BY COBHAM NSA, ABUJA – Concerns over Nigeria’s declining Gross Domestic Product (GDP) have put the World Bank on edge with the caution that increasing poverty will continue to haunt the acclaimed giant of Africa in the years ahead.
According to the Nigeria Economic Update (NEU) report released by the Bank in Abuja on Monday, “With economic growth expected to remain below the estimated population growth of 2.6 per cent through 2021, per capita real GDP will decline from $2,485 in 2018 to $2,460 by 2021, pushing more Nigerians into poverty.”
The world’s foremost financial institution said the situation is precarious because Nigeria’s population growth is expected to exceed economic growth, thereby undermining its prospects for poverty reduction.
Backing its alarm bell with facts, the World Bank report also stated that money in the Excess Crude Account (ECA) has almost “been exhausted, rendering Nigeria more vulnerable to shocks.”
It noted that the situation is quite worrisome given that “the account balance on June 30 was $0.1 billion, down from $0.6 billion at the end of 2018 and $2.5 billion at the end of 2017.”
Though sounding a bit restrained in its observations, the World Bank lamented that the “ECA has rarely operated as envisaged; when it was established in 2004″, noting that the account “was to be drawn on only when the actual crude oil price falls below the budget benchmark price for three consecutive months.”
“The financial account balance is estimated to have deteriorated, despite sustained Foreign Portfolio Investment (FPI) flows. FPI inflows rose in 2017, after exchange rate stabilisation, and were further spurred by accelerated issuance of CBN bills and after the 2019 national elections, supported by the stability of the Investors and Exporters Foreign Exchange (IEFX) window exchange rate and by high short-term domestic money market rates (rates on Nigerian Treasury and CBN bills), which currently range from 11 to 17 per cent. Foreign direct investment (FDI) picked up slightly, but at 0.6 percent of GDP remained low”, the report said.
Interestingly, the report update also delivered some knocks on the Central Bank of Nigeria (CBN) over its current intervention in the agriculture sector.
Finding fault with the apex bank’s policy initiative, the NEU report said; “CBN financing schemes for the agriculture sector and forex restrictions designed to reduce imports of staple foods will continue to support the sector, but will affect the quality and increase the price of agricultural produce,” it said.
It warned that “with little growth in agriculture and few opportunities elsewhere, agricultural labour productivity is expected to stagnate, failing to improve the living standards of the 40 million Nigerians it employs.”
The World Bank report also stated that “uncertainties about Nigeria’s macro-economic fundamentals may limit FDI inflows to small investments in domestic production. Although in recent years the Federal Government and some state governments have made significant efforts to improve business regulation, long-term investors continue to find Nigeria unattractive because of such fundamental structural deficiencies as prolonged insecurity and a significant infrastructure deficit.”
Furthermore, it stated that “sources of external financing for Nigeria require close monitoring. It added: Highly concentrated in monetary instruments, FPI flows tend to be responsive to domestic monetary policy decisions. For Nigeria, the report stated. “sudden outflows would eat into already slipping external reserves and could destabilise the current exchange rate solution decision to hold the IEFX rate at about N360/$).”
External reserves rose from $43.1 billion in January to $45.1 billion at the end of June, equivalent to six months of goods and service imports.
Looking at efforts in the area of job creation and employment generation, the NEU report said “some states are creating enough jobs to keep up with the growth of their labour forces.
It stated that in the year following the recession (between the first quarter of 2017 and the first quarter of 2018), “10states saw some positive job creation, but the number of new jobs was not sufficient to absorb the new entrants into the labour force”.
Noting that during the period under review, 26 states and the Federal Capital Territory (FCT) were still losing jobs, with rising unemployment rate,the World Bank said; “By the third quarter of 2018, four states—Lagos, Rivers, Enugu, and Ondo—growth of full- and part-time jobs significantly outpaced the growth of the labour force, reducing unemployed, and the number of job-losing states declined to 21, including the FCT”, adding that The remaining 11 states created new jobs, but not enough to employ all new labour-force entrants.”
Commenting on the average unemployment rates, the report said, “are higher in oil abundant southern states and in the North, where they are also rising more rapidly. In 2018, nine northern states experienced increases in unemployment rates of over 10 per cent.”
The report however claimed that the quality of available jobs, has declined significantly, noting that; “Most new jobs created in the last five years were part-time, and the likelihood of getting a full-time job is now lower than it was before the oil shock. In 2014, 81 per cent of new jobs were full-time. As the economy entered recession in 2016, fewer full-time jobs became available, though there were more part-time jobs.”
“In 2017, there were not enough part time jobs to balance the sustained decline in full-time jobs, and total jobs fell by more than 700,000. In 2018, both full- and part-time jobs grew positively, but at a low rate. By the end of the year, three million fewer full-time jobs were available than had been before the crisis.”
About 48 hours after the report was released, there is no official reaction from the Nigeria government.
Meanwhile, some media reports quoted the Director, Corporate Communications of the CBN, Mr Isaac Okorafor as saying that the apex bank will have to fully study and dissect the report first before coming up with its official position.