African Development Bank claimed that the poverty rate in more than half of the 36 states of the nation is above the national average of 69 per cent.
In a 2020 African Economic Outlook report on Nigeria, the bank said that poverty was widespread in the country, adding that the national poverty rate was 69 per cent of the population.
This means that out of the country’s reported 180 million people, 124.2 million people live in poverty. With more than 50 per cent of the nation’s 36 states having a poverty rate above the national average of 69 per cent, it means that the poverty levels in these states, which the bank did not mention, are even worse.
“Poverty remains widespread. The poverty rate in over half of Nigeria’s 36 states is above the national average of 69 per cent. High poverty reflects rising unemployment, estimated at 23.1 per cent in 2018, up from 14.2 per cent in 2016. Low skills limit opportunities for employment in the formal economy. Government social programmes – N-Power and other youth empowerment schemes – are meant to address unemployment”, the report said.
According to the bank, Nigeria spent more than 50 per cent of federally-collected revenues on debt servicing in 2019. On the performance of Nigeria’s economy in 2019, the bank noted that agricultural sector suffered a setback due to flooding and conflicts between herdsmen and farmers. It, however, reported that the country saw growth in the transport, oil and Information and Communications Technology sectors.
“Real Gross Domestic Product growth was estimated at 2.3 per cent in 2019, marginally higher than 1.9 per cent in 2018. Growth was mainly in transport, an improved oil sector and Information and Communications Technology. Agriculture was hurt by sporadic flooding and by conflicts between herdsmen and local farmers. Manufacturing continues to suffer from a lack of financing. Final household consumption was the key driver of growth in 2019, reinforcing its 1.1 per cent contribution to real GDP growth in 2018. The effort to lower inflation to the six to nine per cent range faced structural and macroeconomic constraints, including rising food prices and arrears payments, resulting in a rate estimated at 11.3 per cent for 2019.
“With fiscal revenues below seven per cent of the GDP, increased public spending widened the deficit, financed mainly by borrowing. At the end of June 2019, total public debt was $83.9bn, 14.6 per cent higher than the year before. That debt represented 20.1 per cent of the GDP, up from 17.5 per cent in 2018. Domestic public debt amounted to $56.7bn, external public debt, $27.2bn. The share of bilateral debt in total debt was estimated at 12.1 per cent and that of Eurobonds at 40.8 per cent. High debt service payments, estimated at more than half of federally-collected revenues, created fiscal risks. The current account surplus sharply declined due to increased imports, lower oil revenues and a smaller-than-expected improvement in capital flows.”
The report said the Central Bank of Nigeria’s recent ‘decree’ that banks hold loan-deposit ratios of 60 per cent boded well for increasing lending to the real sector.
“Simultaneously, the retrenchment of government borrowing and easing of the risks of lending to small business could lower interest rates and unlock bank lending to the private sector,” the report added.
It backed the increase in Value Added Tax, saying, “An increase in the value-added tax from five per cent to 7.5 per cent to shore up domestic non-oil revenues is welcome, though organised labour and businesses have raised concerns of a potential rise in costs.”
It said the current account was projected to remain in surplus in 2020, benefiting from improved oil revenues. According to the report, Nigeria has many opportunities to transform its economy, particularly in agro-processing. It added that special agro-processing zones could promote agro-industrial development and employment.
However, insecurity could deter foreign investors, shrivel the domestic economy, and ultimately dampen prospects for economic growth, it said. It added that high unemployment could create social tensions, just as rising public debt and associated funding costs could pose fiscal risks if proposed adjustments were not implemented. The bank said Nigeria’s oil exports could be affected by developments in the Middle East. Trade tensions between the United States and China could weaken global growth and lower demand for Nigeria’s products, including oil, it said.
The AfDB said prolonged closure of borders by Nigeria to curb smuggling could affect trade with other countries in West Africa and raise the prices of imported products, especially rice. These risks underscored the need to accelerate structural reforms to promote economic diversification and industrialisation to minimise vulnerability to external shocks, the bank said.