Economy

Troubled Economy: Crisis looms as three million Nigerians sink into poverty

Nigeria’s misery index is set for a spike, with more than three million people joining the population of poor Nigerians, at the backdrop of the projected contraction of the economy as measured by the Gross Domestic Product, GDP, and the population growth rate.

The Federal Government had projected that the economy (GDP) will contract by 4.4 per cent GDP by end of 2020, down from growth of 2.27 per cent in 2019, due mainly to fallouts of the COVID-19 pandemic.

On the other hand the population is set to grow by 3.5 per cent, reaching about 218.3 million at year-end, though some socio-economic analysts told Vanguard this is a conservative estimate.

The decline in GDP growth rate may result in loss of about N3.1 trillion to the population’s purchasing power which will equally bring down the per capita GDP to about N312,697, about eight perc ent drop from the 2019 figure of N337,550.

Consequently, the declines would precipitate increase in the nation’s poverty index, with the number of citizens below poverty line growing to 89.5 million by year end from 86.71 million last year, based on the Nigeria Bureau of Statistics, NBS, 40.1 per cent poverty rate for the country.

Many analysts have given background and perspectives to the growth imbalance in the GDP per capita.

Gloomy days ahead

Against the emerging trend in population-to-GDP ratio, economists and industry analysts are worried that the trend portends grave socio-economic danger for Nigeria.

Dr. Adebayo Adedokun, Trade, Finance and Development Expert, Department of Economics, University of Lagos, said the implication of the widening negative gap between population growth rate and the GDP is that standard of living of the populace will decline faster in the years ahead.

He stated: “There will be increase in number of people that will be living below the poverty line, food poverty, energy poverty, unemployment, and over-stretched infrastructure.

“Human development index will worsen, and this will have implications for crime rates and social tensions because of survival tendencies.”

Commenting on the trend, Professor Uche Uwaleke, Professor of Finance and Capital Market, Nasarawa State University, Lafia, said the challenge is not just about real GDP growth rate underperforming population growth rate, it is more about inclusive growth rate which has eluded Nigeria for years.

According to him, “even when GDP growth rates were as high as six per cent to seven, on the back of high crude oil prices, unemployment rates were still high, implying that the country only experienced jobless growth which bred poverty amidst plenty.

“This is so because of the huge distortion in the structure of the Nigerian economy. The oil sector, which is just about nine per cent of GDP size continues to significantly determine the rate of GDP growth; a sector that employs less than three per cent of the population accounts for over 90 per cent of the country’s foreign exchange earnings.

Unrests, tension will escalate’

For Executive Vice-Chairman, High Cap Securities Limited, Mr. David Adonri, “with the daily unchecked influx of foreigners and the breeding like parasites, especially in Northern Nigeria, I estimate the population growth rate to be in region of five per cent. This is possibly the highest in the world. Officially, Nigeria has an outdated population policy which has never been implemented.”

According to him, “if this astronomical population growth rate is taken into consideration, the real GDP growth rate at year end will be -8%. At this level, poverty will escalate.

“Amidst huge supply gap, inflation will ravage the economy. This situation will precipitate or escalate social unrest and lead Nigeria to the Malthusian doomsday. War and pestilence will ravage the country more.

“Due to religious and cultural malpractices, Nigeria is unwilling to control her population. This population explosion is behind the astronomical unemployment rate and consequent escalation of violent crimes, communal war and destitution ravaging the country. This will worsen as the economy declines.”

Mr. Victor Chiazor, Analyst/Head, Research and Investment, FSL Securities Limited is of the view that the slowdown in economic activities and GDP growth rate is expected to negatively affect the various aspects of the Nigerian economy, adding that one of the most visible implications will be that more Nigerians will become poorer.

He stated: “The ability to meet basic needs will become almost impossible especially for a country which already has a large amount of its population living below the poverty line.”

Also commenting the National Coordinator, Campaign Against Impunity, Shina Loremikan, said, whether the population is increasing or reducing if there is no proper channel of productivity, it will be a burden to the society.

He stated: “If population is increasing and no child is out of school, that is productive. If population is increasing and infrastructure is improved upon, that is productivity. In a situation where the government is not in a vantage position to plan the life of their population, whether the population is increasing or decreasing it will be a burden to everyone. It will further extreme poverty and when there is extreme poverty, there is gross inequality and insecurity in the society. The few who are working in prosperity will be an endangered species; but when the rank and file of the society is doing well, you can start a job and project that in five years time this is where I want to be, there won’t be a reason for you to commit crime.”

Precarious situation’

For Dr. Bala Mohammed Liman, an energy industry expert, “the concern around Nigeria’s population growth rate has been a recurring subject, with the country’s population expected to reach 400 million by 2050. The contraction of the Nigerian economy due to the twin effects of the COVID 19 pandemic and the fall in crude oil prices puts the country in a precarious situation.

The negative growth rate of -3% coupled with the 3.2% population growth rate widens the inequality in the country and is a threat to its socio-economic well-being. This situation is worsened by the fact that over 60% of the population is under 25 years old and with the lack of employment opportunities, the social imbalance will only get worse.

“The pandemic has exposed the structural deficiencies in the economy and as the population increases at a time when the social sectors require more funding, paucity of funds will make it more difficult for government to fund these sectors and will further accentuate the problem.

“The country is currently the world’s poverty capital with the number of poor increasing faster than anywhere in the world and the current situation will further affect the country’s ability to meet the Sustainable Development Goals by 2030 and the government’s promise to lift 100 million out of poverty over the next 10 years.”

Options for growth

The analysts are not short of solutions to the growth imbalance. Speaking on how to redress growth challenges, Adedokun listed measures including government borrowing to augment income gaps; fiscal stimuli through increased government spending; free resources to the productive sectors of the economy such as the real sector, manufacturing, agriculture, mining and extractive industries.

Others measures, according to him, include “fiscal discipline through cutting unnecessary budgetary spending. A good example is postponing renovation of the National Assembly building which was initially expected to gulp a whopping N37 billion, now reduced to N27 billion.”

He added: “This kind of spending is not expedient at this point in time. COVID 19 with its attendant consequences of global recession should necessitate a rethinking of the way we handle our economy at every level of decision making. We need to prioritise our spending and spend productively out of the impending recession.

“What is the value addition of a kobo to be spent? What implications will it have on social welfare, on poverty, on employment, and welfare of the people? These are the lenses through which govt spending should look through before committing resources to any project.”

He also cautioned that “government borrowing should not crowd out private sector borrowing, private sector remains the engine of growth and should be supported through creation of enabling environment for businesses to thrive.

Adedokun spoke further: “There is need for government to support the private sector through stimuli packages that will enable them to be back in business. SMEs should be given priority access to credit to jump-start their activities. About 50 per cent of people engaged in formal employment are in the SMEs; the survival of SMEs therefore is important for the economy.

Diversify now!

“Diversification of the economy away from oil should be more seriously pursued. We needed to develop agriculture, manufacturing, mining and other social services such as education, health and provision of social safety net through social investment.

“Monetary policy intervention through lowering of interest rates will also help access to credit, while foreign exchange management should be tightened to ensure that only critical sectors are funded through available foreign exchange which is becoming dwindling as a result of sharp decline in global oil prices, which is affecting factor driven economies such as Nigeria.

“Trade should be encouraged to generate newer sources of foreign exchange for the economy, non-oil export sector should be encouraged through appropriate policy supports and incentives.”

Develop other sectors

In his own suggestions for balanced population and GDP growth, Uwaleke stated: “The way forward is to consciously develop other sectors and expand their job-creation capabilities. This effort should involve emphasis on agriculture and food processing and massive support to small businesses and the informal sector in general through enhanced access to credit facilities and provision of enabling infrastructure such as electricity”.

Speaking on the solutions, Chiazor, stated: “The action to reduce the Monetary Policy Rate, MPR, by the Central Bank of Nigeria is a good step in the right direction as they have signaled their intention to push much-needed credit to the real sector at a business friendly interest rate which is expected to kick-start and increase business activities in the near term.

“Other policies like the CBN’s additional moratorium of one year on CBN intervention facilities, interest rate reduction on intervention facilities from nine per cent to five per cent, granting regulatory forbearance to banks to restructure terms of facilities in affected sectors amongst other policies are critical measures expected to aid overall economic recovery.

“In our view, the CBN has been proactive with regards to its policies that would address anticipated negative growth. However, the fiscal policy aspect needs to also play its part, as the federal and state governments need to use the little funds being generated effectively and avoid wastage and leakages of government resources. Also, the need for the country to shift its bulk income base away from crude oil cannot be overemphasised as we cannot continue to be significantly vulnerable to drops in crude oil prices.”

On his part Loremikan said: “We need to create a lot of awareness in terms of productivity — industrial, agricultural, educational, managerial, and administrative productivity. That can raise the vision of the people and let them be part of the wagon of industrial revolution advancement to mankind. If we don’t sit and plan it, we will always be lamenting that our population is a burden.”

Also speaking on solutions, Liman said: “Managing the country’s population will need to become a priority and there is a need to put in place a policy that can effectively reduce the rising population. The challenge of this has been cultural and religious beliefs, especially in Northern Nigeria, that are barriers to accepting such a policy. The most effective way is for improved education of the girl child and government must make a conscious effort to educate religious and community leaders on risks of rising population.

“In the short term, the country has to increase skill acquisition programmes that will provide a source of livelihood outside the traditional sources of employment for the increasing population.”

Source: Vanguard

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