The World Bank has highlighted Nigeria’s high inflation rate as a significant factor in pushing an estimated four million people into poverty between January and May 2023. The bank emphasized that if the government fails to compensate or provide palliatives for the removal of fuel subsidy, approximately 7.1 million poor Nigerians will become even poorer. The World Bank’s Nigeria Development Update report pointed out that inflation in the country has reached a 17-year high due to factors such as fiscal imbalance, multiple exchange rates, devaluation, and trade restrictions.
The report further revealed that Nigeria’s inflationary pressures have led to an increase in the poverty headcount rate. The number of poor people in the country has risen to an estimated 137 million in 2023, with a 4 percent increase in rural areas and an 11 percent increase in urban settings. The World Bank warned that without adequate compensation, newly poor households may resort to detrimental coping mechanisms, such as cutting back on education, healthcare, and nutritious food choices.
The bank applauded the removal of the fuel subsidy and foreign exchange market reforms as crucial steps towards fiscal space and macroeconomic stability. However, it emphasized the need for comprehensive and ambitious reforms to improve long-term growth prospects. Various state governors and representatives from international organizations also commented on the reforms, acknowledging their potential side effects and urging the government to implement social safety nets, sustainable cash transfer programs, and policies to curb inflation.
Marketnews Thoughts: these findings shed light on the challenges faced by Nigeria in terms of high inflation, poverty, and the impact of subsidy removal. The government should prioritize effective compensation measures to alleviate the burden on vulnerable populations and mitigate the adverse effects of these reforms. Long-term solutions should focus on structural reforms that address fiscal imbalances and promote sustainable economic growth. International support and cooperation, particularly from multilateral organizations, can play a crucial role in assisting Nigeria during this challenging period and helping the country achieve its development goals.