A new report by the World Bank highlighting how persistently high inflation, unemployment and insecurity are slowing down reforms and recovery has punctured claims to economic success by the Nigerian government. In its latest Nigeria Development Update, the global lender noted that rising consumer prices hit households hard in 2020, pushing seven million more persons into poverty, exacerbating the explosive unemployment rate, and derailing tentative reforms. Faced with unprecedented security and existential threats, the government needs to implement radical measures to expedite recovery, prevent another recession and reduce poverty and unemployment.
One of the world’s best-known investment banks had predicted last August that the naira would depreciate from around N407/$1 to N500-550/$1 in the next 12 to 18 months. The May 2021 Consumer Price Index issued by the National Bureau of Statistics also confirmed a 22.8 per cent rise in food prices, though the overall CPI fell marginally by 0.19 per cent. Higher prices of bread, cereal, milk, eggs, fish, fruits, meat, oils/fats, and vegetables among others, reflect a long-running trend that invariably hits the most vulnerable and increasingly, those just above the poverty threshold. Similarly, reviews by experts and the organised private sector reveal negative trends in the economy that sharply contrast with the self-congratulations of the President, Major General Muhammadu Buhari (retd.), and regime functionaries.
Titled, ‘Resilience through Reforms’, the NDU noted that rapidly rising prices had been “severely impacting Nigerian households,” pushing inflation rates to a four-year high by April this year, with food prices, a segment of headline inflation (the other being energy prices), accounting for over 60 per cent of the total increase in inflation. Its estimate of seven million more Nigerians falling into poverty in 2020 alone contradicts Buhari’s recent assertion that his regime had lifted 10.5 million out of poverty in the last two years. The NBS’s last poverty survey estimates over 40 per cent of the population living below the poverty line; the World Poverty Clock put the number of Nigerians living in ‘extreme poverty’ in 2019 at 77.9 million, rising to 84.48 million in 2020 and 86.8 million by June 2021.
Apart from inflation, described as the “biggest poverty accelerator” by the Lagos Chamber of Commerce and Industry, experts bemoan the country’s hosting of the largest number of people in the world lacking access to electricity, the mismanagement of subsidies, currency market crisis and insecurity as disincentives to investments, job creation and recovery from the adversity triggered by falling oil prices and the pandemic. Unemployment has hit 33.3 per cent; for the youth segment (ages 15-34), Stears Business estimates the jobless rate at 42 per cent and underemployment at 21 per cent.
To change the narrative, exploit the country’s natural, human, and material resources to lift millions out of poverty, create jobs and improve infrastructure and social services, requires bolder economic reforms. The task is made more urgent by the political and social tensions eroding national cohesion and tilting the country towards irreversible state failure.
As the World Bank acknowledged, the regime has taken some positive measures in response to the crisis and to achieve recovery. Among these are pro-poor spending, reductions in energy subsidies, cuts in public spending, allocation of resources to meet the COVID-19 challenge and loosening of the opacity in the crucial oil and gas industry that provides the bulk of public revenues. But these overdue policy reforms, it said, “will have to be sustained and deepened for Nigeria to realise its development potential”. Modest increases in oil prices and faster global recovery helped to deliver a smaller GDP contraction of -1.8 per cent in 2020 for the country than the -3.2 per cent initially projected.
The lender lists three priority objectives for the government: reducing inflation through policies that promote macroeconomic stability, inclusive growth, and job creation; protecting poor households from the impacts of inflation; and facilitating access to financing for SMEs to accelerate recovery. It urges critical reforms of fiscal, monetary, trade and social protection policies, harmonised to reduce inflation, “save lives, protect livelihoods, and ensure a faster and sustained recovery.”
But recovery is precarious without resolving the electricity power crisis where an average of 4,000 megawatts only is delivered to an economy estimated to need 24,000MW. Order must be restored to the exchange-rate management where multiple rates have impacted negatively on manufacturers and importers and deterred foreign investors. The federal and state governments should accord priority to providing the enabling environment for foreign and domestic private investment in agriculture, mining, manufacturing, and IT start-ups.
States should devise economic policies to attract investment for job creation and revenue generation. The economy is tied to the boom-and-bust cycles of the oil market. Diversifying revenue and export sources require quick, effective privatisation and liberalisation of key sectors like railways, airports, seaports, steel and downstream oil and gas. The Financial Times of London recommends resolute implementation of the government’s stated opening of gold mining, exploiting the country’s vast, but largely untapped gas reserves of 206.53 trillion standard cubic feet–the world’s ninth largest–and effective utilisation of the recently passed Finance Act to boost SMEs. A joint report of the UNDP, Asian Development Bank, and UN Economic and Social Commission for Asia and the Pacific advocates innovations in digital technologies to address vulnerabilities, boost businesses and reduce poverty.
Other countries are adopting ingenious reforms to combat the COVID-19-induced economic crisis; Nigeria should too. UNCTAD’s Global Trade Update released in May attributed the impressive 10 per cent global growth in Q1 2021 partly to the “strong export performance” of East Asian economies. The IMF projects “swift rebound” in the United States, China, and Western Europe whose economies have been super-charged by unparalleled fiscal and monetary stimulus. China is projected to grow by 8.5 per cent; the ADB’s Asian Development Outlook in April projected a recovery powered by a growth of 6.0 per cent for Malaysia on the back of its “accommodative” business-friendly policies and technological upgrading of its small and medium-sized manufacturing enterprises. Crude oil is rightly envisaged to rally at $75 a barrel this third quarter, according to Goldman Sachs. The regime should take advantage of the rise to complete strategic road projects.
Buhari and the state governors should initiate the necessary reforms to promote private sector-led economic growth, inclusion, job creation and poverty reduction. Both the economic recovery and growth plan developed in response to the 2016 recession and the post-COVID-19 economic sustainability plan should be transparently implemented. Further delay is perilous.
