CEM REPORT, ECONOMY | Five million Nigerians were pushed into poverty as a result of rising inflation between January and September 2022 the World Bank has said.
This is as the international financial organisation warns that interest payments by the Federal Government on borrowing from the Central Bank of Nigeria (CBN) will gulp over 62 percent of revenue in four years (2027).
The World Bank made this known in the latest edition of its Nigeria development update (NDU) titled, ‘Nigeria’s choice’.
The World Bank estimates that between 2020 and 2021, inflation lifted Nigerians below the poverty line to about 90 million adding about eight million within the review period.
The report states that an additional five million Nigerians were pushed into poverty between January and September 2022, as a result of higher inflation, mainly through higher prices of local staples, such as rice, bread, yam, and wheat, especially in non-rural areas.
The report said that inflation is partly the result of monetary, exchange rate and fiscal policy decisions.
“After loosening monetary policy through September 2020 to help combat the economic impact of the pandemic, the CBN left its monetary policy rate unaltered until May 2022, making it one of the last emerging economies to begin tightening policy,” the report said.
“CBN has implemented measures to curtail inflation, raising the monetary policy rate by 500 bps and the cash reserve ratio by 500 bps.
“However, exchange rate management, which has widened the gap between the parallel rate and official rate from 37 per cent in January 2022 to 71 per cent in October 2022, and the provision of development finance at subsidized rates, have compromised the effectiveness of monetary policy.”
Additionally, the World Bank stated that interest payments by the Federal Government on borrowing from the Central Bank of Nigeria (CBN) will gulp over 62 percent of revenue in 2027.
Last November, the IMF warned that the CBN’s continued financing of the country’s deficit through ways and means will complicate the effort to contain inflation.
In November 2021, the World Bank listed the sizeable “fiscal deficit financing” by the CBN as one of the factors undermining the business environment, compounding underlying constraints on domestic revenue mobilization, foreign investment, human capital development, and the delivery of public services.
In its latest report, the World Bank said interest payments on such advances will increase by 2.4 percentage points of the gross domestic product (GDP) between 2018 and 2027.
The global institution added that financing of the fiscal deficit through Ways and Means continues to fuel inflation by increasing liquidity in the money market.
Consequently, it said, the CBN’s inflation target of 6–9 per cent, which has not been achieved since 2016, remains unlikely to be met in the near term.