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How current economic squeeze may deepen misery, poverty in Nigeria – Economists

The high level of inflation in the country will worsen the misery of Nigerian households and ultimately lead to greater poverty in the country, economists…

The high level of inflation in the country will worsen the misery of Nigerian households and ultimately lead to greater poverty in the country, economists have said.

Earlier this week, Mr. Shubham Chaudhuri, the World Bank Country Director in Nigeria declared that households should prepare for an “exceptional squeeze” in their disposable incomes this year. 

This is already happening in the country, says Dr. Bongo Adi, an economist, and Senior Lecturer at the Lagos Business School, who blames the development on obstinately high inflation and ongoing disruptions in the economy.

“The high level of inflation may still lag into next year. So definitely, households are going to face a very tough time,” Dr. Adi told Daily Trust on Sunday in an interview. 

Reinforcing Dr. Adi’s position, Mr. Yadinma Onwu, a serial investor in the financial market, real estate, and hospitality, noted: “The purchasing power of the Naira has been significantly eroded by the elevated inflation rate over the past years, and this continues to worsen standards of living, especially as most Nigerians have experienced a shrink in their disposable income. Whether you ask a farmer or trader, carpenter or driver, everyone is complaining of lower income.”

“So, it’s a double whammy for Nigerians, as the simultaneous impact of stagnated or lower income and high inflation means Nigerians can no longer afford even the low lifestyle they had a decade ago. It shows how the country is regressing in real terms, Mr. Onwu added. 

Nigeria’s headline inflation for January 2022 stood at 15.6 percent, but rose marginally to 15.7 percent in February. Over the same period, the Food inflation stood at 17.1 percent for the two months of the new year, according to figures released by the National Bureau of Statistics.

The Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed
The Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed

Emphasising that households, who have fixed incomes, are going to suffer under the unfolding scenarios, Adi pointed out that this should be of concern to the authorities, especially given the disruptions being experienced in the productive system of the economy.

“Now, we have so much disruption with energy. You’ve seen what is going on with the power supply. You know what is going on with diesel,” he pointed out.

For Mr Onwu, “having a safety net for the vulnerable poor is critical at this time but it is unfortunate that most programmes aimed at creating social palliative for the poor are often politicized and marred with the same corruption that caused the problem ab initio. More importantly, it is high time that the government sincerely coordinated efforts to create sustainable solutions to the glaring crisis across different sectors.”

“Nigerians are not asking for so much; most people just want to have access to a stable power supply, potable water, a roof on their head, and school for their kids, these are not too much, but it seems to be a mystery in Nigeria. How does one describe the recent power outage, which has paralysed some businesses and raised the cost of production for others?” Onwu lamented.

Economic activities in Nigeria, from industrial production to land and air transportation have experienced deep disruptions on account of shortages and high prices of energy sources; especially diesel and aviation fuel. The impact of the shortage in supply of diesel has been made much worse by the disruption in electricity supply, which has forced factories to cut down on their production scales. The aviation industry came close to shutting down as the price of aviation fuel raised costs for airlines beyond what they could bear.

With the feedstock for production hit so “very badly,” Adi notes that prices have risen, leading to the relative scarcity of essential commodities. What does this portend for households? “The implication is that households are going to suffer. Households, who are already running on empty pockets are being projected to experience worse standards of living, on account of rising prices of foods and other consumer goods. It’s not even a question of their disposable incomes being squeezed alone. It’s just a matter of poverty, hunger, and malnutrition staring people in the face,” said the economist.

The World Bank had in February warned that between 15 and 20 million Nigerians face the risk of sliding into poverty this year, swelling the country’s army of the poor into the majority.

“We actually consider Nigeria right now to be at a critical junction in the sense that the achievement of its development goal of lifting 100 million people out of poverty by 2030 was already challenging even before COVID-19 struck, and then COVID-19 has made this even more challenging and more urgent, Gloria Joseph-Raji, a World Bank Senior Economist, said at an event in Abuja.

“So, with slower growth and fewer jobs, and then coupled with high inflation, our estimates are that the number of the poor will increase by about 15 to 20 million people by 2022 from about 83 million people in 2019. And the 2019 numbers are from the Nigeria Living Standards Survey of 2018/2019.”

With the farming season here and farmers about to go into production activities, Adi notes that prices will experience further increase. “This is usually the season when the price of basic stuff begins to ramp up as a result of people going into production in the new agricultural season.  So, food prices are going to go extremely high,” he says.

Painting the picture of how things are likely to play out, the economics lecturer says that “there may not be enough to go round. It may be a very difficult time for families.”

“People are going to go hungry; poverty will intensify. Hardship will multiply. When people are pushed to the edge, they will have to react, and sometimes the only way they could is to push back; pushing back means there may, unfortunately, be increased social tension, agitation, and perhaps a higher level of insecurity.”

Adi warns that more people may be pushed into stealing and banditry and that unfortunately is not likely to abate any time soon. “Beyond that too, when people are hungry, that is going to have an implication on their decision making. The issue now is that there may not be a rational election that will take place in 2023.” 

“It’s sad that Nigerians now find it difficult to afford staple food. We are not talking about clothing or housing, which are also basic necessities. With more than half of the population living below the poverty line, there is a serious security concern, and this is why the security agencies are currently overwhelmed because it is too easy for bandits and terrorists to recruit hungry foot soldiers, who consequently unleash terror on innocent Nigerians,” Onwu told Daily Trust on Sunday.

Hungry people are angry people; hungry people looking for money to eat.

So, the money bags will continue to dictate the political dynamics. So, who’s going to win the election may be influenced by stipends, with the person who will give out the most money for daily bread or able to buy votes at winning in some or many wards, says Adi.

“Hunger and broad poverty are the geneses of vote-buying in the country and some politicians are perhaps happy to continue to impoverish Nigerians to sustain their illegitimate control over their franchise. It’s worrisome that the poverty situation may once again influence the outcome of the upcoming 2023 elections, as the hunger in the land makes it easier for unfaithful politicians with selfish interests to buy over voters at both party primaries and general elections. Indeed, this is one of the bases of the leadership crisis in the country and one can only hope that we don’t fall into the same trap again,” Mr. Onwu exclaimed.

That raises concern that innocent but hungry Nigerians may not necessarily get the right people to bring about a lasting solution to the hunger crisis, as people sell the franchise for peanuts and daily bread to quench their immediate hunger. It is an unfortunate reality that seems to perhaps sit perfectly in the political strategy of many elites.