Rising inflation and weak earnings have pushed 10 million Nigerians into poverty in 2023, according to the World Bank in its Macro Poverty Outlook for Nigeria: April 2024.
Presenting a grim reality where nominal earnings have drastically lagged behind the surging inflation rates, rendering the economic growth of the country insufficient to improve living standards, the report noted:
Nigeria struggles with weak macroeconomic fundamentals
The report attributes this dire situation to a combination of weak macroeconomic fundamentals and deep-seated structural constraints.
A significant overreliance on the oil sector has been identified as a major factor. With the deteriorating performance of this sector, there has been a consequent erosion in macroeconomic stability.
The challenges are compounded by low state revenues exacerbated by an expensive petrol subsidy, ineffective tax rates, and inadequate tax administration, which collectively hamper the government’s capacity to provide essential public services.
Further exacerbating the economic strain are the high levels of inflation, which have persisted and escalated due to loose monetary policies and depreciating exchange rates.
Nigeria also faces substantial hurdles such as inadequate energy and transport infrastructure, high costs of domestic and foreign trade, widespread insecurity, weak institutional frameworks, and low levels of human capital development.
The report noted:
The World Bank emphasizes the critical need for continued ambitious reforms centered around macroeconomic stabilization. The economic forecast projects an average growth of 3.5% between 2024 and 2026, which marginally outpaces the population growth rate by 0.9 percentage points. This growth is expected to be driven by the stabilization of macroeconomic conditions and a gradual recovery in the non-oil sectors, even as the oil sector might see some stabilization and recovery in production levels.
Despite these projections, the report noted that “poverty rates are expected to increase in 2024 and 2025 before stabilizing in 2026” due to the initial impact of ongoing reforms and the prevailing high inflation rate, estimated to average 24.8% in 2024.
Inflation is anticipated to gradually moderate to 15.1% by 2026 due to tightened monetary policies and efforts to stabilize the exchange rate.
