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updated 10:20 AM UTC, Dec 13, 2023

Nigerian Economy Shrank By 1.8%, Inflation High, 7 million Pushed Into Poverty – World Bank

Unic Press UK: The Nigerian economy shrank by 1.8% in 2020 – its deepest decline since 1983 – due to several factors: low oil prices, capital outflows, intensified risk aversion, COVID-19 crisis, and shrinking foreign remittances, according to the World Bank in a report ‘The Nigeria Development Update (NDU)’ published Tuesday, 15 June 2021,

In the report the World Bank says it found that:

High inflation rates since September 2019 are worsening poverty and depressing economic activity. A combination of unfavorable weather, insecurity and conflict, and pandemic-related shocks affecting food production and market access are pushing food prices up. Inflation is exacerbating poverty. The headline inflation rate reached
a four-year high in March 2021, and in 2020 food prices accounted for 63 percent of the total increase in inflation.

Trade restrictions, including the closure of land borders in August 2019, have also pushed up prices for both food and nonfood consumer goods. In 2020, rising prices alone—even without incorporating the direct impacts of COVID-19 on welfare—may have pushed an estimated 7 million Nigerians into poverty. The pandemic continues to affect employment and household welfare in Nigeria.

Adopting a sequenced program to protect the lives and livelihoods of poor and vulnerable Nigerians—with immediate attention to reducing inflation—is vital to sustain the recovery. 

An estimated 43 percent of Nigeria’s population (85 million people) lack access to an electricity grid—the largest energy-access deficit in the world. Privatization efforts have not delivered their intended outcomes, and the power sector is now under severe stress. Distribution companies report aggregate technical, commercial, and collection losses of about 50 percent, far above the 15 percent benchmark for international good practice. The inefficiencies, combined with uneven reforms of tariffs, have led to a breakdown in the sector’s payment chain. 

The World Bank notes that reforming the power sector is central to igniting economic growth; and recommends policy proposals that should be organized around three priority objectives: (1) Reduce inflation by adopting policies to support macroeconomic stability, inclusive growth, and job creation. (2) Protect poor households from the impacts of inflation. And (3) Facilitate access to sustainable financing for small and medium enterprises in key sectors to mitigate the effects of inflation and accelerate the recovery.

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