A French saying goes, “The more things change, the more they stay the same.” A Nigerian might as well have originated this quote, and it’d still ring true.
A new administration will lead Nigeria on May 29, 2023. However, age-old problems remain, and as the latest World Bank report shows, things aren’t looking promising, as 13 million Nigerians are projected to fall into poverty by 2025.
We went through the report and highlighted key findings from it.
Nigeria’s macroeconomic stability is severely weakened
The “Macro Poverty Outlook for Nigeria” report disclosed what every Nigerian knows — that our economy is a shambles. The report reads, “Oil price booms have previously supported the Nigerian economy, but this hasn’t happened since 2021.
“Instead, macroeconomic stability has weakened amidst declining oil production, costly fuel subsidies, exchange rate distortions, and monetisation of the fiscal deficit. The deteriorating economic environment is leaving millions of Nigerians in poverty. Risks are tilted to the downside given the lack of macro-fiscal reforms, the naira demonetisation, and an uncertain external outlook.”
What does that mean?
To explain the jargon, the report says that Nigeria, which used to be heavily dependent on oil revenue, no longer gets enough money because its production capacity has dropped. Other issues like fuel subsidies, multiple exchange rates and high government borrowing have turned the economy upside down. The result? Nigeria’s future looks “uncertain”.
The infographic above shows macroeconomic indicators from 2014 and projected into 2024. That orange wavy line you see is oil price over the years. From 2015 there was a slump which picked up slightly in 2018 but fell in 2020, which, as you’ve guessed, was when the pandemic hit hard.
In 2021 there was a sharp rise due to the Russian-Ukraine war. Almost every oil-producing country reaped from the oil windfall as demand peaked. We say “almost” because Nigeria was the notable exception. The light blue line below the orange one is Nigeria’s revenue which tells its own story. As oil prices were soaring, revenues were dwindling. A truly astonishing feat that shows the Nigerian government’s uncanny ability to snatch defeat from the jaws of victory.
[President Buhari / Daily Nigerian]
The dark blue line is our GDP growth which the World Bank says will grow by an underwhelming average of 2.9 per cent per year between 2023 and 2025.
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Grim outlook
The report describes Nigeria as “more fragile than before the late 2021 global oil price boom.” The World Bank reports Nigeria’s debt is over 38 per cent of GDP. In 2022, 96.3 per cent of our revenue was used to service debt.
Between now and 2025, our population is expected to grow, on average, by 2.4 per cent annually. Given that GDP growth will be at 2.9 per cent for that same period, that’s not encouraging. Our economic growth rate should be outpacing our population growth rate by far to have any chance of lifting Nigerians from poverty.
On poverty, the World Bank said: “With Nigeria’s population growth continuing to outpace poverty reduction and persistently high inflation, the number of Nigerians living below the national poverty line will rise by 13 million between 2019 and 2025 in the baseline projection.”
To provide a sense of where we are, the Nigerian Bureau of Statistics (NBS) said in November 2022 that 133 million Nigerians live in multidimensional poverty. That number is expected to rise by millions.
The World Bank said fiscal and debt pressures would increase if the petrol subsidy is not phased out in June 2023. It recently gave the federal government a loan of $800 million, which it’ll use as petrol palliative by disbursing cash to 50 million Nigerians. How effective that’ll be is anyone’s guess.
Way forward
Besides phasing out fuel subsidies, the World Bank has advised the following:
- Increasing oil and non-oil revenues,
- Tightening monetary policies to reduce inflation and;
- Unifying the multiple FX windows and adopting a single, market-responsive exchange rate.
This heavy burden falls on whoever assumes office on May 29, and it’s one hell of a job. We wish them good luck as they’ll need every ounce of it.
