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World Bank Says Inflation Will Push 2.8 Million Nigerians Into Poverty

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Rising inflation and low economic growth in Nigeria will push a further 2.8 million people into poverty by 2023’s end, the World Bank has disclosed.

This is based on a report titled, ‘Macro Poverty Outlook: Country-by-country Analysis and Projections for the Developing World,’ released recently. The Washington-based bank said, “By the end of 2023, the rise in inflation and low economic growth will have contributed to an increase of 2.8 million people in poverty (y-o-y), a 0.4 percentage points bump to 37.5 per cent of the population.”

It noted that Nigeria’s high inflation reached a17 17-year high of 24.1 percent (y-o-y) in July 2023, partly reflecting surging food prices and the temporary impact of the removal of the fuel subsidy. It stated that a cumulative 725 basis points hike in the monetary policy rate since May 2022 has had little effect on reining in inflation due to clogged transmission channels, also weakened by direct credit allocation by the central bank, and the continued monetization of the fiscal deficit.

The global bank further declared that federal fiscal deficit has risen to 63 per cent higher between January and May 2023 than in the same period in 2022, due to increasing interest payments, higher capital spending ahead of the elections, and the continuous large cost of the fuel subsidy.

The impact of this is set to spike public debt to 45 per cent of GDP and keep debt service above total revenue in 2023. It said. “The fiscal financing need and the devaluation of the naira are expected to push the public debt to 45 per cent of GDP and keep the debt service above total revenues in 2023.

“The current account balance (CAB) recorded a surplus of 2.2 per cent of GDP in Q1 2023, driven by lower imports and income outflows. However, the small CAB surpluses and capital flows since 2022 have been insufficient to increase foreign reserves, as oil export FX flows to CBN contracted, likely as a result of the direct crude sale-direct fuel purchase arrangements.”

The Bretton Woods Institution further predicted that future economic growth in the country will depend on the continued implementation of macro-fiscal and inclusive structural reforms. It stated the current reforms of the government will boost economic growth to an average of 3.4 per cent in 2023-2025.

It also expects inflation to begin to moderate by 2024.

The World Bank added, “The share of Nigerians living below the international poverty line is expected to peak in 2024 at 38.8 per cent before beginning a gradual decline, as inflation cools down and economic growth picks up. Targeted measures, including cash transfers, could mitigate short-term adjustment costs to the poor and vulnerable and mitigate their risk of falling into intergenerational poverty traps.”

Earlier in June, the bank disclosed that inflation pushed an estimated four million people into poverty between January and May 2023. Inflation has since risen to 27.33 per cent as of October 2023.

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Order CBN to honour Letters of Credit– SINET to Tinubu, NASS

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Amidst several hardships facing the Nigerian populace, the Social Integrity Network, (SINET) has urged President Ahmed Bola Tinubu and the leadership of national assembly to compel the Governor of Central Bank of Nigeria (CBN) Mr. Olayemi Cardoso, to order and reconsider honouring the forward contracts that are genuinely backed up with proper compliant documents for utilisation against each Letters of Credit (LCs) opened by the commercial banks using the forwards as a hedge.

The group also urged the Federal Government to make further clarification concerning a statement credited to the CBN Governor on issues regarding the alleged and well-publicized revelations of a $2.4 billion forex trading fraud.

SINET recalled that “On February 5, 2024, the governor of CBN made this declaration in both his interactions with Senate committees and his interview on a national television, following the engagement of Deloitte Management Consultant to conduct a forensic investigation where he claimed that the said amount was uncovered.

A statement issued on Monday by SINET national coordinator, Ibrahim Issah, disclosed that “On the contrary, we wish to unequivocally state that these claims lack merit and do not take into account the consequences they will have on businesses, public perception, or the economy of our cherished nation and its implication on forex both at home and abroad.”

According to him, “Without sentiment, the claim is completely falsehood and unacceptable as he, the CBN governor, failed to consider its economic implications. It is pertinent to state that genuine businessmen and women across the country, borrowed Funds from commercial banks, some with interest rates as high as 30% to secure forex from the CBN through their respective commercial banks since CBN does not sell the dollars to individuals directly.

“The same funds have been deposited with CBN for the past one and half years for forwards allocated for which the Apex Bank is now claiming were fraudulent transactions. May we remind Mr. Governor that while the CBN allocated the forwards after collecting the naira for each forward allocated, the commercial banks used these same forward contracts as a hedge and issued Letters of Credit (LCs) to their various customers against their offshore credit lines and also as a sovereign guarantee to their offshore banks which stand unpaid till today as a result of the failure of CBN to honour the various forward contracts.

“May we also remind our CBN Governor that as a result of their failure to honour these contracts, the outstanding foreign loans continue to accrue interest (post-negotiation charges), which the commercial Banks are passing to their customers: the same customers you say do not have a genuine claim.”

The statement further stressed that, “The public would like to ask Mr. Governor the following questions: What will happen to the foreign bank that is expecting their payment to be paid back? What will happen to the businessmen and women who had borrowed Naira from commercial Banks and paid the same into the CBN account for the purchase of forex for over eighteen months? Who will bear the interest charged on borrowed funds locally? Who will bear the charges running against the offshore lines used in establishing Letters of Credit? What will happen to the businesses? What will happen to the employees that are dependent on the survival of the businesses that CBN is trying to kill?

“We call upon the senate president and, in fact, the president and Commander In-Chief of the Federal Republic of Nigeria to call the CBN governor to order and reconsider honouring the forward contracts that are genuinely backed up with proper compliant documents for utilisation against each Letters of Credit (LCs) opened by the commercial banks using the forwards as a hedge.

“Let us state categorically that the CBN is killing businesses by cancelling the forward contracts that were sold to them about 18 months ago at the rate of N450/dollar and now selling the same funds to the commercial banks and directing the bank to sell the money at the rate of 1,500/dollar to the same businesses who initially had a forward contract at the rate of N450/dollar.

“May we also remind Mr. Governor, that failure to honour these forward contracts is taking commercial banks longer time to clean the offshore lines already used for establishing Letters of Credit against which shipments have been done and payment made to LC beneficiaries by the offshore banks. The delays of the commercial banks to settle their Forex obligations to their offshore banks is making our country risk to be very high.

“Lastly, the public will like to call on the coordinating minister for the economy, Mr. Wale Edun to engage the CBN regarding this issue of undelivered forward contracts because at present in Nigeria, almost 60% of companies in the manufacturing sector have been closed due to the volatility of Forex in Nigeria in order to avoid the other 40% from also closing down.

“This will go a long way to help the few remaining manufacturing companies still in operation in Nigeria and also encourage the new investors that the president and commander in-chief of the federal republic is trying woo to bring their investments to Nigeria.”

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Senate Passes Sen Ashiru’s Bill To Establish National Road Transport Council

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The Senate on Tuesday granted first reading to a bill seeking to establish a National Road Transport Council which is to be saddled with the responsibility of regulating the road transport industry and the transport profession in Nigeria.

The bill titled National Road Transportation Council (Establishment) Bill 2024 is sponsored by Deputy Senate Leader Senator Oyelola Ashiru and was introduced to the Senate plenary after the Senators resumed from their 30 day recess.

Further details of the bill fronted by the Kwara South Senator reveals that if signed into law a council board will be established which shall consist of a Board chairman and six members drafted from each geo-political zone of the country.

More insights of the bill sighted by the Sun also states that the board shall be presided by a representative from Ministries of transport, commerce and industry and aviation and they shall not be below the rank of a Director.

As highlighted in the explanatory memorandum of the bill , [b]the functions of the proposed council include; creating an effective regulatory framework on road transport service operators; determining the standard of knowledge and skills required for road transport service operators; encouraging the advancement of education in road transportation; ensuring accessibility of road transport facilities, [/b]channels, and routes; monitoring the performance of the regulated road transport industry; conducting background check on road transport service operators; registering all road transport service providers and determine the fees for such registration; setting guidelines and general policies for road transport service operators; updating the Federal Government on its activities and progress through annual and audited reports; reviewing progress and suggest improvement within the provisions of this Bill and do such other things as are necessary or incidental to the objects of the Council under this Bill or as may be assigned by the Federal Government.

The bill received the nod of the Senators via voice votes presided by the Senate President Godswill Akpabio shortly after it was introduced to the floor of the Red Chambers by the Leader of the Senate, Senator Opeyemi Bamidele.

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