According to the World Bank, in the first half of 2023, 4 million more Nigerians will fall into poverty and 7.1 million more will follow.
The World Bank has revealed that in the first half of this year, four million Nigerians fell into poverty, and if the removal of fuel subsidies is not properly managed, an additional 7.1 million people could join them.
During the launch of the Nigeria Development Update (NDU) in Abuja, the World Bank shared these findings. The report, authored by Alex Sienaert, the World Bank Lead Economist for Nigeria, highlighted the increase in poverty with the alarming figure of four million Nigerians affected.
The World Bank report emphasized the potential consequences of higher petrol prices without adequate compensation. It warned that households might resort to coping mechanisms with long-term adverse effects, such as not sending children to school or forgoing preventative healthcare.
Nigeria’s economic growth weakened in the first part of 2023, with real gross domestic product (GDP) growth dropping from 3.3% in 2022 to 2.4% year-on-year in Q1 2023. The global economic context has posed challenges, but the report emphasized the importance of domestic policies in determining Nigeria’s economic performance and resilience to external shocks.
The report acknowledged the Nigerian government’s recognition of the need for critical reforms and highlighted the removal of petrol subsidies and FX market reforms as examples. The elimination of the petrol subsidy is projected to result in fiscal savings of approximately N2 trillion in 2023, with expected savings of over N11 trillion by the end of 2025. However, the report stressed the importance of compensating transfers to shield vulnerable households from the initial price impacts.
The move to harmonize the FX windows was also noted as a positive step, but it emphasized the need to remove FX restrictions, clearly communicate the new FX regime, and implement supportive monetary and fiscal policies.
The World Bank report highlighted the urgency for Nigeria to change course due to persistently high inflation and low fiscal revenues hindering economic growth. It emphasized the potential transformative impact of seizing the window of opportunity presented by the removal of petrol subsidies and FX reforms.
In conclusion, the report underscored the importance of sustaining and building on these reforms to establish a solid foundation for sustained growth and improve the lives of millions of Nigerians.