According to the World Bank, Nigeria’s persistent budget deficit has expanded the country’s public debt stock, with debt repayment accounting for 96.3 percent of government income in 2022.
According to the World Bank’s Macro Poverty Prediction for Nigeria: April 2023.
According to the research, “the budgetary situation has deteriorated.” In 2022, the cost of fuel subsidies will rise from 0.7% to 2.3% of GDP. Low non-oil revenue and huge interest payments increased fiscal constraints. In 2022, the fiscal deficit is projected to reach 5.0 percent of GDP, above the federal fiscal deficit limit of 3%. This has kept the public debt stock over 38% of GDP and boosted the debt service-to-revenue ratio from 83.2% in 2021 to 96.3% in 2022.”
The bank also noted that the CBN’s naira redesign plan has hampered the country’s economic development and poverty reduction efforts, and that between 2019 and 2025, about 13 million Nigerians will become destitute.
“Nigeria is in a more precarious position than it was prior to the late 2021 global oil price increase,” it stated. In the framework of the Naira restructuring, cash shortages have impeded growth and poverty alleviation. The economy is predicted to grow at a 2.9 percent yearly rate between 2023 and 2025, somewhat faster than the population growth rate of 2.4 percent. Growth will be driven by services, trade, and manufacturing. Because to inefficiency and unpredictability, oil output is anticipated to remain small.
“With Nigeria’s population growth outpacing poverty reduction and inflation continuing to rise, the number of Nigerians living below the national poverty line is expected to rise by 13 million between 2019 and 2025.”
According to the World Bank, the country’s worsening economic position has forced millions more Nigerians into poverty.
“Historically, oil price rises have benefitted the Nigerian economy, but this has not been the case since 2021,” according to the brief. Instead, macroeconomic stability has deteriorated due to lower oil output, costly fuel subsidies, currency rate distortions, and fiscal deficit monetization. As the economy deteriorates, millions more Nigerians are living in poverty. Risks are weighted to the negative due to a lack of macro-fiscal reforms, naira demonetization, and an uncertain external outlook.”
The Washington-based bank also claimed that macroeconomic stability has deteriorated substantially as a result of multiple FX rates, high and rising inflation, mounting fiscal constraints, and depleting forex reserves.
According to the research, Nigeria’s economic situation has deteriorated since 2015 as a result of lower oil revenue and increasing spending, resulting in persistently large fiscal deficits.
According to the bank, Nigeria’s persistently high inflation has been rising since 2019, especially for food items, eroding the purchasing power of poor and vulnerable Nigerians and increasing poverty.
According to the lending agency, inflation would reach a 21-year high of 18.8 percent in 2022, pushing five million Nigerians into poverty.
It went on to state that many FX windows, the central bank’s provision of subsidized development funds, and monetization of the fiscal deficit all impair the country’s monetary policy’s effectiveness.
“According to the brief, “persistent structural economic issues (volatile growth, low private investment, low and inefficient public spending as a result of low revenue collection, and low social development outcomes leading to low productivity”) have also prevented any meaningful acceleration of growth.” Insecurity prevails, with more violent conflict erupting across the country, impeding private investment and growth.”
