Why Nigerians will suffer deeper economic hardship in 2022
Home Business Insight & Analysis Here is Why Over 45% of Nigerians May be Poorer in 2022
Insight & Analysis - November 24, 2021

Here is Why Over 45% of Nigerians May be Poorer in 2022

Petrol pump price would hover between N320 to N340 per liter

Since the launch of President Muhammadu Buhari’s economic plan in 2020, Nigeria has produced more poor people than it did over a year ago. According to the Nigerian National Bureau of Statistics (NBS), 83 million Nigerians lived in poverty last year, and the figure is estimated to reach 90 million by the end of 2021. And by 2022, 45% of the population would be plunged into extreme poverty.

The economic plan dubbed “Bouncing Back: Nigeria Economic Sustainability Plan“, was the government’s grand plan to mitigate the impact of the COVID-19 pandemic. It focused on food security, job creation (especially for young people and women), renewable energy, support for small and medium-sized enterprises, manufacturing, infrastructure and social investment.

However, many months later, the economic situation looks grimmer. Nigerians are crying foul, with many saying there is nothing to show for the government’s supposed efforts to improve citizens’ lives. To an average Nigerian, who is compelled to pay three times more for food and other essential commodities, the Buhari administration is a failure.

Last week, the NBS released new data that shows that the annual food inflation rate rose for the 24th consecutive month to 20.75 percent in October from 20.71 percent in September due to the increases in the prices of essential food items.

With other national issues, including insecurity, corruption, ethnic clashes, among others in the mix, there seems to be no roadmap to recovery in sight. 

Why Nigerians Will Suffer Deeper Economic Hardship in 2022
Nigeria’s poverty rate stats. Source: World Bank

Why more Nigerians may be poorer

It would appear the hardship trend may continue to 2022 as the Federal Government says it would totally remove subsidy on Premium Motor Spirit (PMS).  The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, announced this in Abuja on Tuesday at the launch of the World Bank Nigeria Development Update (NDU), titled ‘Time for Business Unusual.’

According to her, to cushion the effect of the proposed subsidy removal, the government will transfer N5,000 stipend to 40 million Nigerians considered ‘poorest of the poor.’ This means the government would need about N200 billion every month and no less than N2.4 trillion yearly for this intervention project.

In Mrs. Ahmed’s words: “The subsidies regime in the [oil] sector remains unsustainable and economically disingenuous.

“Ahead of the target date of mid-2022 for the complete elimination of fuel subsidies, we are working with our partners on measures to cushion potential negative impact of the removal of the subsidies on the most vulnerable at the bottom 40% of the population.

“One of such measures would be to institute a monthly transport subsidy in the form of cash transfer of N5,000 to between 30 – 40 million deserving Nigerians.

“We are very optimistic that the recent developments in the oil sector, such as the Petroleum Industry Act (PIA) 2021, hopefully, the full reactivation of the 4 public refineries in the country, and the completion and coming on stream of the 3 private refineries under construction in 2022, would significantly boost contribution from the sector to our economic growth efforts.” 

Economic experts and stakeholders have repeatedly made valid cases for the removal of subsidy as it is believed to largely serve the interest of some highly connected individuals in the country. According to the World Bank, Nigeria lost N864 billion ($2.1 billion) in the first nine months of 2021. Buttressing this figure, the Governor of Kaduna state, Malam Nasir El-Rufai says “right now, we are losing N250 billion a month”  to subsidy, while he drums state governments’ support for the proposed removal.

However, what many find problematic is the timing and the government’s N500 intervention plan, which seems to defy logic. Considering many Nigerians’ current unbearable standard of living, any astronomical increase in fuel price may set the stage for insurrection. If the subsidy is removed, a liter of petrol would sell for between N320 and N340, from its current N165.60 pump price, according to Mele Kolo Kyari, the Group Managing Director of the NNPC.

Senator Shehu Sani, a former lawmaker, berated the subsidy removal idea, says the government is insensitive to the painful reality of Nigerians. “…they live in Mars & think 5k can solve all these problems,” he wrote on Twitter.

Nigeria is in debt

How will the government fund the proposed N5000 stipend? Minister Ahmed did not say but clearly, not from the national coffers as Nigeria currently survives on borrowing.

In October, President Buhari unveiled the 2022 budget, a record 16.39 trillion naira ($39.8 billion), with a projected 25% year-on-year rise in government spending. The budget deficit will rise to N6.26 trillion, or 3.39% of GDP, and is expected to be funded by new borrowing, proceeds from privatisations and drawdowns on loans secured for specific projects.

Speaking on the budget, Buhari had said, “some have expressed concern over our resort to borrowing to finance our fiscal gaps. They are right to be concerned. However, we believe that the debt level of the Federal Government is still within sustainable limits.”

A month before Buhari’s budget presentation, Ms. Patience Oniha, Director-General of the Debt Management Office, had raised concerns about the country’s public debt stock, which she said stood at N35.465 trillion as of June 30, 2021.

“We should focus on revenue. The good thing about it is that the Minister of Finance, Budget and National Planning has started a programme aimed at growing the revenue profile. We must discipline ourselves to follow through to grow our revenue. If we continue to borrow and do nothing about growing our revenue base as other countries have done, we may have a debt sustainability challenge,” she said.

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Nigeria’s debt data

– According to a breakdown of the national debt under review, Nigeria’s external debt was N13.711 trillion, or 38.66%.

– Domestic debt – N21.754 trillion, representing 61.34% of the entire stock.

– The Federal Government’s foreign debt was N11. 828 trillion and N17. 632 trillion in domestic debt.

– The external debt of states and the FCT was N1.883 trillion, and domestic debt stock was N4.122 trillion.

– Multilateral debt – World Bank Group and African Development Bank Group – own the majority of the debt representing 54.88%.

– Commercial debt – Eurobonds and Diaspora bonds – with 31.88%

– Bilateral debt – China, France, Japan, India, and Germany – with 12.70%.

– Promissory Notes account for 0.54% of the total.





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