The World Bank has warned that Nigeria risks becoming home to 25 per cent of the world’s poor people in 10 years unless it revives its economic growth.
According to the Bank, in its Nigeria Economic Update report published Monday, December 2, Africa’s most populous country’s Gross Domestic Product (GDP) has declined.
It advised the President Muhammadu Buhari administration to increase domestic revenue, remove trade restrictions and improve the predictability of economic policy.
“Under a business-as-usual scenario, where Nigeria maintains the current pace of growth and employment levels, by 2030 the number of Nigerians living in extreme poverty could increase by more than 30 million,” the bank warned in its Nigeria Economic Update (NEU) report.
“With economic growth expected to remain below the estimated population growth of 2.6 per cent through 2021, per capita real GDP will decline from $2,485 in 2018 to $2,460 by 2021, pushing more Nigerians into poverty.
“Population growth is expected to continue exceeding economic growth, undermining Nigeria’s prospects for poverty reduction.”
The report also revealed that money in the Excess Crude Account (ECA) had almost “ been exhausted, rendering Nigeria more vulnerable to shocks.”
The NEU report stated that “the account balance on June 30 was $0.1 billion, down from $0.6 billion at the end of 2018 and $2.5 billion at the end of 2017.”
According to the World Bank, “ECA has rarely operated as envisaged; when it was established in 2004.” It explained that that the account “was to be drawn on only when the actual crude oil price falls below the budget benchmark price for three consecutive months.”
The World Bank also cautioned the Central Bank of Nigeria (CBN) on its agriculture intervention.
“CBN financing schemes for the agriculture sector and forex restrictions designed to reduce imports of staple foods will continue to support the sector, but will affect the quality and increase the price of agricultural produce,” it said.
The report warned that “with little growth in agriculture and few opportunities elsewhere, agricultural labour productivity is expected to stagnate, failing to improve the living standards of the 40 million Nigerians it employs.”
“The financial account balance is estimated to have deteriorated, despite sustained Foreign Portfolio Investment (FPI) flows. FPI inflows rose in 2017, after exchange rate stabilisation, and were further spurred by accelerated issuance of CBN bills and after the 2019 national elections, supported by the stability of the Investors and Exporters Foreign Exchange (IEFX) window exchange rate and by high short-term domestic money market rates (rates on Nigerian Treasury and CBN bills), which currently range from 11 to 17 per cent. Foreign direct investment (FDI) picked up slightly, but at 0.6 percent of GDP remained low,” it added.
“Uncertainties about Nigeria’s macro-economic fundamentals may limit FDI inflows to small investments in domestic production. Although in recent years the Federal Government and some state governments have made significant efforts to improve business regulation, long-term investors continue to find Nigeria unattractive because of such fundamental structural deficiencies as prolonged insecurity and a significant infrastructure deficit.”
It also said, “Sources of external financing for Nigeria require close monitoring. It added: Highly concentrated in monetary instruments, FPI flows tend to be responsive to domestic monetary policy decisions. For Nigeria, the report stated. “sudden outflows would eat into already slipping external reserves and could destabilise the current exchange rate solution decision to hold the IEFX rate at about N360/$).”
With regard to job creation, the NEU report said, “some states are creating enough jobs to keep up with the growth of their labour forces. According to the report, in the year following the recession (between the first quarter of 2017 and the first quarter of 2018), “10states saw some positive job creation, but the number of new jobs was not sufficient to absorb the new entrants into the labour force.”
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