no rest for the weary

Nigeria: Pandemic to poverty in the post-COVID future

By Ruth Olurounbi

Posted on July 13, 2020 14:36

Oil-rich Nigeria can’t seem to catch a break. From an unemployment rate forecast to rise to 33.5% by 2020, to a global pandemic that could push at least 5 million people into poverty and, a near 14% inflation rate as well as an impending recession, the Nigerian future looks dire in the coming months, according to multiple data and reports from several agencies including the World Bank and the United Nation’s World Food Programme.

Africa’s largest economy has had to review its oil benchmark downward in the 2020 spending plan to $25 per barrel from $57 per barrel, cutting the planned crude production of  2.18 million to 1.94 million barrels per day to meet the current realities, said Zainab Ahmed, the Minister of Finance.

READ MORE Nigeria VS Coronavirus: Gas could be saving grace over crashing oil

Nigeria’s projected fiscal deficit also jumped to N5.2 trillion or 3.7% of GDP from an initial N2.2 trillion.

Food inflation

Rising inflation in the country of nearly 200 million people means that more Nigerians are unable to afford food, according to data from Nigeria’s data agency.

“More than 37% of households report being exposed to an increase in prices of major food products, while nearly 12% of exposed households report reducing food consumption in order to manage the impact of shocks”, the National Bureau of Statistics (NBS) said in its Nigeria Living Standards Survey published earlier this month.

READ MORE Coronavirus: Food insecurity fallout from Nigeria’s lockdown

Food inflation in Nigeria rose to 15.04% in May; the highest rate since March 2018, or in 26 months. That mixed with increasing poverty and lack of food availability risks fuelling protests in Nigeria, as well as other African countries, says Verisk Maplecroft, a global risk and strategic consulting firm based in Bath, United Kingdom. It adds: “rising food costs will fire up Africa unrest.”

Lagos state has seen food prices rise by up to 50% in some cases. Increasing rice production (up by an average of 1.8 million tonnes from 2017-2018) is still insufficient to feed Africa’s most populous country.”

The majority of people suffering from acute food insecurity in 2019 were in countries affected by conflict, climate change, and economic crises, says WFP. Nigeria was one of the 10 countries that constituted the worst food crises in 2019. The other nine were Yemen, the Democratic Republic of the Congo, Afghanistan, Venezuela, Ethiopia, South Sudan, Syria, Sudan, and Haiti, according to the  Global Report on Food Crises.

The World Food Programme already sees COVID-19 doubling the number of people facing food crises unless swift action is taken. Some 265 million people in low and middle-income countries will be in acute food insecurity by the end of 2020, the UN agency said in April.

Recipe for unrest across the continent

Africa’s “hotbeds of protest are set for a torrid year,” says Indigo Ellis, Head of Africa Research, in the firm’s June 2020 Risk Insight report. “A perfect storm of economic issues and discontent with government are gathering on the near horizon in countries across the region, but the catalyst is going to be food… Falling government revenues and lockdown-related restrictions will have a devastating effect on food supplies, resulting in inevitable price rises that populations can ill afford,” she adds.

READ MORE Coronavirus: Counting the economic costs on Sub-Saharan Africa

Extreme poverty levels exacerbate the risks of unrest across five African countries including Nigeria,  Kenya, DR Congo, Ethiopia and Mozambique; “as do the nations’ inability to guarantee adequate food supplies,” adds Maplecroft.

“As lockdowns loosen, but secondary impacts of the coronavirus pandemic bed in, our 2020-Q2 Civil Unrest Index projections indicate that over the next six months these countries are more likely than other sub-Saharan African countries to witness instances of unrest motivated by food insecurity,” notes the firm.

“COVID-19 is potentially catastrophic for millions who are already hanging by a thread. It is a hammer blow for millions more who can only eat if they earn a wage. Lockdowns and global economic recession have already decimated their nest eggs. It only takes one more shock-like COVID-19 – to push them over the edge. We must collectively act now to mitigate the impact of this global catastrophe,” said Arif Husain, WFP’s Chief Economist.

READ MORE Coronavirus: Nigeria’s varied responses to controlling COVID-19

The rolling lockdown measures in Lagos, Abuja and Kano – Nigeria’s top states with the highest number of COVID-19 infections –” to guarantee these areas remain the centres of unrest over the coming months, says Maplecroft.

Poverty rate jumps

Security experts who see armed atrocities restricting already limited access to food say conflicts are worsening poverty in the West African nation. Pre-pandemic, 86.9 million Nigerians lived in extreme poverty according to a 2018 World Poverty Clock. The World Bank, which anticipates Nigeria heading into its worst recession in 40 years as it projects the economy to shrink between 3.2% and 7.4% this year, said COVID-19 shock alone is projected to push about 5 million more Nigerians into poverty in 2020.

Prior to the pandemic, the number of poor Nigerians was expected to increase by about two million largely due to population growth. But that number will likely increase by seven million – with a poverty rate projected to rise from 40.1% in 2019 to 42.5% in 2020, according to the global bank’s report.

Already, 1 in 10 or more than 82.9 million Nigerians live in poverty according to the National Bureau of Statistics (NBS) in its Poverty and Inequality report published in May. The statistics agency defined national poverty as annual expenditure below N137,430 (N376.5 per day or roughly $1 on 360/$1). In updated data to reflect the expected impact of the virus, however, the World Poverty Clock reported on its website that 50% of the country’s population or 102.1 million people are now living in extreme poverty.

Unemployment rises

The combination of coronavirus pandemic-dependent factors – including lockdown measures and depressed global crude prices – completely derailed the economy’s already fragile recovery from its 2016 recession. It has also led to a sharp rise in unemployment rates in Nigeria, says Vice President Yemi Osinbajo, who chairs Nigeria’s Economic Sustainability Committee (ESC).

READ MORE Nigeria’s VP Osinbajo: Does he have friends in the political elite?

According to the VP, the government anticipates 39.4 million job losses by December due to the pandemic.

Before the COVID-19 pandemic, Nigeria’s unemployment rate was already high at 23.1% while underemployment stood at 16%, according to the NBS. In May 2019, Chris Ngige, the Minister of Labour and Employment, forecast an unemployment rate of 33.5% by 2020.

Over 40% of Nigerians employed in non-farm enterprises reported a loss of income in April-May 2020. In addition to that, a fall in remittances is likely to affect household consumption given half of Nigerians live in remittance-receiving households.

To help Nigeria recover from the COVID-19 crisis, the World Bank recommends:

  • Enhancing macroeconomic management to boost investor confidence.
  • Safeguarding and mobilising revenues.
  • Reprioritising public spending to protect critical development expenditures and stimulate economic activity as well as protecting poor and vulnerable communities.

Bottom line

“The unprecedented crisis requires an equally unprecedented policy response from the entire Nigerian public sector, in collaboration with the private sector, to save lives, protect livelihoods, and lay the foundations for a strong economic recovery,” says Marco Hernandez, World Bank Lead Economist for Nigeria.

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