing power of Nigerians and increasing poverty. Since October 2019, Nigeria’s inflation has been persistently high. Inflation accelerated after the closure of Nigeria’s land borders in October 2019, and increased steadily throughout 2020 due to domestic supply constraints related to the COVID-19 pandemic. In 2021, at an average of 17 percent, inflation was above that of the previous four years and among the highest rates in the world.
“During the course of 2020 and 2021, inflation was mainly driven by higher food prices, especially for staples such as bread and cereals, potatoes, yams, and other tubers, meat, fish, fruits, and oils and fats. The pace of price increases eased somewhat in 2021 as the economy reopened and domestic manufacturing and agricultural production increased, but inflation remained high at an average of 17 percent y-o-y.”
