There are fears that the on-going food inflation in Nigeria could be a threat to the projection that the economy of the country may grow at the rate of 3.2% and 3.4% in the 2024/2025. This fear was expressed by the African Development Bank, AfDB at the AfDB launch of the ‘Nigeria Country Focus Report’.
What gave the Bank the impression that Nigeria may not meet up with the projection that was given after all the indices had been considered, even by international financial institutions? It is because the report being presented showed that 18 out of the 36 states in the country have a record poverty level that are above national average. The report also indicated that the index followed the various economic reforms put in place by the government since last year, and the attendant shocks that greeted the private sector bringing about a shortfall that hampered the contribution of the sector to the economy.
BUSHLINK had reported that Food inflation in June rose to 40.87 per cent while the headline inflation increased to 34.2 per cent. The lead economist, Nigeria Country Department, AfDB Jacob Oduor, said inflation was a major issue in Nigeria, as it remains higher than the West African average and African average. His fears, therefore, include the fact that the development will continue to affect food production, agricultural production, as well as oil production. He, however, said certain policy initiatives have yielded gains, but cautioned that if care is not taken the gains may be neutralized by other factors and the food inflation that has become a major challenge in the country.
According to him, “So looking forward into 2024, 2025, growth is expected to improve in 2024 to 3.2 and 3.4 in 2025. But this growth, even though is better, is still lower than the West Africa average and the African average.
“So, what we see currently with the escalation of persistent inflation and escalation of food prices, which are expected to dampen consumption, are probably going to be issues that may dampen this growth further.
“We also expect to see further pressure on the exchange rates, which have implications again on imported inflation with a high import bill being transmitted into the consumption basket of the general population.
“So generally, policy measures to foster high and resilient growth in the short term, currently the tight monetary policy in place should be maintained, but just cautiously not to increase the monetary policy rate too fast and too further, because that has implications on credit and that feeds back into production costs.
“And then secondly, as the reforms take shape, there’s need also for social protection, influencing those who are vulnerable and those who are adversely affected. But here also targeting of beneficiaries is important, so as to ensure social benefits only go to those who merit it”.
The report warned on the slow pace of structural transformation has not been sufficient for industrial takeoff. This he said has led to the relocation of labor from agriculture to other sectors, particularly service. According to the report, “More than half of Nigeria’s workforce (56 percent) are employed in three sectors that are less productive than the economy-wide productivity (agriculture, transport, and public service).
“Manufacturing and wholesale and retail trade, both of which are only 20 percent more productive than the economy-wide productivity, the total workforce employed in the five sectors is 80 percent”. In his remarks, the Director General Nigeria Country Department, AfDB, Lamin Barrow, noted that that Nigeria needs significant financing to accelerate its structural transformation.
The annual financing gap to fast-track the structural transformation, Barrow said, is estimated at $31.5 billion to achieve the SDGs and $5.5 billion to achieve the Agenda 2063 targets.
“Closing this financing gap will require innovative policy responses including accelerated domestic revenue mobilization in the context of the ongoing fiscal consultation program as well as proper valuation of the Nigeria’s critical and rare earth minerals.
“These, if well-valued, managed and managed, will have the potential to generate additional resources and for that matter substantial additional resources to underpin structural transformation” Barrow asserted.
