Sad! Why million more Nigerians will be poor in 2020

• As global economy contracts by 5.2%
  

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The year 2020, being the turn of another decade, was expected to bring many fortunes due to individuals’ personal resolve to make the twin year worth everything.

Little was it known that what the year has in stock were in sharp contrast with the high hope of businesses to grow their bottom line; aspirations of organizations to expand their influence and individuals’ dream to record landmark achievements.

The Coronavirus pandemic had heralded an era of dashed hopes and despondency as the fallout of the killer disease has disrupted economies and this will drag many more million Nigerians below the poverty line this year.

The World Bank Group has warned that global economy is expected to contract by 5.2 per cent in 2020 and additional 100 million people will fall below poverty line in the same period.

This is contained in its June 2020 edition of Global Economic Prospects, reviewing the impact of the Coronavirus (COVID-19) pandemic.

According to the World Bank, per capita incomes are expected to decline by 3.6 per cent, tipping between 71 and 100 million people across the globe into extreme poverty, measured at below $1.90 per day, up from the previously predicted 40-60 million.

Due to the impact of pandemic, the report said more people from Nigeria, India, and the Democratic Republic of Congo (DRC), will slip below the poverty line.

This is anchored on the intelligence that population will grow faster than their gross domestic products (GDPs) this year and beyond in these countries.

This is further reinforced by the fact that the three nations are home already to over a third of the world’s poor.

The report revealed that while Nigeria could record per capita growth rate in real GDP of –0.8 per cent this year, its population growth rate is estimated at 2.6 per cent. this means more people will become poor.

India is expected to fare better with its GDP estimated to grow by 2.1 per cent, faster than its 1.0 per cent population growth rate; while DRC is forecast to have GDP growth of 0.3 per cent and a population growth of 3.1 per cent.

High Poverty and inequality in Nigeria

Recall that the recent National Bureau of Statistics ( NBS ) survey found that 40.1 per cent, that is 82.9 million, of Nigerians are living in poverty with the national poverty line estimated at ₦137,430 per year.

As such, four out of 10 Nigerians spend less than ₦376 (U.S. $1) per day on both food and non-food basic needs.

A further disaggregation of the NBS data by the Centre for the Study of African Economies (CSAE) shows that the population in rural and urban areas living in poverty are 52.1 per cent and 18 per cent respectively.

On inequality, the report found that the national Gini coefficient was 35.1 while the coefficient for the rural and urban population are 32.8 and 31.9 respectively.

The level of inequality in Nigeria is comparable to that of India 35.2 per cent but significantly below countries like South Africa which spike at 62.5 per cent.

More on the World Bank Report…

According projections by to the report, economic activity among advanced economies would shrink 7  per  cent in 2020 given the severe disruption in domestic demand and supply, trade, and finance; even as emerging market and developing economies (EMDEs) are expected to shrink by 2.5 per cent this year, their first contraction as a group in at least 60 years.

The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing, the report noted.

While the magnitude of disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks.

Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development.

Ceyla Pazarbasioglu, World Bank Group vice president for equitable growth, finance and institutions, remarked: “This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges.

“Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment.”

Under the baseline forecast—which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting — global growth is forecast to rebound to 4.2 per cent in 2021, as advanced economies grow 3.9 per cent and EMDEs bounce back by 4.6 per cent.

Despite such optimism, the World Bank warned that the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages.

A downside scenario could lead the global economy to shrink by as much as 8 per cent this year, followed by a sluggish recovery in 2021 of just over 1 per cent, with output in EMDEs contracting by almost 5 per cent this year.

“The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades,” Ayhan Kose, the bank’s prospects group director, explained.

The current episode, he continued, “has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”

Way Out for Nigeria?

Succinctly, the CSAE has said that “Based on the experiences of countries that have improved the living standard of a large proportion of their population, Nigeria will need to achieve sustained and high economic growth, substantial infrastructural development, provide large-scale structured and targeted poverty alleviation programmes alongside social development programmes.

“In doing this, the government will not only provide immediate relief to the poor but will also enhance the income-generating potential of citizens and minimize the risk of falling into poverty.”