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World bank says inflation to increase mediocrity. Rising inflation and slow economic growth in Nigeria will push another 2.8 million people into poverty by the end of 2023, according to the World Bank.
This is based on a paper titled ‘Macro Poverty Outlook: Country-by-Country Analysis and Projections for the Developing World,’ which was just issued. The Washington-based bank said, “By the end of 2023, the rise in inflation and low economic growth will have contributed to an increase of 2.8 million people in poverty (y-o-y), a 0.4 percentage points bump to 37.5 per cent of the population.”
It was highlighted that Nigeria’s high inflation reached a 17-year high of 24.1 percent (year on year) in July 2023, indicating rising food costs and the temporary impact of the elimination of the gasoline subsidy. It claimed that a cumulative 725 basis point raise in the monetary policy rate since May 2022 has had little effect on reigning in inflation due to choked transmission channels, which have further been undermined by the central bank’s direct credit distribution and the ongoing monetization of the fiscal deficit.
The global bank further declared that federal fiscal deficit has risen to 63 per cent higher between January and May 2023 than in the same period in 2022, due to increasing interest payments, higher capital spending ahead of the elections, and the continuous large cost of the fuel subsidy.
This is expected to increase public debt to 45 percent of GDP and keep debt servicing above total receipts in 2023. It stated. “The fiscal financing need and the devaluation of the naira are expected to push the public debt to 45 per cent of GDP and keep the debt service above total revenues in 2023.
“The current account balance (CAB) recorded a surplus of 2.2 per cent of GDP in Q1 2023, driven by lower imports and income outflows. However, the small CAB surpluses and capital flows since 2022 have been insufficient to increase foreign reserves, as oil export FX flows to CBN contracted, likely as a result of the direct crude sale-direct fuel purchase arrangements.”
The Bretton Woods Institution further predicted that future economic growth in the country will depend on the continued implementation of macro-fiscal and inclusive structural reforms. It stated the current reforms of the government will boost economic growth to an average of 3.4 per cent in 2023-2025.