Nigeria’s economic outlook bleaks as misery index triggers poverty, crime rate
By Oludare Mayowa
The Outlook for Nigeria’s economy seems bleak considering the implications of the negative data churned out by the National Bureau of Statistics (NBS) in the last couple of days and unless policymakers step up measures to ameliorate the situation.
This week in quick succession, the statistics bureau released the unemployment and inflation rates on Monday and Tuesday respectively, with the trend showing an uptrend in both data.
The nation’s unemployment rate stood at 33.3 percent in the fourth quarter of 2020, up from 27.1 percent in the second quarter of last year. There was no data production for the third quarter of last year.
Same for the inflation rate which rose to 17.33 percent in February from 16.47 percent in the preceding month of January.
According to the renowned economist, Bismarck Rewane, the current inflation rate place Nigeria as the country with the 8th highest inflation rate in Africa and the current rate is seen as growth retarding.
Unlike what the Central Bank of Nigeria (CBN) would want the world to believe that the driving force behind rising inflation is mainly cost push, Rewane attributed the galloping inflation to excessive lending to the government through the printing of new naira notes for the government to plug its budget deficits.
“The inflation spiral is driven mainly by rapidly increasing Ways and Means advances (money supply saturation), commodity supply disruptions, forex rationing and exchange rate pass-through.
“The currency adjustment has affected all imported commodities – wheat, dairy products, etc. Cost push inflation increased partly due to re-pricing of PMS and kerosene,” Rewane stated in a note to clients on Tuesday.
With the combination of rising inflation at 17.33 percent and the higher unemployment rate of 33.3 percent, Nigeria’s misery rate has shot up to 50.63 percent.
The misery index, according to Wikipedia, helps determine how the average citizen is doing economically and it is calculated by adding the seasonally adjusted unemployment rate to the annual inflation rate.
“It is assumed that both a higher rate of unemployment and a worsening of inflation create economic and social costs for a country.”
It has been suggested in some quarters that the components of the Misery Index drive the crime rate to a degree. This means that as the conditions of living of the populace worsen, the crime rate escalates as many people will seek alternative means of surviving.
With projections of a higher inflation rate in the coming months, as predicted by economists, and possible rising in unemployment due to the downturn in the economy, more Nigeria may be pushed down the poverty line causing more hardship in the country.
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Rewane projected that rising “inflation and unemployment will worsen the country’s misery level and could trigger social unrest.”
The signs are ominous with the possible increase in the domestic pump price of fuel in the month ahead and the rising cost of energy, it’s expected that the outlook for Nigerians is bleak indeed.
Already, many farmers across the country are been driven away from their farms by herdsmen, bandits and Boko Haram insurgents and this will further worse the food shortage and lead to increase in pricing.
Also, the escalating insecurity situation in the country has led to the closure of many schools in the northern part of the country. Again, this is expected to have dire implications on the educational system in that part of the country and further increase the poverty level in the north.
At 0.11 percent Gross Domestic Product (GDP) growth in the fourth quarter of 2020, Nigeria’s economy is not growing as fast as the population, which translates to insignificant impact of the economy in the lives of Nigerians.
What are the issues confronting the country despite the efforts by the government and the CBN to stimulate the economy through both fiscal and monetary measures?
Besides the impact of the Coronavirus Pandemic and the lag effect of the #endsars protest on the economy, the rising inflation in the last couple of months have continued to erode the purchasing power of Nigerians and indirectly impacting growth.
Also, the government is not earning enough revenue to support its developmental projects while there are many leakages unplug in the government finance which is further eroding the impact of the income on the economy.
However, the good news is that crude oil prices is gradually surging on the back of the decision by the OPEC+ to extend production cut further at their meeting this week.
With the surge in global crude price, Nigeria is expected to earn more foreign exchange revenue and improve on its current account in the near term.
Also the possible increase in revenue from oil export could enhance the economic growth, being that the CBN would be able to increase its capacity to intervene in the domestic forex market and reduce pressure on the local currency.
Also, the possible increase in revenue could help the country to depend less on the CBN Ways and Means to finance its budget deficits and consequently reduce the impact of excess liquidity on the economy.
But on the downside is that with the extension of the current production cuts to April by OPEC+ and the surge in crude price, these is likely to send pump fuel price hurtling towards new records high in line with the deregulations of the downstream petroleum sector by the government.
The implications of a possible hike in the pump price of fuel is more inflation, increase in production cost of local manufacturing firms, further drop in the standard of living for Nigerians and the ripple effect on economic growth.
Eventually, this may erode whatever gain that might have accrued through the improve earnings from higher oil prices and stifle the pass down effect on the economy at large.
What should the government do?
First, the government may have to maintain a balance between meeting the conditions imposed on it by the World Bank and the International Monetary Fund (IMF) and the need to assuage the pain of the economic hardship on the populace.
Perhaps the government could still retail some element of subsidy on both fuel consumption and electricity tariff in the meantime to ensure that the strangulating impact of hike is lessen on Nigerians.
The government should also increase its efforts to plug all loopholes and leakages in the system to ensure that it conserve the little resources and get more done for less.
It’s also time for the government to slash the cost of governance across the board, by shedding some weights around political office holders and cut down on excesses in allowance and other pecks of office.
The ongoing effort to flatten the curve on the pandemic should be intensified while the government should quicken the rollout of the Vaccines and ensure that more doses of the vaccines are obtained to ensure that more Nigerians are inoculated.
On the part of the CBN, it should continue to ensure that adequate supports are provided the productive sector in term of moratorium on the intervention fund, sustained rate cut and improve on dollar sales to ensure the wheel of productions are not stalled.