Crisis looms as Nigeria’s vulnerable non-poor struggle

    In under a week after the World Bank published a report that many non-poor Nigerians were only one small shock away from falling into poverty, the Abuja-Kaduna train attack occurred and made the message clearer.

    The World Bank had stated in its report that one of the factors that could push non-poor Nigerians into poverty was violent conflicts. The abrupt end the bombing brought to the lives of some people could be enough to push their families, if dependent on the individuals, into poverty in the blink of an eye.

    Charity Ansalem, a 70-year-old retiree, in an interview with BusinessDay, likened her situation to that of the family of the late Chinelo Nwando, who was killed at the attack, saying the loss of her only son to a racist gang attack abroad left her with almost nothing as he was practically the breadwinner of the family after his father died.

    “My son was my last hope after my husband died; so I invested all I had to send him abroad to study and settle there and probably bring me over once he was settled in as well as help me with some bills over here,” she said. “It was not up to four months after his departure that I got a message from his university over there that he was killed by a gang of racists.”

    “Life has not been the same ever since then. It seemed as though my reality just flipped. I’ve been living off my pension, which is almost useless currently since that incident,” Ansalem added.

    Chief Obinna Agbaneje, who retired from the Nigerian Postal Service more than 10 years, also happens to be one of those already tilting towards the poverty pit.

    He said, “For us the retirees, our pensions were already lower than the normal living standards before the pandemic, and our pensions have barely been sustaining us as they are fixed.

    “However, after the coronavirus pandemic, coupled with the escalating economic downturn, I could as well just accept that I am poor, except my children can somehow pull a rabbit out of a hat by some miracle and come and salvage my situation. To make matters worse, even bread and beans are now becoming luxury foods because of the consistent price increments of food items.”

    Almost 47 percent of pensioners in Nigeria are living in poverty, the highest number since 2014, according to an analysis by BusinessDay.

    With the economic hardship in the overall population rising, pensioner poverty has risen by almost 25 percent since the pandemic struck, according to data from National Pension Commission (PenCom.)

    Of the over 200 million people living in Nigeria after the pandemic, about 5.2 million pensioners live in poverty after paying the necessary bills, and 2.3 million of them are living in severe hardship.

    “Losing a job of five years, just a week away from a promotion, isn’t an experience I wish for anyone – my enemies inclusive,” Seun Ogunlesi, a former staff member of a leading Nigerian bank and a father of three, told BusinessDay.

    Read also: Many rich Nigerians one shock away from poverty – W/Bank

    He said, “It still seems surreal to me. I’ve been the sole provider for my family since my wife was diagnosed with cancer, and to think that our sole source of income was stolen from me by the COVID-19 pandemic just leaves sour memories.

    “I tried being strong for my wife and kids all through this trauma by trying my hands on various options but the rising cost of commodities, coupled with the current economic crisis, has driven me to my wit’s end. At this point, I have no other choice than to send my family back to my parents at Osun State so I can try to get back on my feet.”

    “It’s so bad that I don’t know what my family would eat tonight,” he said in tears.

    This has been the reality for many Nigerians since the pandemic struck in 2020. Poverty in Nigeria has become a ‘bonding concept’, almost more popular than the concept of ‘football’ and ‘politics’, which brings many Nigerians from different tribes and beliefs together.

    Being poor in Africa’s largest economy seems like trying to climb out of a pit while roped together with your family.

    At the bottom of the pit (below the international poverty line of $1.90 per person a day), the water is filthy, there’s very little food and hardly any government support of any kind.

    For the first few levels the family climbs, there are no safety nets. A single shock – war, insecurity, surging prices of basic commodities, grandparents needing costly medicine, the loss of a family-sustaining job or the death of the breadwinner – could throw many into the poverty pit.

    Monday Abbas spends his mornings washing cars he can get his hands on, while he spends his afternoons/evenings collecting recyclable plastics for resale – a potentially growing business in most parts of the country.

    “There seems to be growing competition in the recycling space, compared to a few years ago. That’s why I literally doubled my hustle. It’s getting more and more difficult to make a living since the pandemic struck,” Abbas said.

    The 47-year-old happens to be one of the victims caught up in the 2016 recession, which claimed the family business that he had been running on ‘thin ice’ long before the recession hit and has since then been struggling to navigate the poverty pit.

    A lucky day’s toil on the streets means he can earn between N1,500 and N2,000, barely enough to feed a family of three that he heads. On a normal day, he navigates between N500 and N900 a day.

    The unemployed populace (estimated by demographic experts to number in millions) has long been a presence in Nigeria but is said to have grown amid the widespread job losses and the COVID-19 pandemic.

    “The pandemic has not only increased unemployment, but also increased [the number of people] who are underemployed,” said Moses Okafor, associate professor of demography and statistics at Baze University, specialising in poverty.

    Nigeria aspires to lift all of its people out of poverty by 2030.

    But sluggish growth, low human capital, labour market weaknesses, and exposure to shocks are holding Nigeria’s poverty reduction back, the World Bank noted in a recent report titled ‘A Better Future for All Nigerians: Nigeria Poverty Assessment 2022.’

    In the report, the World Bank estimated that 95.1 million Nigerians would be poor by the end of 2022 (that is an additional 5.1 million) on the back of the shocks from the COVID-19 pandemic and the anticipated shocks from the ongoing Russia-Ukraine war, which has toppled any chance at global growth expectations this year.

    The report indicated that about 90 million Nigerians were expected to be poor by 2022. However, due to the pandemic, the projection increased to 95.1 million Nigerians.

    “The COVID-19 crisis is driving up Nigeria’s poverty rate, pushing more than 5 million additional people into poverty by 2022. With real per capita GDP growth being negative in all sectors in 2020, poverty is projected to have deepened for the current poor, while those households that were just above the poverty line prior to the COVID-19 crisis would be likely to fall into poverty,” it said.

    The World Bank is concerned that compounding macroeconomic frailties, shocks and uncertainty may blight Nigeria’s progress on poverty reduction; climate change could intensify shocks, further limiting opportunities to spread the proceeds of growth.

    Nigeria’s growth performance was declining even before the COVID-19 crisis.

    Before COVID, the country had not achieved the sustainable, inclusive growth it needed to strongly reduce poverty. However, with the uproar of the pandemic, coupled with the lockdown imposed by the government to slow its spread, the poverty situation in the country only got worse.

    Not only did the uncertainty of the pandemic expose the country’s economic inefficiencies as well as reduce the appeal of business investment and trade, but higher sanctions, government and private-sector debt levels further dug the country into deeper poverty thresholds.

    Between 2000 and 2014, Nigeria enjoyed a period of sustained expansion, during which the economy grew by around seven percent per year, outstripping the estimated annual population growth rate of 2.6 percent.

    But real GDP growth dropped to 2.7 percent in 2015, then -1.6 percent in 2016, as the decline in global oil prices triggered Nigeria’s first recession in almost two decades.

    Growth has not recovered subsequently. It lies below population growth and the growth performance of peer countries over the same period.

    “This weakening overall growth performance makes it significantly harder to reduce poverty,” the World Bank noted.

    Nigeria’s dependence on oil exports is one of the leading causes of its frail growth prospects; it may also prevent any growth from being broad-based.

    In 2019, while oil represented just 10 percent of GDP, it accounted for more than 80 percent of Nigeria’s total exports. Indeed, this has been true every year since the 1970s.

    Despite their large role in implementing key programmes, states and local governments rely on revenue collected at the federal level, which makes them susceptible to overall shocks to the federal budget, as in the 2016 recession and the COVID-19 crisis.

    But while state and local governments implement almost half of government spending, the majority of their revenues are statutory transfers from the Federal Government.

    This leaves Nigeria’s economy extremely exposed to movements in global oil production and oil prices. Moreover, despite oil’s importance for export revenue, extractive industries are not a large employer in Nigeria.

    “This means any growth due to oil production would not necessarily be shared among workers and households: less than 1 percent of working Nigerians are employed in mining and extractives, with the share being even smaller among those from poor households,” the Breton Woods institution said.

    The World Bank is further concerned that distortionary policies – especially on exchange rates and trade – could further weaken Nigeria’s prospects for inclusive growth and poverty reduction.

    It said, “Nigeria’s multiple exchange rates for different types of transactions and the country’s trade restrictions — including bans on certain goods and the 2019 border closure — may reduce investor confidence. This, in turn, could limit foreign direct investment and competition, factors required to support firms and the job creation needed for broad-based growth.

    “Such policies can also have immediate negative effects on poverty reduction through the price channel, as trade restrictions can make the goods that poor households consume — especially food items — more expensive, reducing people’s purchasing power and welfare in turn.”

    Ifeanyi Coleman Okeke, who deals in imported vehicle parts, indicated that one of the major factors that put the brakes on his 10-year successful business was the border closure of 2019.

    He said, “While I was still trying to revive my business from the shock of the border closure sanctions, the pandemic dealt me a new hand. At the beginning of the pandemic, we were told that we would be home for seven days, then it turned out to be two months and then extensions kept coming and coming.

    “I was believing that there was still light at the end of the tunnel by the beginning of this year and a new shock (Russia-Ukraine war) added to the damage. At this point, any other surprise is going to wreck both my business and my family by extension.”

    “We rely heavily on imports from China; so that pandemic really affected our businesses because we could not get any goods at that time to sell because of the lockdown and that drained every savings I had,” Okeke added.

    The World Bank report further indicated that in a situation where the pandemic did not occur (the counterfactual scenario), the forecast of the poverty headcount rate would have remained ‘virtually unchanged’, with the number of poor people rising from 82.9 million in 2018/19 to 85.2 million in 2020 and 90.0 million in 2022, due largely to natural population growth.

    “Given the effects of the crisis, however, the poverty headcount rate is instead projected to jump from 40.1 percent in 2018/19 to 42.0 percent in 2020 and 42.6 percent in 2022, implying that the number of poor people was 89.0 million in 2020 and would be 95.1 million in 2022,” it said.

    Emeka Ucheaga, CEO of EU intelligence and financial analyst at Credit Direct, told BusinessDay that many non-poor households affected by the COVID-19 pandemic had already used up their savings and exhausted help from relatives and friends.

    “Even though the unemployment situation is no more as bad as during the pandemic, the working poor situation is however escalating,” Ucheaga said.

    Become a part of our family!

    Latest articles

    Related articles