In his 2021 Democracy Day speech, President Muhammadu Buhari claimed that his administration has lifted at least 10.5 million people out of poverty in the country in the last two years.
Buhari also stated that the Nigerian government will pull 100 million of its current population out of poverty in 10 years.
“In the last two years, we lifted 10.5 million people out of poverty – farmers, small-scale traders, artisans, market women and the like,”
Though, the President didn’t provide enough evidence to support the grime statistics used to arrive at such figure; the reality in Nigeria is in sharp contrast to Mr. President’s claim.
The poverty rate in the country that year was 40.1 %, figures published by the National Bureau of Statistics showed. In plain terms, 4 out of 10, or 82.9 million people in the country were classified as poor.
The World Poverty Clock put the figure of the people living in extreme poverty back then at 77.9 million or 39% of the population.
However, despite Buhari claims of 10.5 million people escaping poverty in the last two years, World Bank Nigeria Development Update says seven million Nigerians plunged below poverty line in 2020.
In a fresh statement on its website, the bank said about seven million Nigerians dropped below poverty line due to increase in inflation in the country in 2020.
“In 2020 the Nigerian economy experienced a shallower contraction of -1.8% than had been projected at the beginning of the pandemic (-3.2%).
“Although the economy started to grow again, prices are increasing rapidly, severely impacting Nigerian households,” the statement reads in part.
“As of April 2021, the inflation rate was the highest in four years. Food prices accounted for over 60 per cent of the total increase in inflation. Rising prices have pushed an estimated seven million Nigerians below the poverty line in 2020 alone.”
Shubham Chaudhuri, the World Bank Country Director for Nigeria, was quoted in the statement to have said, “While the government has made efforts to reduce the effect of these by advancing long-delayed policy reforms, it is clear that these reforms will have to be sustained and deepened for Nigeria to realize its development potential.”
Earlier in February, a World Bank report had projected that an additional 20 million Nigerians could be impoverished by 2022.
Gloria Joseph-Raji, a senior economist at the Washington-based financial institution, predicts an astronomical surge in Nigeria’s 83 million poverty cycle.
“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 the about 83 million people in 2019,” Ms Joseph-Raji said.
Also, African Development Bank (ADB), in its assessment of the Nigeria economic outlook states that Nigeria’s economy entered a recession in 2020, reversing three years of recovery, due to fall in crude oil prices on account of falling global demand and containment measures to fight the spread of COVID–19.
The containment measures mainly affected aviation, tourism, hospitality, restaurants, manufacturing, and trade. Contraction in these sectors offset demand-driven expansion in financial and information and communications technology sectors.
Overall real GDP is estimated by the Bank to have shrunk by 3% in 2020, although mitigating measures in the Economic Sustainability Programme (ESP) prevented the decline from being much worse.
Inflation rose to 12.8% in 2020 from 11.4% in 2019, fueled by higher food prices due to constraints on domestic supplies and the pass-through effects of an exchange rate premium that widened to about 24%.
The removal of fuel subsidies and an increase in electricity tariffs added further to inflationary pressures. The Central Bank of Nigeria cut the policy rate by 100 basis points to 11.5% to shore up a flagging economy.
The fiscal deficit, financed mostly by domestic and foreign borrowing, widened to 5.2% in 2020 from 4.3% in 2019, reflecting pandemic-related spending pressures and revenue shortfalls.
Total public debt stood at $85.9 billion (25% of GDP) on 30 June 2020, 2.4% higher than a year earlier. Domestic debt represented 63% of total debt, and external debt, 37%. High debt service payments, estimated at more than half of federally collected revenues, pose a major fiscal risk to Nigeria.
The current account position was expected to remain in deficit at 3.7% of GDP, weighed down by the fall in oil receipts and weak external financial flows.
Outlook And Risks
The economy is projected to grow by 1.5% in 2021 and 2.9% in 2022, based on an expected recovery in crude oil prices and production.
Stimulus measures outlined in the ESP and the Finance Act of 2020 could boost nonoil revenues.
Improved revenues can narrow the fiscal deficit to 4.6% and the current account deficit to 2.3% of GDP in 2021 as global economic conditions improve. Reopening borders will increase access to inputs, easing pressure on domestic prices and inflation, projected at 11.4% in 2021.
Downside risks include reduced fiscal space, should oil prices remain depressed. In addition, flooding and rising insecurity could hamper agricultural production.
Further depletion in foreign reserves from $35 billion (7.6 months of import cover) could lead to sharp exchange rate depreciation and inflationary pressures.
A potential relapse in COVID–19 cases could exacerbate these risks. High unemployment (27%), poverty (40%) and growing inequality remain a major challenge in Nigeria.
Financing Issues And Options.
Nigeria’s public debt is relatively sustainable at 25% of GDP. But debt service payments are high, and the country’s ability to attract external private financial flows is hurt by macroeconomic imbalances and policy uncertainty.
During the first half of 2020, Nigeria received $7.1 billion in foreign investment. This was half the amount it received in the corresponding period of 2019. Nigeria’s financing requirements require improved domestic revenue collection.
Currently, nonoil revenue collections are equivalent to 4% of GDP. The revenue yield in 2020 from an increase in the value-added tax rate to 7.5% from 5% was less than projected because of subdued economic activity.
Broadening the tax base could strengthen Nigeria’s fiscal buffers, if structural reforms to enhance compliance are supported and illicit financial flows are tackled.
Remittances and sharia-compliant sukuk bonds also offer potential financing options. In 2019, remittances totaled $23.8 billion (5.3% of GDP), but the effect of the COVID– 19 pandemic in key source markets could reduce this figure.
The third issuance of sukuk bonds of 150 billion naira ($395 million) in June 2020 attracted 669.1 billion naira, of which 162.5 billion naira was allotted to finance 44 critical road projects.
Use of foreign reserves as a financing option in the medium term is impaired by lower oil receipts, the main source of foreign exchange.
With the various statistics from World Bank , African Development Bank, and the reality of things in Nigeria; it is obvious that the claim by President Muhammadu Buhari that his administration has lifted over 10million Nigerians out of povery in two years is false.