Although Nigeria’s economy continues to recover from the 2016 recession, the country’s growth outlook is vulnerable to external and domestic risks, including geopolitical and trade tensions that may affect inflows of private investment, the World Bank has said.
The bank, which stated this in its Nigeria Economic Update report published yesterday, noted that Nigeria’s “GDP growth remains below the estimated population growth rate of 2.6 per cent, resulting in declining real per capita incomes.”
The Nigerian Economic Update is prepared twice a year (Spring and Fall) to appraise stakeholders interested in economic and social developments, prospects and policies.
According to the World Bank, unless the country’s authorities urgently implement reforms to revive economic growth and lift employment, Nigeria risks becoming home to a quarter of the world’s destitute people in a decade.
The bank said: “In the aftermath of the recent oil shock, Nigeria’s living standards began to decline as sustained high population growth rates exceed the growth rate of the economy. In 2018, about half of all Nigerians were estimated to be living in extreme poverty. The vulnerability of those living below the poverty line is worsened by the adverse security situation in the North, which has displaced a large population that has amplified the high incidence of poverty in the North-East.”
Projecting a 2.1 per cent growth for Nigeria in 2020 and 2021, the bank called on the Federal Government to increase domestic revenue, remove trade restrictions and improve the predictability of economic policy.
It also urged the government to remove fuel subsidies and reduce central bank lending to targeted sectors that, according to it, crowds out lenders.
The World Bank said: “The cost of inaction is significant. Under a business-as-usual scenario, where Nigeria maintains the current pace of growth and employment levels, by 2030 the number of Nigerians living in extreme poverty could increase by more than 30 million.”
However, the World Bank in the report entitled, “Jumpstarting Inclusive Growth: Unlocking the Productive Potential of Nigeria’s People and Resource Endowments,” noted that Nigeria had the opportunity to advance reforms that will speed up economic growth.
It pointed out that although Nigeria created about 450,000 new (net) jobs in 2018, partially offsetting the loss of 700,000 jobs in the previous year, the country’s labour force is growing rapidly, adding that in 2018 over five million Nigerians entered the labour market, which resulted in 4.9 million more unemployed people in the last year.
It noted that while some states had recorded progress in the area of job creation, the jobs were not enough to absorb the number of fresh entrants into the labour market.
Specifically, it said: “Positive news is emerging from a subset of states that are creating enough jobs to keep up with the growth of their labour forces. In the year following the recession (between the first quarter of 2017 and the first quarter of 2018), 10 states saw some positive job creation, but the number of new jobs was not enough to absorb the new entrants into the labour force.
“The situation improved by the third quarter of 2018, as four states (Lagos, Rivers, Enugu, and Ondo) created more jobs than the entrants to the labour market, and as a result these states reduced unemployment.”
The Bretton Woods institution also emphasised that increasing productivity would be key to supporting robust growth and job creation in Nigeria.
It stated: “Nigeria’s economic productivity is low by international standards. Productivity has grown slowly, and since the recession, it has been declining, affecting growth. The productivity gap between Nigeria and comparator countries reflects both its lower relative stocks of physical and human capital and the inefficiency with which inputs (capital and labour) are transformed into outputs.
“The vulnerability of Nigeria’s economy to volatile oil prices has also inhibited sustained productivity gains: labour has repeatedly shifted from agriculture to services when oil prices were high, then shifted back when oil prices were low, thereby limiting the economic transformation that is needed to produce more and better-paid jobs.”
Further stressing the need for urgent implementation of reforms, the World Bank warned that Nigeria could slide back into recession if crude prices fall by 25 per cent to $50 a barrel.
Speaking at the event, Mr. Shubham Chaudhuri, Country Director, World Bank Group, Nigeria, said that the country needed to make concerted efforts to boost productivity with a view to creating more jobs and accelerating economic growth.
Mr. Marco Hernendez, Lead Economist of the bank, expressed worry that 100 million Nigerians live on less than $1.9 per day.
According to Hernendez, with population growth estimated at 2.6 per cent, out spacing economic growth in the context of weak job creation, per capita incomes are falling.
Mr. Babatunde Fowler, the Executive Chairman, Federal Inland Revenue Services (FIRS), called for stronger collaboration between the federal and state governments.
Fowler also said there was need to utilise land optimally to establish projects and create jobs.