By celebrating a miserly 0.11% exit from recession fueled by unsustainable credit, Nigeria is not making a solid plan for growth. Pumping more money into the economy with no improvement to productive capacity will worsen inflation, which affects the poor disproportionately.”
According to the “2019 Poverty and Inequality in Nigeria” prepared by the National Bureau of Statistics (NBS) with the support of the World Bank, two out of every five Nigerian are living “below the poverty line”, defined as living on N137,430 per annum, or N377 per day.
Poverty in Nigeria is worsened by the lack of access to basic social amenities like quality healthcare, clean water, and quality education. Under a social protection scheme, Nigeria plans to transfer N5,000 monthly (N166 per day) to the most vulnerable citizens. This transfer will reach only a few of the Nigerian poorest citizens and may do little to relieve their poverty. Recent readings from Nigeria show there is more hardship in store for the Nigerian poor.
Inflation figures released on February 16 by the National Bureau of Statistics (NBS) put the country’s annual inflation rate at 16.47%, the highest since April 2017. According to the latest inflation figures from the NBS, food inflation rose 20.57% year-on-year, urban inflation by 17.03%, and rural inflation by 15.92%. This rise in the food index was caused by the increase in the prices of a wide variety of staples like bread and cereals, potatoes, yam, and other tubers and meat, fruits, vegetable, fish, and oils and fats. Many households now spend more than 50% of their income on food.
The implication is that more Nigerians were impoverished during the last year. Core inflation, which excludes the prices of food, stood at 11.85 percent in January 2021, up by 0.48 percent when compared with 11.37 percent recorded in December 2020.
The highest price increases were recorded in prices of passenger transport by air, medical services, passenger transport by road, pharmaceutical products, repair of furniture, vehicle spare parts, motor cars, miscellaneous services relating to the dwelling, maintenance, and repair of personal transport equipment. This means that Nigerians are paying more for the basic needs of life as everyone prices in the higher cost of living into the goods and services they sell to each other.
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Nigeria’s economic growth slowed by 1.9% in 2020 as a whole but the economy grew by a miserly 0.11% in the fourth quarter of 2020, a pace that does not suggest the economy is on the path to a self-sustaining recovery. The modest 0.11% has been engineered largely through exorbitant monetary intervention by the government and the Central Bank of Nigeria. This includes reflationary policies like the N-Power programme, TraderMONI, MARKETMONI, FARMERMONI, MSME Survival Fund, and the N75 billion National Youth Investment Fund through which several billions of naira was injected into the economy.
By celebrating a 0.11% exit from recession fueled by unsustainable credit, Nigeria is not making a solid plan for growth. Pumping more money into the economy with no improvement to productive capacity will worsen inflation, including rising food prices, which tend to affect the poor disproportionately. It would also worsen Nigeria’s exchange rate woes. And the more Nigeria spends creating cheap credit, the less it can spend on things such as infrastructure and education which provides the basis for durable growth.
The only bright light in the economic firmament for Nigeria is rising oil prices, from the budget benchmark of $40 to $67 as of press time. Yet, with the government’s resumption of paying subsidies on imported fuel, the opportunity for productive investment is being squandered yet again.