ABUJA – The World Bank has highlighted Nigeria’s alarming inflation rate, which has resulted in an estimated four million people falling into poverty between January and May 2023. The announcement came during the launch of the Nigeria Development Update for June 2023. The Washington-based lender also cautioned that around 7.1 million poor Nigerians could slide further into poverty if the government fails to provide compensation or palliative measures following the removal of fuel subsidies.
According to data from the World Bank, 89.8 million Nigerians were already living in poverty at the beginning of this year. The report revealed that an additional four million people were pushed below the poverty line during the first five months of the year, raising the total to 93.8 million. If vulnerable citizens are not adequately compensated for the fuel subsidy removal, this number is projected to further increase to 100.9 million.
The Nigeria Development Update report by the World Bank pointed out that inflation in Nigeria has reached a 17-year high due to factors such as the funding of budget deficits by the Central Bank of Nigeria (CBN), multiple exchange rates, devaluation, and trade restrictions. The report emphasized the urgent need for reform efforts, as high inflation has been a persistent issue in Nigeria, with prices increasing at their fastest pace in 17 years in 2022. Consumer price inflation continued to accelerate in 2023, reaching 22.4 percent year-on-year.
The National Bureau of Statistics recently revealed that inflation in Nigeria rose to 22.41 percent in May, marking a 19-year high. The bureau’s National Multidimensional Poverty Index report further disclosed that 133 million Nigerians are living in multidimensional poverty, with 63 percent of them lacking access to health, education, adequate living standards, employment, and security.
The World Bank’s report highlighted that the loss of purchasing power due to high inflation has increased the poverty headcount rate by an estimated 2 percentage points or 4 million people. This suggests that the total number of poor people in Nigeria may have risen to 137 million this year. The report also noted a 4 percent increase in poverty among rural areas and an estimated 11 percent increase in urban settings.
With the removal of fuel subsidies, the World Bank warned that approximately 7.1 million people are at risk of falling into poverty if the government does not provide compensation. The report emphasized the adverse impact of rising petrol prices on poor and economically insecure households, which could lead to disruptions in education, healthcare, and nutrition. The World Bank stressed the importance of adequate compensation measures to shield Nigerian households from the initial price impacts of the subsidy reforms.
The World Bank commended the removal of fuel subsidies and foreign exchange management reforms as crucial steps toward rebuilding fiscal space and restoring macroeconomic stability. However, it also called for further ambitious and comprehensive reforms to enhance long-term growth prospects. Governor Seyi Makinde of Oyo state supported the reforms but emphasized the need for social safety nets to mitigate the local and global challenges affecting Nigeria.