Africa’s largest economy is grappling with soaring food prices, high unemployment and soaring inflation – a cocktail that the World Bank says is pushing more Nigerians into criminal enterprises to compensate for the losses. loss of income.
Soaring inflation is jeopardizing the recovery of Africa’s largest economy, pushing 7 million Nigerians into poverty and encouraging crime as rising prices deplete already meager incomes, according to the World Bank.
In its Nigeria Development Update report, the Washington-based lender forecasts economic growth of 1.8% this year, down from a previous estimate of 1.2%. But he warned that without far-reaching reforms, the economy will continue to grow more slowly than the rate of population expansion of around 2.6 percent per year.
This, coupled with rising unemployment and inflation, is leading more and more Nigerians to engage in criminal enterprises to make up for the loss of income of the continent’s largest oil producer. Rising insecurity over the past two years has further slowed economic activity and left more people unemployed, fueling a vicious cycle of violence and crime, the lender said.
“As a lot of people enter the informal sector and scramble, criminal activity has become one of the options for getting out,” said World Bank Country Director for Nigeria Shubham Chaudhuri, in an interview. “Against the background of rising inflation, this means further deterioration in the purchasing power and livelihoods of many Nigerians.”
Chaudhuri reiterated that the government must develop a sustainable economic stimulus package before the bank can release a $ 1.5 billion loan initially discussed over a year ago.
While inflation slowed slightly for the second month in a row to 17.9% in May, it remains close to its four-year highs with food price growth of more than 20% year-on-year. The World Bank forecasts average inflation of 16.5% this year and remaining above the top 9% of the target range until at least 2023.
The World Bank has challenged the central bank’s position that high inflation stems mainly from supply constraints, citing tight exchange rate controls and expansionary monetary policy as the main drivers of price growth.
“Policy decisions related to exchange rate, trade, and monetary and fiscal factors drive inflation, especially in 2021, more than exogenous factors related to conflict and climate shocks,” said Marco Hernandez, the World Bank’s chief economist for the country.
The lack of a credible monetary anchor keeps inflation high as the central bank tries to meet too many goals, such as controlling price increases, promoting economic growth and keeping the exchange rate stable, according to the report.
Although the central bank made the right decision by unifying the official exchange rate with that used by investors and exporters, the exchange rate does not yet reflect market forces, the World Bank said.
The central bank should aim for greater flexibility by re-establishing an interbank dollar market, effectively allowing banks to exchange currencies for their own account to increase liquidity and move towards a single rate, the bank said.