Wednesday, June 16,
2021 / 12:37 PM/ by CSL Research / Header Image Credit: Stears Business
The World Bank, in its latest Nigeria development update released yesterday, noted that that inflationary pressure in Nigeria has pushed about seven million Nigerians below the poverty line in 2020 alone. According to the report, the lack of economic opportunities is contributing to the rising crime cases and insecurity in Nigeria. In the update, Mr. Shubham Chaudhuri, the Country Director for Nigeria noted that although the country has returned to positive growth, prices are increasing rapidly, severely impacting Nigerian households. As of April 2021, the inflation rate was the highest in four years. The World Bank further stressed the need for the federal government to set policy foundations to aid recovery and curb inflation.
The economic recession witnessed in 2015-17 had a major impact on Nigerian households, eroding their purchasing power and driving joblessness across the country. Household income levels dipped significantly as employers either laid off workers or cut salaries. The hikes in key consumer utilities (Fuel & Power) in the past year further squeezed the already. pressured consumer income. Clearly, the onset of the global pandemic in 2020 has worsened the situation. The global pandemic led to many businesses cutting workforce or implementing steep salary cuts. Against this backdrop, unemployment level grew to 33.3% in Q4 2020. This is in addition to the abysmal growth in income, double-digit inflation and increase in VAT rate to 7.5% earlier in February 2020. The recent devaluation of the Naira has also resulted in an increase in prices.
CPI data released by the National Bureau of Statistics (NBS) for May 2021 showed that headline inflation moderated by 20bps to 17.9%, the second consecutive month of decline. The moderation was mainly due to the high base from the corresponding period last year. Food inflation remains the pressure point, as the rate increased by 7bps to 1.06% m/m. This continues to reflect the incessant killings from banditry, kidnapping, cattle rustling and insurgency in the food-producing regions of the country. We expect food inflation to remain elevated, as security challenges continue to threaten agricultural productivity. Only recently, the Onion Producers and Marketers Association (OPMAN) have announced a halt in the supply of onion and the Amalgamated Union of Food Stuff and Cattle Dealers of Nigeria (AFUCDN) have threatened to cut food supply.
The spate of insecurity, rise in consumer prices, and shrinking household income requires urgent attention in our view. There is the need for the government to tackle the insecurity situation headlong and come up with favourable policies to aid rapid growth. Like the world bank, we also hold that improved private sector investment is needed to address the issues of unemployment and rising prices, a development that will require an improved business environment â€“ better access to power, good road infrastructure and security of lives and property.
Related News - World Bank, IMF and Devt Agencies