How Many Nigerians Will Be In Poverty Because Of Cost Of Living Crisis?

Over half of all Nigerians could be living below the poverty line in the next few years as a result of the cost of living crisis sparked by a rise in the price of fuel, an economist has told HumAngle.

The number of people living on less than a dollar a day could shoot up by at least 40 million, a 50 per cent increase on the current estimates.

As a result of the sudden increase in the cost of fuel at the pump, in just a matter of months, the total number of Nigerians in poverty could grow to anything from 120 million in total, according to a shocking forecast by a development economist at Nigeria’s prestigious Ahmadu Bello University, Zaria.

In the worst-case scenario, the number of people in poverty could leap to as many as 140 to 150 million, the economist estimates.

In the month of July, Nigerians experienced the second fuel price hike since the removal of subsidy under President Bola Tinubu. The product currently sells for as high as ₦617 ($0.79) per litre, a change that is most likely driving many Nigerians into a deeper level of poverty.

Muhammad Babagoro, a development economist at ABU Zaria, said 2019 figures from the National Bureau of Statistics showed that about 82.9 million Nigerians live on less than a dollar per day. Although recent changes in the exchange rate will have had an effect on this number, the absolute number of people in poverty will dramatically increase, he says.

Double?

Large-scale unemployment, rapid inflation while salaries have been frozen, the lasting effects on the cash economy of the reduction of money in circulation following the naira redesign, the lingering effects of COVID-19 19 and the effect of the war in Ukraine on grain prices are all factors that had to be added to the removal of the subsidy, he told HumAngle. 

“There is no way that you can’t agree that the number of people in poverty will double,” Professor Babgoro said.

As costs go up and people either lose their jobs or become unable to even afford the means to make money in the informal economy, the effect could spiral. 

“People are living hand to mouth just to survive the current economic challenges,” Babagoro says. “We can imagine the number of people who have been pushed and will be continually pushed into graver states of poverty. Millions of Nigerians will be rendered vulnerable as a result of the fuel subsidy removal and exchange rate.” 

Long term effect

Babagoro added that key sectors of the economy have been impacted by the latest development, particularly the transportation of people, goods and services. Because prices of commodities keep going up, transportation will become limited. “There will also be an increase in the unemployment rate which is like adding oxygen to an already existing fire.” 

HumAngle reported how many Nigerians, particularly those working in the informal sector, particularly those in cities live on tiny margins between their income and their financial commitments through credit. 

This means that even a small increase in costs doesn’t just mean a reduced income, it makes working impossible as they can suddenly not afford the rent they pay in order to access the market.

For example a taxi driver, Kasali Ogundele, in Ibadan, Southwest Nigeria has had to stop work altogether. Then there is Akeem Adewale, a cement store secretary who resigned his job because he is no longer able to afford transporting himself to work.

Is the purpose defeated?

Dr Auta Elijah Menson, a lecturer with the department of Economics, Faculty of Social Sciences at the Kaduna State University with expertise in development economics waded into the discussion.

Menson pointed out that fuel subsidy has its own economic implications if the government had decided to continue with the programme. “On one hand, the intended beneficiaries were not benefitting as they should from it due to underhand dealings. On another hand the fuel subsidy itself had issues of corruption also leading the country to accrue more debts.” 

So, the purpose of the subsidy, which was to provide better lives for people, has not been achieved, he said. After its removal, the government is expected to save for a rainy day and use the money towards creating a better life for the citizens. “However, it’s the process and lack of planning that is being debated on, not the removal itself.” 

Where items cost ₦200 ($0.25) before, they now cost ₦1,000 ($1.29), Menson said. Also, where people pay less than ₦1,000 for transport fare, they are now paying way more and transportation means almost everything to the Nigerian economy. 

“Regarding welfare issues, in 2022, a poverty study conducted by NBS in collaboration with some other agencies brought up a figure saying about 133 million Nigerians are multidimensionally poor. Also, World Bank has predicted that some of the policies now will push about four million Nigerians into the same grade of poverty,” Menson elaborated. “However, there could be more Nigerians in that bracket of poverty and this removal of fuel subsidy has superimposed on the already threatened economic situation.”

Menson is of the opinion that if the federal government had planned well, they would have first put in place relief programmes to serve as shock absorbers.

“Every policy that is implemented has implications; however the ability to carry out a diagnosis and build scenarios of possible outcomes makes it easier to deal with. As it is now, the possible reliefs are thrown at the symptoms. Whatever intervention is coming from the government should consider the short-term and long-term effects.” 

Women suffer more

Menson said as regards poverty, there tends to be more women who fall under the poor category than men, whether in rural or urban areas. This is because women have less access to factors that can pull them out of poverty such as education, and employment opportunities. 

“Poverty sometimes is about available opportunities that increases the chance of wellness or welfare. This is also as a result of religious and cultural influences.” 

A HumAngle report shows that working women are usually underemployed with 17.3 per cent working less than 20 hours per week compared to 10.7 per cent of working men.

This information disclosed in the Nigerian Poverty Assessment 2022 by the World Bank discovered that women usually end up working in less economically fruitful sectors that further constrain their earnings.

“We talk about gender equality as one of the sustainable development goals, but there are fewer women in the positions of power where they can influence change and make their voices heard,” Menson explained.

“However, in our own case, there are more men making decisions for women. Having fewer women in these positions also has a negative impact on the economy. The economic impact of women affects their families and the country in general. The more people are participating and contributing to the GDP of the economy, the more the country will thrive.”

Crisis of accountability

He added that even though there have been policies in the past to empower women such as trader money, and agencies like bank of industry, bank of agriculture and development banks that had specific programmes for women entrepreneurs, in terms of actually implementing policies there are political and economic considerations that affect them. “This leads to crisis of accountability in recovering some of the money given out.”

There is also the lack of continuity, monitoring and measuring impact which has been a huge factor in influencing the lack of sustainability of these programmes. 

“When it comes to managing the economy, Nigeria’s federal structure plays a huge role in managing the fuel subsidy removal- when it comes to relief programs, both the federal, state and local government have to work together.” 

“I don’t know what the government is planning for rural communities but this is the place where the local government should play a key role. Even if they have a programme on ground, implementing those programmes will be a concern because the data they are relying upon may not be accurate.”

Menson insisted that an all-encompassing committee should be set up to include all segments of society, because representation matters as people will protect their own interest. Instead, it should be a collective effort.

“People that are doing okay in this economy are also dealing with external pressures from other family members and the society at large,” he said.

“As lecturers, we have students coming up to us to ask for a little help because they are struggling to get transport back home or getting food to eat. And it extends outside the school; people are coming over our homes to beg for food on behalf of their starving children.”

This, Menson believes, is happening because of government policies that were not well thought out or that were implemented at the wrong time. “We need to all make contributions and have thorough conversations on what needs to be done for our country.”

Will palliatives help?

Babagoro believes that what will help Nigeria overcome its present predicament is when it sets up its own refineries. 

“We are the only crude oil producing country that has no refineries. Even some non-producing oil countries have their own refineries,” he said. “It will be more economical and will be beneficial to our self-worth to have our own refineries. That will be the best solution in the long run.”

For the short term, he suggested a social protection programme to cushion the effect of fuel subsidy removal. 

In July, the federal government announced plans for the disbursement of ₦8,000 ($10) food aid to 12 million poor Nigerians. The House of Representatives also granted approval to President Bola Tinubu of ₦500 billion ($6.5 million) towards this in the same month.

States have also devised certain measures to help citizens cope with the high cost of living. In Ondo, for instance, these include free rides for students on shuttle buses beginning from September until Dec. 31. 

The Ondo state government has also suspended hospital registration and consultation fees. Apart from ₦10,000 ($13) cash transfers to “selected vulnerable persons” for three months”, they plan to reimburse the hospital directly based on existing data.

“But how can Nigeria identify people that are vulnerable, and those living on the brink, to make sure the palliative will be taken to the right place and not get into the wrong hands?” Babagoro queried. 

“The government has to create a system to identify these people. It is not an entire solution but it will cushion the effects of the removal.” 

He added that in other economies where something similar happened, the government invested more in public transport, making transportation easier for its citizens. “But even with that, how can the Nigerian government target the rural areas who are the majority? Another challenge on this is the bad road network.

“The best way to solve this problem is by using technology to identify the poorest of the poor, so those who have no access to technology can still get the palliative the government is going to distribute. This should have been done even before the subsidy removal happened, not after the subsidy has been removed.”

Babagoro emphasised that before any policy action would be reflected in the economy, a lot of damage would have been done. 

“In order to put this in place, the government needs the political will to want to do it. There is nothing in place right now and there is no guarantee what they will come up with will benefit those that it is meant to benefit. But we will wait to see what they do before we offer criticisms or corrections.”