From the World Bank came a frightening report, yesterday, that the Nigerian economy has sunk into its lowest level in the nation’s history as it recommended the deployment of sound fiscal and monetary policies to tow it out of the doldrums.
The gloomy picture, which was contained in global bank’s Development Updates on Nigeria, presented in Abuja, said inflation would push seven million more Nigerians into poverty by the end of 2022.
The report stated that petrol subsidies could cost Nigeria as much as N5.4trillion in 2022, much higher than “all of the resources allocated to health, education, and social protection together”.
It also projected that net oil/ gas revenue for 2022 will fall to N1.6trillion from N2.6trillion recorded in 2021.
The startling report was presented by the Lead Economist for Nigeria at the World Bank, Dr. Marco Hernandez, who attributed the economic nightmare to a plethora of policy distortions on the part of the Nigerian government and global shocks that have fuelled inflation.
He painted a particularly worrisome picture of the Nigerian situation, that it was not just the price of imported products that were skyrocketing, but includes locally-produced goods.
Hernandez noted that the high inflation has crashed the value of the national minimum wage of N30,000 ($82), which is now worth N22,000 ($37).
The fast-eroding minimum wage aside, the World Bank reckoned that most Nigerian families earn N15,000 monthly which was worsening the poverty situation in the country.
He further stated that there is a nexus between foreign exchange rate and inflation, adding that when the former’s rates go up at the parallel market, inflation rate follows automatically.
He said: “suboptimal exchange rate management is fuelling inflation due to FX supply constraints and lack of predictability, which is ultimately leading to a rise in the parallel exchange rate which is closely associated with inflation.
“Import and FX restrictions reduce the supply of food and key staples, increasing their prices and those of associated goods. The monetisation of fiscal deficits by the Central Bank of Nigeria (ways and means) and CBN’s subsidised lending to firms add to inflationary expectations”.
The report noted that despite that the rising price of crude in the international market due to the Russia-Ukraine war, Nigeria’s oil production and revenue have continued to slump because of several factors.
The bank said it was quite concerned about Nigeria’s fiscal side, emphasizing that Nigeria needs to address fiscal deficits most urgently.
Reacting to the report, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, who spoke virtually noted that the huge amount spent on petrol subsidy has put the economy on ventilators and threatening its survival.
She passed the buck on subsidy removal to Nigerians.
“We really are at a crossroads and there are very difficult times. It is actually paradoxical. At a time when growth is accelerating there are so many other challenges that have gathered and are impacting the lives of the people.
“On our part, we are going to reduce the fiscal pressures caused by the increase in our deficit caused by increase in PMS subsidies. These PMS subsidies are costing us an additional N4trillion than was originally planned.