Inflation, Low Oil Production Bane of Nigeria’s Economy in 2022

Ugo Aliogo examines the effect of inflation and low oil production on the Nigerian economy, among other developmental issues that shaped the year 2022

A review of the activities of events that shaped the year 2022, shows that the year had its own fair share of challenges. There have been twists and turns, good and bad days, all through the year. The development space in Nigeria was not exempted from the litany of positive and negative events that characterised the year. However, in the development space, there were major events that shaped things in 2022.

World Bank Outlook

In the year 2022, the World Bank through the Nigeria Development Update (NDU) which is the bank’s biannual report series, revealed that in June 2022, inflation in Nigeria, already one of the highest in the world before the war in Ukraine, is likely to increase further due to the rise in global fuel and food prices caused by the war.

The report also stated that the inflation is likely to push an additional one million Nigerians into poverty by the end of 2022, on top of the six million Nigerians that were already predicted to fall into poverty this year due to the rise in prices, particularly food prices. The report also states that the inflationary pressures will be compounded by the fiscal pressures Nigeria will face this year because of the ballooning cost of gasoline subsidies at a time when oil production.

In its December report, the World Bank stated that to reduce its vulnerability to crisis and rise to its potential, Nigeria has to choose among markedly different paths. Policy reforms are available to help the country overcome the current challenges and set the foundations for rising to its potential. These reforms are needed in three key areas: restoring macroeconomic stability; boosting private sector development and competitiveness; and expanding social protection to protect the poor and most vulnerable.

The outcome of the report shows that the Nigeria economy didn’t grow and perform as expected, due to structural economic shocks and challenges, brought about by the global fall in oil prices, which was a fall-out of the Russia-Ukraine war. Therefore, there is need to fix the economy in the new year and this presents huge challenges for the incoming government. Experts have said that the new government should pay attention to ramp up oil production which is at an all-time low due to the activities of crude oil theft to ensure that the country meet its OPEC production quota, increase export and gain more foreign exchange.

World Bank in another report said Nigeria’s economic growth has slowed on the back of declining oil output and moderating non-oil activity. Real gross domestic product (GDP) rose by 3.1 per cent year-on-year (y-o-y) in the first three quarters of 2022, little more than the annual population growth of 2.6 percent. World Bank Country Director for Nigeria, Shubham Chaudhuri, said:“Nigeria has a choice to implement critical macroeconomic and structural reforms that can reduce crisis vulnerabilities and increase growth. Doing so will lift per-capita incomes, sustainably reduce poverty and deliver better life outcomes for many Nigerians. Urgent business-unusual choices are needed to avoid a scenario in which up to 80 million working-age Nigerians do not have a full-time job by 2030 and up to 23 million more Nigerians could be living in extreme poverty.”

The report said inflation surged to 21.1 per cent y-o-y in October 2022, pushing as many as five million more Nigerians into poverty since the start of 2022.

The report said the fiscal pressures have intensified, exacerbated by the soaring cost of the petrol subsidy which will likely exceed five trillion naira this year. Despite higher oil export revenues, official reserves have fallen, and the currency market is severely distorted, undermining the business environment and investment. The weaknesses in the macroeconomic policy framework are suppressing growth and making Nigeria more vulnerable to shocks.

Out Of School Children (OOSC)

Nigeria now has about 20 million out-of-school children, according to the latest global data on out-of-school children by the United Nations Educational, Scientific and Cultural Organisation (UNESCO).

UNESCO, which said a new and improved methodology was used to arrive at the latest figures, further said: “244 million children and youth between the ages of 6 and 18 worldwide (who) are still out of school.” According to the statistics, India, Nigeria and Pakistan have the highest figures for out-of-school children globally. The figures in Nigeria have oscillated between 10.5 million and around 15 million for more than a decade, with the situation growing worse due to the degenerating security situation in the country.

Flooding

Despite increased enlightenment and sensitisation campaigns for better preparedness on flood mitigation and management, particularly in the flood risks zones in the country, flooding became a major climate change problem that the country grappled with in 2022. Though some states are making frantic efforts in addressing the challenges brought by the flooding, however there seem not be an end in sight anytime soon.

The Nigeria Hydrological Services Agency, (NIHSA) has in its prediction of the 2022 Annual Flood Outlook, (AFO), predicted that 233 Local Government Areas (LGAs) in 32 states of the Federation and the FCT fall within the Highly Probable Flood Risks Areas, while 212 LGAs in 35 States of the Federation including FCT fall within the Moderately Probable Flood Risks Areas. The remaining 329 LGAs fall within the probable flood Risks Areas.

The Highly Probable Flood Risk States are; Adamawa, Abia, Akwa-Ibom, Anambra, Bauchi, Bayelsa, Benue, Cross-River, Delta, Eboyin, Ekiti, Edo, Gombe, Imo, Jigawa and Kadunna, others are, Kano, Kebbi, Kogi, Kwara, Lagos, Nasarawa, Niger, Ogun, Ondo, Osun, Oyo, Rivers, Sokoto, Taraba and Yobe, as well as Zamfara and Federal Capital Territory (FCT).

Rising Poverty Rate

The Multi-dimensional Poverty Index (MPI) report issued by the National Bureau of Statistics (NBS) in 2022, puts the number of Nigerians living in poverty at 133 million out of a population of over 200 million.

The report painted a grim picture of not only poverty but its impact on children, their health, education and nutrition. Majority of the poor in Nigeria, it showed are children, as 67.5per cent of children under the age of 18 are poor and 70.1per cent of children under five are poor.

The report expressed worry that children’s education is one of the most impacted by poverty with 57.8 million children of school-going age (6 to 15 years old) and 29percent of all school-aged children not attending school. The report said 27 percent of all school-aged children are both poor and out of school (with no significant gender disparities), making this a critical area in need of urgent investment.

The report said multi-dimensional poverty is higher in rural areas, where 72percent of people are poor, compared to 42percent of people in urban areas. Approximately 70per cent of Nigeria’s population live in rural areas, yet these areas are home to 80per cent of poor people; the intensity of rural poverty is also higher: 42percent in rural areas compared to 37per cent in urban areas. Sixty-five percent of poor people 86 million live in the North, while 35per cent nearly 47 million—live in the South.

Child Malnutrition

The United Nation Children Education Fund (UNICEF) Humanitarian Situation Report through its 2022 Nigeria Humanitarian Action for Children between January and June, revealed that it admitted 154,697 children 6-59 months old (53 percent girls) with severe acute malnutrition for treatment in Northeast Nigeria (vs. 158,377 mid-year targets) and 109,247 children (53 percent girls) in the Northwest (vs. 112,397 mid-year target).

The report stated that in the Northeast, a 22 percent increase in admissions of severely malnourished children has been observed in nutrition centres across the Northeast compared to the previous year.

The report noted that humanitarian situation monitoring results indicated high levels of acute malnutrition among new arrivals from inaccessible areas, with Global Acute Malnutrition (GAM) at 16.9 percent and Severe Acute Malnutrition (SAM) at 6.3 percent, worsened by poor water and sanitation access and poor health conditions. Overall, 4.1 million people are projected to have crisis level food needs in 2022 according to the most recent Cadre Harmonisé; and 1.3m children to be acutely.

The report further explained that the 22 percent increase in admissions of severely malnourished children under the age of five to nutrition centers in comparison to the previous year has been deduced from a range of factors by partners on the ground: closure of outpatient treatment centers (OTPs) for SAM children without medical complications; the influx of patients from areas inaccessible to humanitarian actors, and those without stabilization centers in hospitals; dwindling food assistance, not least for relocated IDPs; insufficient coverage of preventive services (such as blanket feeding) and this year’s measles outbreak.

The report added that the June Integrated Food Security Phase Classification (IPC) acute malnutrition analysis for Northeast Nigeria assessed that 317,000 children are to be Severely Acutely Malnourished (SAM) in Borno, Adamawa, and Yobe States in 2022.

Gender Based Violence

Gender Based Violence (GBV) was a recurring problem in Nigeria 2022. The incidence of gender-based violence (GBV) is growing astronomical with the activities of the insurgency in the North East. From forced and early marriages to the physical, mental or sexual assault on a woman, 1 in 3 Nigerian women have experienced physical violence by age 15 (NDHS 2013).

Despite several efforts by women led groups and Civil Society Organisation (CSOs), stakeholders feel that there is still a long way to go to ending gender-based violence in Nigeria. They called for greater cohesion among the various institutions and individuals working in the human rights space to end gender-based violence in Nigeria.

The US Missions in Nigeria noted that as Africa’s largest democracy, Nigeria sets the tone for the rest of the continent.  Nigeria has done so much to advance women’s issues, including the passage of the Violence Against Persons Prohibition Act and the implementation of the National Gender Policy.  However, there are still many structural inequalities that impede women’s access to economic resources and opportunities and that hinder women’s full participation in society.  According to the World Economic Forum 2021 Global Gender Gap Index, Nigeria ranks 78th out of 156 countries in terms of economic opportunities for women.