More people in Nigeria and other Sub-Saharan African (SSA) countries are expected to fall into extreme poverty, especially in countries reliant on imports of food and fuel, predicts World Bank.
The report published in the Bank’s newsletter titled, “Global Economic Prospects,” disclosed that Russia’s invasion of Ukraine and its effect on the commodity market, supply chains, inflation, and financial conditions have intensified the slowdown in economic growth
The new report is coming on the heels of similar advice by some analysts that in view of structural and endemic nature of inflation, ocassioned by the invasion, Central Bank of Nigeria (CBN) and those of other developing countries should go beyond hike in policy rates if the world would remain a better place to live.
But, while the Russian invasion may prolong these challenges being encountered by these countries, worsening security situation in Nigeria, particularly the recent Ondo attack could affect production of cocoa a major foreign exchange earner for the country, produced in the area.
But most global central banks have accepted that this “bout of inflation is no longer transitory but structural, hence, the recent increases in policy rates across countries. Nigeria has also followed with its own interest rate hike.
Since it is widely believed that an interest rate hike is not sufficient in tackling cost push inflation, there will be need for other complementary policy initiatives,“ says Bismarck Rewane chief executive of Financial Derivatives Company in in the current FDC Bulletin.
The Washington-based bank further explained that the possibility of high global inflation could eventually result in tightened monetary policy in advanced countries which might lead to financial stress on emerging markets and developing economies.
The report also quoted the World Bank President, David Malpass, as saying that the world was facing the deepest global recession since World War II.
He said, “The global economy is facing high inflation and slow growth at the same time. Even if a global recession is averted, the pain of stagflation could persist for several years- unless major supply increases are set in motion.”
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The report added that growth in Sub -Saharan Africa is projected to slow to 3.7 per cent this year reflecting forecast downgrades of over 60 per cent of regional economies.
Price pressures, partly induced by Russia’s invasion of Ukraine, are sharply reducing food affordability and real incomes across the regions.
The report read, “More people in SSA are expected to fall into extreme poverty, especially in countries reliant on imports of food, and fuel.
Fiscal space is narrowing further as the government ramps up spending on subsidies, support to farmers, and in some countries, security.
“However, the impact of the war will vary across countries, as elevated commodity prices will help soften the damaging effects of high inflation in some large commodity exporters”.
Among the risks to the forecast, prolonged disruptions to food supply across the region could significantly increase poverty, hunger, and malnutrition, while persistent inflation could ignite stagflation risks and further limit policy space to support recoveries.
An elevated cost of living could increase the risk of social unrest, especially in low-income countries.
On how the global economic situation could worsen the poverty level in Nigeria, Lagos based analyst Friday Ameh aligned with the world Bank’s observation, adding that, “part of the reasons sone of us have been calling for stronger institutions is for the economy to withstand this kind of problems. The time has come for CBN and other development banks in the country to think outside the box and save the country. “
Another analyst decried the present situation where Nigerians have been reduced to mere consumers of anything due to reduced disposable income, with the attendant reduced standard of living.