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Doom and gloom as severe economic crisis threatens

16 January 2023
Reading time: 6 minutes

Global growth is slowing sharply, with the worldwide economic output projected to be just 1.7% this year, according to the latest analysis from the World Bank Group.

Its economists have warned that that the downturn will be widespread and any adverse developments could push the global economy into recession.

It said slowing growth affected 95% of advanced economies and nearly 70% of emerging markets and developing economies and had the potential to increase poverty rates in some regions.

Following the pandemic-induced recession in 2020, Nigeria’s economic growth recovered but macroeconomic stability weakened, it said. Amid global commodity shocks, a depreciating currency, trade restrictions and monetisation of the deficit, inflation had surged, pushing millions of the country’s citizens into poverty.

“Since 2021, Nigeria is also unable to benefit from the surging global oil prices, as oil production has fallen to historic lows and the petrol subsidy continues to consume a larger share of the gross oil revenues,” it said.

While the economy was projected to grow at an average of 3.2% in 2022-2024, the growth outlook was subject to downside risks, including further declines in oil production and heightened insecurity.

Meanwhile, continued scarcity of foreign exchange and tighter liquidity could affect the economic activity in the non-oil sector and undermine overall macroeconomic stability. The uncertainty was also expected to be accompanied by high inflation and continued fiscal and debt pressures, said the World Bank.

The weakening of economic growth to 3.1% in 2022 was a 0.3 percentage point downgrade from the June projection.

The World Bank said oil output dropped to 1 million barrels per day, down by more than 40% percent compared with its 2019 level, reflecting technical problems, insecurity, rising production costs, theft, lack of payment discipline in joint ventures, and persistent underinvestment, partly because of the diversion of oil revenues to petrol subsidies, estimated at more than 2% of gross domestic product (GDP) in 2022.

A strong recovery in non-oil sectors moderated in the second half of last year as floods and surging consumer prices – the annual inflation surpassed 21% for the first time in 17 years – disrupted activity and depressed consumer demand. Persistent fuel and foreign exchange shortages, with the naira depreciating by more than 30% last year, further dampened economic activity, the World Bank said.

RNI reporter Aisha Jamal spoke to citizens in Maiduguri about the high inflation in the country and the difficulties they faced from escalating prices of almost all items, from petrol to food, rent, essential household items and healthcare.

Bana Kura said: “The hike in commodity prices is not easy at all; the economy is tight, people are finding it hard to make money. Many people do not have jobs. When we go shopping, we often find the prices have doubled. Transport just gets more and more expensive.

“On some items the prices have even tripled.”

Ya Ka’ande said people – especially the poor, who made up most of the population – were finding it exceptionally difficult to survive because there were very few jobs and the steep rise in the prices of commodities was making it virtually impossible to put food on the table, even just the basics.

“We cannot feed our families properly because we can’t afford it. Many people go to bed with hungry bellies.

“The people keep pleading to the authorities to introduce some means the citizens can rely on to cope. But the prices just keep escalating.”

Malik Marte said: “What we are going through is ordained but still man-made activities, such as injustice and wars, are the greatest factors that are contributing to the economic hardships we are experiencing.”

Mallam Jidda Ibrahim, an economist from the University of Maiduguri, told RNI that the World Bank report showed that people everywhere were experiencing economic hardships.

He said: “Nations are suffering economically. Nigeria is the giant of Africa but the war between Russia and Ukraine has made things even harder, not only there but throughout the world, including in Nigeria. Exports affect the GDP, budgets and income of the nation, which in turn affect the economy and the result is high inflation.

“The hike in the fuel price has been a nightmare because it affects the prices of all commodities. All products need to be transported. The heightened fuel price makes transportation more expensive and results in traders and business people raising the prices of goods.

“Government budgeting and spending is not meeting the expectations of the population because demand is always increasing and the economy is in a state of collapse. No profits are being recorded.”

Ibrahim said debt was also a factor. The amount of debt was a “major issue” for both ordinary citizens of Nigeria because many people had to borrow money to get by and because the country needed to borrow money to try to rebuild the economy. He described it as a vicious cycle.

“Nigeria depends on its reserves of crude oil to make a profit. But the market is slipping and now one litre is being sold for ₦300.

“It is this kind of thing that is having a hard impact on the economy and the whole country and all its people are suffering.”

Ibrahim said the only solutions were for authorities to fight corruption and to put in place tight fiscal policy to encourage investment.

Jidda Ramat, who works in the public administration of the Ramat Polytechnic, told RNI that the primary role of the administration was to ensure the lives of its citizens ran smoothly: economically, politically and socially.

“The extreme living conditions around the world signifies that economies globally are crash-landing.

“Here, first Borno State was hit by the insurgency, which resulted in businesses being destroyed and the economy becoming crippled. Then most people’s sources of income came to an end.

“For example, fishing – particularly in the Lake Chad region – was a major business bringing in a profit each week of ₦100 million. But the insurgency soon put an end to that. Fishermen were not allowed to go to the water, stopped out of pure fear, or by security operatives who told them it was not safe, or by insurgents who often made them pay if they wanted to be allowed to fish and then took their fish, too. Most people just stopped fishing.

“Now that relative peace has returned to the area, people have started fishing again. They are trying to revive their livelihoods. But the economy was in left in tatters by the insurgency. And now, just as the people are trying to get back to their old ways of living, the economy of the whole country – the whole world – is crumbling around them. It will take a long time before this improves and the living standards of the people improve.”

Ramat said the only solution, because of the lack of support from the government, was for people to return to agriculture, livestock breeding and selling, and small businesses. If people had technical support, they would not have to rely or depend on donors to sustain them and the country would not need help from the World Bank.



About the author

Aisha Sd Jamal