W’Bank to FG: Reform now to stop further slide into extreme poverty
The World Bank has said the number of Nigerians living in extreme poverty may increase by more than 30 million by 2030 and the country will be home to 25 per cent of the world’s destitute people if the government fails to revive economic growth and create jobs.
It warned that the country could slide back into recession if crude prices fell by 25 per cent to $50 a barrel.
The international oil benchmark, Brent crude, traded around $61 per barrel on Monday.
The bank gave the warning in its 2019 Nigeria Economic Update Report, which was released on Monday.
It said, “Economic and demographic projections highlight the urgent need for reform.
“With population growth (estimated at 2.6 per cent) outpacing economic growth in a context of weak job creation, per capita income is falling. Today, an estimated 100 million Nigerians live on less than $1.90 per day.
“Close to 80 per cent of poor households are in northern Nigeria, while employment creation and income gains have been concentrated on central and southern Nigeria.”
According to the report, Nigeria’s economy is expected to grow by 2.1 per cent in 2020 and 2021, compared to an annual population growth rate of 2.6 per cent.
It noted that Nigeria’s economy was recovering gradually from the 2016 recession, with growth projected to pick up from 1.9 per cent in 2018 to two per cent in 2019.
The World Bank, however, warned that the projected growth outlook “is vulnerable to external and domestic risks, including geopolitical and trade tensions that may affect inflows of private investment.”
“Nigeria has the opportunity to advance reforms to mitigate these risks amid growing public demand for greater economic opportunities,” it said.
The World Bank urged President Muhammadu Buhari to increase domestic revenue, remove trade restrictions and improve the predictability of economic policy.
It also advised the Nigerian government to remove expensive fuel subsidies and reduce lending to targeted sectors “that crowd out banks.”
Failure to take actions would see more Nigerians falling into extreme poverty, the bank warned.
“The cost of inaction is significant. 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 said.
About 50 per cent of Nigeria’s almost 200 million people live in poverty, according to the World Bank.
Last year, Nigeria overtook India as the country with the highest number of people in extreme poverty.
A report by the Brookings Institution said data from the World Poverty Clock showed that Nigeria had over 87 million people living in poverty.
The World Bank report, titled ‘Jumpstarting Inclusive Growth: Unlocking the Productive Potential of Nigeria’s People and Resource Endowments’, showed that Nigeria created about 450,000 new (net) jobs in 2018, partially offsetting the loss of 700,000 jobs in the previous year.
“Nigeria’s labour force is growing rapidly, and in 2018, over five million Nigerians entered the labour market, resulting in 4.9 million more unemployed people in the last year,” it said.
The report stated that “positive news are emerging from some states that are creating enough jobs to keep up with the growth of their labour forces.”
It said, “In the year following the recession (between the first quarter of 2017 and the first quarter of 2018), 10 states saw some positive job creation, but the number of new jobs was not enough to absorb the new entrants into the labour force.
“The situation improved by the third quarter of 2018, as four states (Lagos, Rivers, Enugu, and Ondo) created more jobs than the entrants to the labour market, and as a result, these states reduced unemployment.”
According to the report, the signing of the Africa Continental Free Trade Area agreement shows that Nigeria is now more willing to become a driver of continental growth and integration.
The World Bank Country Director for Nigeria, Shubham Chaudhuri, said, “Reforms would help achieve faster, more inclusive, and sustained growth with jobs.
“Building on recent efforts, going forward, we recommend actions in priority areas, such as increasing fiscal revenues and improving the quality of spending to manage oil-sector volatility, investing in much-needed human capital and infrastructure, and improving the business climate to unlock private investment and tackle Nigeria’s jobs challenge.
“Investing in people and removing barriers that make it difficult for new firms to compete and grow will encourage entrepreneurship and innovation, spur job growth, and ultimately reduce poverty.”
The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr Bismark Rewane, said the country’s GDP growth had been hovering below the population growth in the past few years.
He told one of our correspondents in a telephone interview that the country “is not prepared for another recession.”
Rewane said, “The challenge is: how do we get the economic growth to exceed the population growth? The economy has been growing below the population for the past five years, and Nigerians have become poorer.
“It is a wake-up call, and not a panic button. If we do nothing, we are bound to fail. If the economy continually grows sub-optimally, then the World Bank’s forecast will come to pass. But if we reform the economy – do the right thing – there is a chance that we will succeed.”
He added that the consequence of a failed economy was not a pleasant thing.
Professor of economics at Olabisi Onabanjo University, Ago Iwoye, Ogun State, Sheriffdeen Tella, said the industrial sector was not growing and the government had failed to properly fund education.
Tella said that the two sectors were critical to providing employment and developing the human capital of the nation.
He added that since these two sectors had not been properly funded, the World Bank forecast might come to pass.
“Government should have a long-term plan of 20 years to 30 years, stating where the nation should be,” he said.
Head of Social Action, Abuja, Vivien Bellonwu-Okafor, told one of our correspondents that the forecast was not rocket science but obvious.
She said, “The GDP growth being below population growth and with feeble investment in infrastructure, the World Bank’s projection is obviously bound to happen.
“For the country to escape this gloomy projection, it needs consistent investment in education – a minimum of 26 per cent of annual budgets.”
The nation must also apply itself to assiduously working to achieve consistent GDP growth, she added.