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1. The Many Faces of Nigeria in 2023: Understanding the Economics of Change
2. Report Summary: 2023 Macro Economic Outlook - The Many Faces of Nigeria in 2023: Understanding the Economics of Change

The welfare of the average Nigerian deteriorated in the past year. The rising inflation triggered by the Russian-Ukrainian war took a toll on the welfare of the average Nigerian. The significant rise in the cost of clothing, housing, and food without a corresponding upward adjustment in wages crippled the income of individuals, making Nigerians poorer. According to the National Bureau of Statistics, 63% of Nigerians are multi-dimensionally poor, indicating 133m of the total population estimated at 211 million fell into the poverty net. Most Nigerian households were deprived of clean energy sources, quality healthcare, clean sanitation, and water as the cost of basic amenities doubled, making 7 out of 10 Nigerians living in rural areas and 4 out of 10 in urban areas fall below the poverty line. The data confirms that the cost of living spiked compared to the pre-covid period when the monetary poverty rate was 40.1% with about 82.9m people being poor according to the Nigerian living Standards Survey (NLSS) 2018/2019 data. The covid-19 and Russia- Ukraine war tossed more Nigerians below the poverty line. 

Individual income relative to consumption expenditure used to be the poverty gauge traditionally, where people with insufficient income to purchase a basket of goods and services are deemed poor but the multidimensional poverty index gave a wider perspective to capturing the extremity of lack about education, health, housing, empowerment, clean water, and sanitation. The multiple deprivation indicators access poverty at an individual level which shows that an individual is deprived when three or more of the indicators fall below a particular benchmark. World bank embraced the MPI with the inclusion of monetary poverty line at US$2.15 after detecting that the monetary poverty index did not capture 39 percent of multidimensionally poor people that were deprived in non-monetary dimensions alone. Experts believe the multidimensional poverty index is more effective as a measure of poverty as it covers acute deprivation based on household characteristics compared to the monetary poverty index limited to income only (see illustration 15 below). 

Illustration 15: 

Per Capita GDP

The downward trend of the country’s per capita income explicitly showed the diminishing welfare of an average Nigerian. The country’s per capita income has dropped from a peak of US$3201 in 2014 to US$25757.46 in 2016 due to the recession and the 2020 recession gave a further dip to US$2396. However, the recovery in 2021 did not translate to a higher per capita income with the country’s fast-growing population (estimated at 211m), further weakening the per capita income to US$2065.7 according to world bank data.

Inequality

As revealed by the 2022 multidimensional poverty data, the gap between the rich and poor has grown bigger with the high deprivation of basic amenities in the country, only 83m people had access to healthcare, education system, and housing as against 133m poor individuals. The impoverished Nigerians are clustered in the north with 86 million poor people and a lesser number of 47 million people in the south. Across states, Sokoto had the highest percentage of 91% and Ondo state the least at 27%, justifying the wide margin between the rural and urban areas. The wide intra-country wealth distribution might hinder the possibility of poverty reduction in the country and necessitate the need for intervention in the northern region of the country to prevent a future escalation of criminal activities. 

Insecurity 

In the pre-election year, insecurity became a subject of worry with the escalation in terrorist attacks, abductions, and herdsmen attacks. The insurgency spread to all regions, heightened by the terrorist attack on Abuja to Kaduna train, where many were killed and held captive for months, the Ondo state church attack, and much more violence was seen in different regions. The mass abduction and attack on farmlands and individuals became a hindrance to productivity, unleashing intense fear and tension in the country. People had to neglect some specific routes and roadmaps due to the rage of the attacks coupled with the electoral campaigns during the period. The insecurity fueled the migration of individuals and companies to safer countries. 

Amidst other contributory factors, the incessant depreciation of the naira against other major currencies has been another limiting strain to the improvement of Nigerians’ welfare, given that Nigeria is an import-dependent country. The possibility of a better standard of living seems to dampen every passing year for an average Nigerian, looking at the deteriorating inflation, currency, and insecurity (see illustration 16 below). 

Illustration 16: 

Youth Migration: Dodging the Bullet   

Nigerians have been trooping out of the country in a bid to better their earnings, standard of living, and safety nets to cater to their families. The rising unemployment rate, lack of quality basic infrastructure, heightened insecurity, and poor governance fuelled aggressive migration to other countries in recent years. Although the evolution of technology promoted migration to vast growing regions globally, the inherent economic hardship of the country and the large unemployed population spurred the huge shift in Nigeria. 

From a positive lens, the relocation has been beneficial in terms of diaspora remittances. According to the central bank of Nigeria, diaspora remittances into the country grew by 11.2% to US$19.2bn in 2021 and increased by 9.6% between January and June 2022. However, the demography of the emigrant poses a threat to the Nigerian economy, seeing that the skilled workforce dominates the number of people exiting the country such as doctors, Nurses, IT engineers, and others. The number of emigrants has grown significantly, particularly to countries such as the United Kingdom, Canada, the United States, Germany, and others.

According to a UK immigration report, Nigerian immigrants to the UK has risen by +686% from 8,384 in 2019 to 65,929 as of June 2022, the highest percentage growth in the top 5 countries through study visa. Out of the total sponsored study visas for both principal applicants and dependents, Nigerians accounted for 12% of the total population with the highest number of dependents accompanying persons with a study visa for a single country. The data from the Nursing and Midwifery Council (NMC) in the UK revealed that Nigeria-trained nurses increased by 68.4% from 2,790 in March 2017 to 7,256 in March 2022. Likewise in Canada, 12,595 Nigerians relocated to Canada in 2019 alone and over 15,000 were granted permanent residency in 2021.

The massive human capital export might not abate anytime soon, given that many Nigerians see it as an escape route from the jaw of poverty. A recent PEW research survey confirmed that 45% of Nigerian adult plans to relocate to another country within five years, the highest among the 12 countries surveyed from Africa, the Middle East, Europe, and North America. 

Considering that the skilled labour force is an integral trigger for growth in an economy, a continuous human capital export might be detrimental to the country in the long run. The country needs to address the issues of unemployment, health, and security to reverse the trend, seeing that the negative effect outweighs the gains (see illustration 17). 

Illustration 17: 

The removal of subsidies would result in higher fuel prices, while the devaluation of the Naira would affect the price of imported food. Without any significant improvement in the situation of insecurity and on the back of last year’s flash floods, domestic food prices are expected to rise. All of that, as well as higher electricity costs, would reduce the purchasing power of the Nigerian household. The population of unemployed Nigerians can avoid the industrial sector which has been characterized by slowing growth, the logistics, and transport sectors, as well as the Financial and Insurance sector, offer better opportunities. Overall, Poverty and Inequality are likely to rise as unemployment is expected to remain high while growth is expected to occur in sectors that are not job-creating (see illustration 18 below). 

Illustration 18: