World Bank Warns Of Rising Poverty In Nigeria, Says Economy Faces Pressure From Falling Oil Revenues

Nigeria's fiscal and debt pressures will increase due to falling oil revenues, the World Bank warned in a new report.

"Oil price booms have previously supported the Nigerian economy, but this has not been the case since 2021," World Bank said in the report titled "Macro Poverty Outlook for Nigeria: April 2023." "Instead, macroeconomic stability has weakened amidst declining oil production, costly fuel subsidies, exchange rate distortions, and monetization of the fiscal deficit."

The report noted that there are millions of Nigerians who have been pushed into poverty due to the economic environment.

"Risks are tilted to the downside given the lack of macro-fiscal reforms, the naira demonetization, and an uncertain external outlook," World Bank added.

According to the report, the number of people living below the poverty line will increase by 13 million between 2019 and 2025 in the baseline projection.

"Fiscal and external pressures are expected to persist due to rising global and domestic interest rates and low oil revenues resulting from the moderation in oil prices and inability to significantly increase oil production," World Bank noted. "In the absence of significant FX management reforms, international reserves are projected to remain stagnant."

However, the World Bank also predicted that the non-oil revenues of Nigeria are not expected to increase as a share of GDP without significant tax revenue reforms because of which fiscal deficit will remain more than 5.0% of GDP from 2023 to 2025.

The World Bank advised the government to work on its macroeconomic stability through various reforms such as "increase oil and non-oil revenues, tighten monetary policies to reduce inflation, unify the multiple FX windows, and adopt a single, market-responsive exchange rate."

"Increased insecurity, as well as adverse climate change effects, could further dampen the economic outlook for Nigeria," the World Bank continued.

World Bank shared earlier this month that the Nigerian currency naira lost 10.2% of its value last year due to rising food and fuel prices.

KPMG shared last week that the unemployment rate in Nigeria increased by 37.7% last year and will rise to 40.6% in 2023.

Nigeria is also going through a major economic crisis since demonetization as it mopped up over 70% of liquidity.

While the country is already struggling through an economic crisis, the Food and Agriculture Organization (FAO) has warned poverty would deepend for Nigerians between June to August this year.

As per FAO, there are 17.7 million people across 26 states in Nigeria who are going through a food crisis already and their situation might get worse by May. The report also said that the COVID-19 pandemic played a huge role in people losing their jobs, which eventually reduced household income.