Nigeria to retain high poverty rate in 2019, says World Bank

ALTHOUGH THE WORLD BANK is projecting an uptrend in the rate of Nigeria’s economic growth from an estimate of 1.9 percent in 2018 to a 2.2 percent projected growth rate for 2019, the global financial institution has said the high level of poverty in the country will remain unchanged.

“Nigeria economic growth is projected to rebound to 2.2 percent in 2019 and 2.4 percent in 2020-21. These forecasts are unchanged from June and assume that oil production will recover, but peak below government targets, while a slow improvement in private demand will constrain growth in the non-oil industrial sector,” the bank said in its January 2019 global outlook.

The 2019 growth projections suggests that the number of extremely poor should decline but progress in alleviating poverty at higher income levels has been slower, with nearly a quarter of the world’s population still living with less than $3.20 per day, it also noted.

Pointing out that poverty rates remain the highest among Low Income Countries (LICs), the bank said, the majority of extreme poor currently reside in large lowermiddle-income countries, including India and Nigeria.

It also expressed worry that, per capita income growth in Sub-Saharan Africa expected to average only 0.9 percent in 2019- 2021 is insufficient to drive significant progress towards poverty alleviation.

Boosting per capital income in Nigeria will require openness of trade which has been found to have a positive and significant impact on growth rate of per capita income in Nigeria says Fagbohun Akinola, an economist at Lead City University Nigeria. The economic expert further noted that government’s expenditure in boosting school enrolment rate has also been found to have indirect relations with growth rate of per capita income of Nigeria.

In order to deliver sustainable growth with per capita gains, Adedayo Akinbiyi of PwC Nigeria also stated recently that Nigeria will need to aggressively boost domestic and foreign investments over the next decade.

Unfortunately, Nigeria is currently known as the poverty capital of the world. It accounts for about 12 percent of the world’s poorest population. As at 2015, the World Bank noted that of the world’s 736 million extreme poor 368 million people which represents half of the total number of poor people in the world, and that this people lived in just 5 countries.

The 5 countries with the highest number of extreme poor are India, Nigeria, Democratic Republic of Congo, Ethiopia, and Bangladesh. These countries which also happen to be the most populous countries of South Asia and Sub-Saharan Africa are domiciled in the two regions that together account for 85 percent (629 million) of the world’s poor.

To therefore make significant continued progress towards the global target of reducing extreme poverty (those living on less than $1.90 a day) to less than 3 percent by 2030, large reductions in poverty in these five countries will be crucial, the World Bank stressed.

Poverty projections to 2030 for these five countries however, reveal worrisome outcomes for Nigeria, as the bank sees extreme poverty in India and Bangladesh approaching zero by 2030 but extreme poverty in DRC, Ethiopia including Nigeria remaining quite elevated.

A regional analysis of performance in 2018, had the world bank noting that the three largest economies of the Sub-Saharan African (SSA) region which includes Nigeria, Angola and South Africa being more prone to key external risks that will further impact growth, such as an unexpected sharp decline in commodity prices, an abrupt tightening of global financial conditions, and escalating trade tensions involving major economies.

Domestically, the financial institution identified risks pertaining to fiscal slippage, political uncertainty, domestic conflicts, and adverse weather conditions as growth constraints.

The bank acknowledged that the SSA region faced a more difficult external environment last year as global trade growth moderated, financing conditions tightened, and the U.S. dollar strengthened.

It said, “Commodity prices diverged, with metals and agriculture prices dampened by weakening global demand, while oil prices were higher in most of 2018, mainly due to supply factors.”

However, in Nigeria, oil production fell, partly owing to pipeline closures in mid2018, while non-oil activity was dampened by lacklustre consumer demand, as well as conflicts over land between farmers and herders that disrupted crop production.

Overall, a gradual recovery is expected in the region, as an increase in oil production supports a modest growth pickup in Angola and Nigeria, and easing drought conditions boosts agricultural production, the bank said, adding that a rise in investment, as policy uncertainty gradually recedes, should further boost growth in the large economies, while activity in the rest of the region is expected to expand at a solid pace.

Slow progress in poverty reduction is however also projected due to sluggish per capita growth. The bank further said a significant amount of international bonds are maturing, posing refinancing risks and rising nonconcessional debt is making countries more vulnerable to changes in international financial conditions.

Growth in the Sub-Saharan Africa region is expected to pick up to 3.4 percent in 2019, rising to an average of 3.7 percent in 2020-21, but this will predicated on diminished policy uncertainty and improved investment in large economies, together with continued robust growth in non-resource intensive countries.

Faced with the headwinds of a darkening global economy exposed to moderating industrial production, intensifying trade tensions and significant financial market stress, the World Bank subtly noted that the recovery in emerging market and developing economies of which Nigeria is part of has lost momentum.

“Downside risks have become more acute and include the possibility of disorderly financial market movements and an escalation of trade disputes. Debt vulnerabilities in emerging market and developing economies, particularly low-income countries, have increased.

More frequent severe weather events would raise the possibility of large swings in international food prices, which could deepen poverty. In this difficult environment, it is of paramount importance for emerging market and developing economies to rebuild policy buffers while laying a stronger foundation for future growth by boosting human capital, promoting trade integration, and addressing the challenges associated with informality, ”the bank cautioned.

The task ahead of Nigeria’s next political administration thus continues to hike with challenging demands. Eradicating the dim social and economic projections for the country will mean top priority if Nigeria must turnaround woes long endured and pacify despair further seen.