Unemployment rate may hit 37% amid rising poverty, NESG warns

• Nigeria needs to invest in human capital, infrastructure to achieve shared prosperity, says World Bank
• NESG projects 2.98% growth rate, 20.5% inflation rate for 2023

The Nigerian Economic Summit Group (NESG) has projected that unemployment rate is likely to increase to 37 per cent, while poverty headcount will increase to 45 per cent due to weak performance in the job-elastic sectors.

The Group in its latest macroeconomic outlook, noted that low labour absorption of sectors that will drive growth and population growth estimated at 3.2 per cent would lead to a decline in real per capita income.

Similarly, the World Bank has said that the country must invest in human capital, put in place necessary infrastructure, tackle insecurity, as well as empower the private sector to flourish to create more jobs.

Without putting these in place, the World Bank said no country would ever achieve a shared prosperity.

Country Director for Nigeria, World Bank, Dr. Shubham Chaudhuri, said this yesterday, during the launch of the NESG 2023 Macroeconomic Outlook Report.

Chaudhuri, who gave insights from a macroeconomic perspective, challenges facing Nigerians, advised the Federal Government to be judicious in spending.

Giving the outlook for the year, Head of Research and Chief Economist, NESG, Dr. Olusegun Omisakin, said real GDP growth is expected to moderate to 2.98 per cent, while economic growth would be subdued in 2023 due to strains on investment and low productivity in critical sectors.

Stating that the services sector would drive economic growth, however, he said the growth will not be strong enough to generate significant jobs.

As a result, he said unemployment will remain unabated, even as economic growth will be supported by election-related spending and improvement in the oil sector.

He also said the inflation rate is expected to average 20.5 per cent in 2023.

According to him, inflationary pressure is expected to remain elevated, driven by structural, cost and monetary factors.

Food inflation, he said, will remain the fundamental driver of inflation due to the enduring impact of flooding, increased production costs due to increased cost of credit, insecurity and displacement.

The economist said existing fuel shortages and the removal of fuel subsidies will continue to increase the core components, especially transportation.

Noting that the projection for 2023 assumes that crude oil future will average $85/barrel.

“This suggests that the effect of the Russia-Ukraine crisis on the energy market will remain subdued and that elevated demand for crude oil will sustain prices at a level relatively higher than the US$70/barrel proposed in the 2023 budget,” he said.

As efforts to contain crude oil theft in Nigeria intensify, he maintained that crude oil production would average 1.35 million barrels per day (mbpd) in 2023.

“This represents an improvement over 1.15mbpd in 2022 but is 20 percent lower than the 2023 budgetary oil production of 1.69mbpd. The outcome is an improvement in government capital expenditure to N2.35 trillion representing a budget implementation rate of 43.9 percent,” he said.

On the budget, he said the Federal Government 2023 budget appeared quite ambitious, as revenue projections sit far above actual in 2022, especially as oil revenue continues to falter and there is no end in sight to the sector’s problems.

Despite the rising concern about the public debt situation, he said the government is not slowing down on borrowing.

The outlook projected that if fuel subsidy is not removed in 2023, fiscal deficit and public debts are set to expand further.

The outlook stated that the 2023 budget, which intensifies spending to support the economy, like previous ones, does not state how the government intends to support growth, employment and tame inflation.

He added that using N435.57/$1 as the benchmark exchange rate is also unrealistic and shortchanging the government.

One of the panelists, Fiscal Policy Partner and Africa Tax Leader for PwC, Taiwo Ayodele, lamented the lack of coordination between the monetary and fiscal arm of government.

He listed measures such as harmonisation, data gathering and effective policy coordination for Nigeria to achieve shared prosperity

“In the budget for 2023, 63 MDAs are generating revenue, yet the money is not getting to the government. Harmonisation is an issue, second is using data for intelligence. Economic activities are centred on government one-way or the other, but we are not connecting the dots.

“Also for the government to do effective policy coordination, we need to remove the impediments for people trying to raise finance through the capital market. These are enablers to finance prosperity, to show that the government becomes creative on how they finance not only bonds, but also to ensure they look at equities in finance and also listing of government entities in the capital market,” he said.