Inflation fuels crimes, limits Nigeria’s economic growth ─World Bank

*The Bank suggests lack of credible monetary policy anchor is stoking inflation, and seeks deep reforms to prevent further deterioration of the purchasing power and livelihood of many Nigerians

Alexander Davis | ConsumerConnect

Coupled with rising unemployment in the country, the World Bank has said surging inflation is undermining the recovery of the Nigerian economy.

ConsumerConnect gathered the Bank posited that inflation is pushing seven million Nigerians into poverty and encouraging criminality, as rising prices deplete already meager incomes of individuals and families.

The Washington-based lender, in its Nigeria Development Update report, projects economic growth of 1.8 percent this year, compared with a previous estimate of 1.2 percent.

However, the World Bank also cautioned that without deep reforms, the country’s economy would continue to grow slower than the pace of population expansion of about 2.6 percent a year.

It noted that, coupled with rising unemployment and inflation, is leading more Nigerians into criminal enterprises to make up for lost earnings in the continent’s top oil producer.

According to the global lender, a surge in insecurity in Nigeria over the past two years has further slowed economic activity and left more people unemployed, thereby fuelling a vicious cycle of violence and criminality in the country.

Shubham Chaudhuri, World Bank’s Country Director for Nigeria, in an interview said: “While you have many people going into the informal sector and hustling, criminal activity has become one of the options to get by.

“In the context of rising inflation, that means a further deterioration of the purchasing power and livelihood of many Nigerians.”

It is noted that food costs in the country are rising at the fastest pace since 2005, pushing up inflation

Chaudhuri restated that the government must develop a sustainable economic-recovery plan before the World Bank can release a $1.5 billion loan facility initially discussed over a year ago.

While inflation eased slightly for the second straight month to 17.9% in May, it remains at near four-year highs with food-price growth at more than 20% year-on-year, agency report said.

The World Bank sees inflation at an average of 16.5% this year, and remaining above the 9% top of the target band until at least 2023.

In regard to the factors inducing inflation in the country in recent times, the World Bank challenged the Central Bank of Nigeria’s (CBN) position, that high inflation stems primarily from supply constraints, citing tight exchange-rate controls and expansive monetary policy as key drivers of price growth.

Marco Hernandez, World Bank’s Chief Economist for Nigeria, said: “Policy decisions related to exchange rate, trade and monetary and fiscal factors are driving inflation, especially during 2021, more so than exogenous factors related to conflict and weather shocks.”

The Bank’s report further explained the lack of a credible monetary anchor is keeping inflation elevated, with the CBN’s trying to achieve too many goals.

These include controlling price increases, promoting economic growth and keeping a stable exchange rate, according to the report.

Nevertheless, the World Bank acknowledged although the Central Bank of Nigeria took the right step in unifying the official exchange rate with one used by investors and exporters, the exchange rate is not yet reflective of market forces in the economy.

The CBN should aim for greater flexibility by re-establishing a Dollar interbank market, effectively allowing banks to trade currency on their own behalf to increase liquidity and move toward a single rate, the bank said.

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