Eye brows have been raised over the recent growth in Gross Domestic Product (GDP), the highest since 2014 as Nigeria, once among the happiest nations in the world is now ranked 116 out of 149 countries in the recent Happiness Index.
In the lastest FDC report, Chief Operating Officer (COO) of Financial Derivatives Company (FDC) Limited, Bismarck Rewane, wondered why there is economic growth, but people are hungry?
In the report, Rewane also wondered why GDP is up and income levels are down.
During a Lagos Business School (LBS) Breakfast Session, more eye brows were raised, “Food prices are rising but inflation is falling! What do we believe,” many asked?
“We remember that in 1999 Professor Sam Aluko said: “The poor cannot sleep, because they are hungry! And the rich cannot sleep, because the poor are awake and hungry””, quoted Rewane.
“Nigeria ranks 116 out of 149 countries in the happiness index. The joy should naturally be accompanied with great news like economic growth and declining inflation. However, beneath this supposed happiness is the undercurrent of misery, which is reinforced by high unemployment (33.3 per cent) and rising multidimensional poverty. Nigeria’s misery index is at a record high of 50.68 per cent. People are worried about the divergence between great data and pain. In the words of Fela, Nigerians are “Shuffering and Shmiling! 49 sitting, 99 standing””, said Rewane.
The FDC report said, though it expects inflation for August to fall again to 16.8 per cent, the impact of insecurity, exchange rate pass through and higher energy costs could exacerbate inflationary pressures. The EIU projects inflation to average 17.1 per cent in 2021.
“For an investor trying to hedge against inflation, we recommend you diversify your portfolio to include investments in the Nigerian equities, US equities, real estate and possibly cryptos/precious metals or e-Naira”, said the FDC report.
Rewane said, it is very unlikely that the naira crashes to N600/$. The necessary and sufficient conditions for naira stability at the parallel market is a significant increase in foreign exchange supply at the official window rather than administrative solutions.
“We believe that the invisible hand is better than the hidden hand in bringing equilibrium to any market (forex market inclusive)”, said the report.
Phillips Consulting are equally afraid, saying rising insecurity and unemployment constitute key risks to the Nigerian economy. The World Bank recently estimated that over one million more Nigerians are expected to fall into poverty during 2020-22 due to the impact of Covid. With 86.9 million Nigerians currently living in severe poverty and unemployment at 33 per cent, strategic effort geared towards job creation and creating an enabling environment for businesses is required.
Similarly, the investment climate is pressured, underpinned by heightened insecurity across the country. Heightened insecurity continues to significantly weigh on investment climate, dragging down economic growth and job creation in the economy.