The World Bank says inflation is likely to push an additional one million Nigerians into poverty by the end of 2022.
The international financial organisation made the projection in its latest Nigeria Development Update (NDU), released on Tuesday.
The report, titled ‘The continuing urgency of business unusual’, said inflation in Nigeria, already one of the highest in the world before the war in Ukraine, is expected to increase further as a result of the rise in global fuel and food prices caused by the war.
“And that, the World Bank estimates, is likely to push an additional one million Nigerians into poverty by the end of 2022, on top of the 6 million Nigerians that were already predicted to fall into poverty this year because of the rise in prices, particularly food prices,” the report reads.
According to the bank, Nigeria is in a paradoxical situation where growth prospects have improved but inflationary and fiscal pressures have also increased considerably, leaving the economy much more vulnerable.
The situation, it said, is because of the ballooning cost of gasoline subsidies at a time when oil production continues to decline.
“Hence, Nigeria, for the first time since its return to democracy, and alone amongst major oil exporters, is unlikely to benefit fiscally from the windfall opportunity created by higher global oil prices,” the World Bank warned.
Speaking on the report, Shubham Chaudhuri, World Bank country director for Nigeria, said:
“When we launched our previous Nigeria Development Update in November 2021, we estimated that Nigeria could stand to lose more than three trillion naira in revenues in 2022 because the proceeds from crude oil sales, instead of going to the federation account, would be used to cover the rising cost of gasoline subsidies that mostly benefit the rich. Sadly, that projection turned out to be optimistic.
“With oil prices going up significantly, and with it, the price of imported gasoline, we now estimate that the foregone revenues as a result of gasoline subsidies will be closer to five trillion naira in 2022.
“And that five trillion is urgently needed to cushion ordinary Nigerians from the crushing effect of double-digit increases in the cost of basic commodities, to invest in Nigeria’s children and youth, and in the infrastructure needed for private businesses small and large to flourish, grow and create jobs.”
The World Bank said Nigeria’s growing macroeconomic challenges in 2022 has shown the need for the continuing urgency of a departure from business as usual, and the need for consensus around a package of robust reforms.
To reduce inflation, lessen fiscal pressures, and attract investment for jobs, the bank recommended three policy priorities for the Nigerian government.
“Reducing inflation through a sequenced and coordinated mix of exchange rate, trade, monetary, and fiscal policies including the adoption of a single, market-responsive exchange rate,” the bank said.
“Addressing mounting fiscal pressures at the federal and sub-national levels by phasing out the petrol subsidy (estimated to cost up to five trillion naira in 2022) and redirecting fiscal resources to investments in infrastructure, education, and health services; increasing ‘pro-health taxes’ and improving tax compliance.
“Catalyzing private investment to boost job creation by improving the transparency of key government-to-business services and eliminating trade restrictions.”