• Says North is poorer
• Predicts 7.4% growth in 2014
• CBN: Elections-related spendings may drive up inflation

James Emejo and Obinna Chima

Going by the statistics released to journalists yesterday in Abuja by the World Bank, only 55.9 million Nigerians (about 33.1 per cent of the country's population put at 169 million) are living below the acceptable poverty level, a significant improvement from the figure released last February by the Nigerian Bureau of Statistics (NBS) which put the poverty level at 112.519 million (62.6 per cent). The World Bank also predicted a 7.4 per cent growth rate in the country's Gross Domestic Product (GDP).

The World Bank attributed the improvement in the poverty statistics to the positive economic trend as well as significant progress made towards poverty eradication in the country by the government. The poverty figure by the World Bank was drawn from its 2012/2013 poverty estimates while the one by the NBS was from the 2009/2010 estimates.

But in Abuja yesterday, the Central Bank of Nigeria expressed concern that the possibility of increased government spending in the run up to the 2015 elections may drive up the liquidity in the system which could push upward the inflation figure, a condition which may force people to spend more money to buy less goods.

The World Bank said, in its second edition of the Nigeria Economic Report (NER) which was launched in Abuja that going by the recent rebasing of the economy as well as analysis from the new General Household Surveys (GHS) conducted by the National Bureau of Statistics (NBS) with the support of the Bank, new poverty estimates in 2010/2011 and 2012/2013 should be within the range of 35.2 per cent and 33.1 per cent respectively.

Although the previous NBS Harmonised Nigeria Living Standards Survey (HNLSS) 2009/2010, which took a larger study sample into account had estimated poverty rate at 62.6 percent, the Breton woods institution said it had strong reasons to believe that "consumption was seriously underestimated in the large HNLSS household survey in 2009/2010."

It stated that an analysis of a panel survey data (GHS) of 5000 households for 2010/2011 and 2012/2013 provided "evidence that consumption is likely higher than previously estimated from the HNLSS survey."

Furthermore, the new GHS analysis put rural poverty at 46.3 per cent and 44.9 per cent in 2010/2011 and 2012/2013 respectively compared to 69.1 per cent and 51.2 per cent respectively in the HNLSS 2009/2010 estimates by the NBS.
The World Bank estimates further suggested that the number of poor Nigerians remained at 58 million adding that more than half of the figure are located in the North- east or North-west.

Specifically, it noted:" Poverty rates range from 16 per cent in the South- West to 52 per cent in the North-east. While the South and North central experienced declines in the poverty rate between 2010/2011 and 2012/2013, the poverty rate increased almost unchanged in the North West."

The NBS had since placed a temporary suspension on publishing unemployment statistics pending the adoption of a new methodology, it was gathered.

The Bank also said an unofficial assessments using accepted International Labour Organisation (ILO) methodologies would suggest that the unemployment rate in Nigeria is less than 10 per cent compared to the 25 percent figure by the NBS.

"This masks the critical problem in Nigeria of underemployment. Most Nigerians cannot afford not to work, but a large share of the population is engaged in low productivity and low paying tasks."

The report said the rebase GDP figure has again drawn attention to official poverty statistics wondering how a country of the size and wealth of Nigeria could have such high poverty rates even relative to neighbouring countries including Niger and Benin Republic- and why the strong economic growth experienced for more than a decade had not generated more poverty reduction.
However, in its short- term economic outlook, it said it expected the Nigerian economy to grow by 7.4 per cent in 2014 "despite significant risks related to oil and potential volatility in short term capital flows."

Speaking at the launch, Lead Economist and Acting Country Manager of the World Bank, John Litwack said: "The combination of the new GDP and poverty estimates is valuable in giving us what we believe to be a clearer picture of development and poverty reduction in Nigeria. Both sets of numbers indicate the prime importance of urban areas for growth and poverty reduction.”

Continuing, he said: "The poverty disparities between the North and South echo disparities in public services as well as the degree of connectedness to large markets."

Elections-related Spendings May Drive up Inflation

In spite of its resolve to keep the key micro and macroeconomic numbers stable , the Central Bank of Nigeria has expressed concern that the possibility of increased government spending in the run up to the 2015 elections may drive up the liquidity in the system which could push upward the inflation figure. The twin anchor for the inflationary condition according to the CBN may be the poor harvest in some agricultural producing areas, particularly in the north eastern and central states of the country.

Nonetheless, the CBN yesterday in Abuja after the two-day meeting of the Monetary Policy Committee (MPC), resolved to leave the monetary policy rate (MPR), otherwise known as interest rate unchanged at 12 percent with a corridor of +/- 200 basis points. It also retained the cash reserve requirement (CRR) of both public and private sector deposits at 75 per cent and 15 per cent respectively while the liquidity ratio was left at 30 percent cent.


The MPR is the rate at which the CBN lends to commercial banks and usually determines the cost of funds while the CRR is a restrictive monetary policy tool used by the apex bank to determine the volume of liquidity in banks' vault.

Godwin Emefele, CBN Governor who read the communique issued at the end of the meeting said the committee unanimously decided to hold rates at current levels having been satisfied with the relative stability in the macroeconomic landscape which had shown impressive growth rates, stable consumer prices and exchange rate as well as increased external reserves.

Addressing journalists in Abuja after the meeting , Emefiele also restated his commitment to gradually reduce interest rate but appealed for patience in order to have the appropriate macroeconomic conditions needed to implement the rates cut-a promise he made on assuming office in June.

He said he was optimistic about achieving low interest rates within a five- year plan taking into consideration all variables within the ambit of the monetary parameters.

He also announced that the country's stock of external reserves had increased to about $40.20 billion as at July 18 compared to about $37.31 billion at end-June 2014 following increased accretion and moderation in the rate of depletion.

The CBN boss said the current level of reserves could comfortably support about 10 months of imports.

But Emefiele equally expressed worry that portfolio flows were not employment generating though essential in the absence of adequate fiscal buffers.

While noting that the policy direction for inflation, exchange rate and interest rate must be seen not only in the context of price and financial stability but also in enhancing the quality of life of Nigerians and promoting employment generation, it added that other reform measures could dampen food prices in the short to medium term and restore inflation to a sustainable long-run path.

He said: "The Committee noted the potential of the power sector to stimulate output growth through enhanced investment and the spill-over effect in employment generation if the challenges confronting the sector are effectively and appropriately addressed. Specifically, it noted that gas-to-power has remained a binding constraint in reaping the benefits of the recently-concluded power sector reforms; urging for the collective efforts of government, private investors and the banks to resolve. Other pressure points include the underlying pressure from food/core inflation and the risks that could emanate from the likely increase in aggregate spending in the run up to the 2015 general elections."

According to him: "The Committee was also concerned about the implications of the on-going QE3 tapering for inflows and external reserves. The Committee recognized the necessity of sustaining a stable naira exchange even as it has to deal with the delicate balancing of the need for a low interest rate regime. The Committee noted that portfolio flows were not employment generating but were essential in the absence of adequate fiscal buffers. The Committee welcomed the moderation in the rate of depletion in external reserves in recent months, noting that reserves accretion needed to improve much faster to provide a strong and more resilient buffer to fiscal operations. The Committee, however, noted that a gradual reduction in the country’s import bills through domestic production of some of the major food imports should be a key element in the overall reserves accretion strategy. It welcomed the decision of the Bank to collaborate with other stakeholders in this regard."

On the domestic economy, he said: "The Committee welcomed the impressive growth performance but noted that the country has the potential to do better with appropriate supportive macroeconomic policies. The Committee, therefore, stressed the imperatives for monetary policy to sustain efforts aimed at supporting non-inflationary growth in key sectors of the economy.

"The Committee also emphasized the need for government to sustain and deepen tax revenue and enhance efforts aimed at fast-tracking the structural transformation of the economy with a view to making it resilient to adverse shocks as well as creating the necessary platforms for reducing unemployment, income inequality, and poverty in the country."

In his reactions to pronouncements by the MPC, the Managing Director/ Head, Africa Macro Research, Standard Chartered Bank, Razia Khan said the decision of the CBN’s MPC was largely expected.

According to her, while mention was made of the upward pressure on inflation, with the CBN stating that it would be carefully monitoring liquidity levels, the MPC nonetheless restated the governor’s goal of lower interest rates in the long-term.

She pointed out that for the markets; the key questions are around how the central bank would react when liquidity pressures are more pronounced than they are currently as additional AMCON maturity of just less than N1 trillion is expected in October.

“The political primary season and pre-election spending are likely to build in intensity from September on.

Analysts at BGL Securities Limited noted that the relative stability of the foreign exchange rates across the market segments provides supports for the monetary policy action.

“Recent improvement in the foreign exchange reserves provides additional comfort for capacity to support the naira. Forex demand however remains high,” BGL added.

‘Macroeconomic risks persist due to fundamental uncertainties’

NIGERIA'S short term macroeconomic outlook improved in the first half of 2014 relative to 2013, according to the World Bank in its new Nigeria Economic Report (NER) launched Tuesday in Abuja.

The report indicated that revenues to the federation have increased, foreign reserves have stabilised, the Excess Crude Account (ECA) has been augmented, and prospects for growth are stronger than last year.

The bank pointed out that the re-based GDP estimates has revealed a larger, more dynamic and complex economy than the previous statistics should. The report however stressed that macroeconomic risks remain due to uncertainty about future oil output, oil prices, and short term capital flows.

The NER analyses new data from household surveys in 2010/2011 and 2012/2013 to reassess poverty and living standards in Nigeria and concludes that poverty rates in Nigeria are likely significantly lower than previously believed, and progress toward poverty reduction may be stronger.

According to the report, poverty reduction in Nigeria appears to be primarily an urban phenomenon, with poverty rates in rural areas higher, and poverty reduction slower.

While recent panel surveys indicate that the per capita national poverty rate based on the official poverty line may now be as low as 33.1 per cent, a large share of the Nigerian population is still not far above the poverty line, indicating vulnerability.

“The combination of the new GDP and poverty estimates is valuable in giving us what we believe to be a clearer picture of development and poverty reduction in Nigeria,” said John Litwack, Lead Economist and Acting Country Manager of the World Bank.“ Both sets of numbers indicate the prime importance of urban areas for growth and poverty reduction.”

The NER also highlighted continuing differences between Nigeria’s regions in poverty reduction. For instance, the South and North Central regions showed progress in poverty reduction between 2010 and 2013, while the North West witnessed little change, and the North East experienced an increase in the poverty rate along with a general decline in living standards.

“Improvements in public services, key infrastructure to better connect markets, and measures to increase productivity in agriculture could help put Northern regions on a strong path toward poverty reduction”, said Litwack, lead author of the report, whilst also noting the critical role of security.

Noctec: As in 1/3? You mean 100 million people are comfortable?