A recent report from the World Bank reveals that a significant proportion of the extremely poor population in Sub-Saharan Africa is concentrated in Nigeria and the Democratic Republic of Congo. The report, titled “Addressing Inequality to Revitalize Growth and Alleviate Poverty in Africa,” sheds light on the challenges faced by the region, including high trade costs, insecurity, poor infrastructure, and elevated levels of inequality.
According to the Washington-based lender, the cost of trade in Nigeria and Ethiopia is four to five times higher than that in the United States, primarily due to factors such as insecurity, transportation costs, topography, and inadequate road infrastructure.
Sub-Saharan Africa, comprising 31 countries, is noted globally for having the highest extreme poverty rate, substantial inequality levels, and a weak ability to translate economic growth into poverty reduction. Despite periods of economic growth, the region has struggled to sustain and expand these periods, often facing economic recessions.
In February of this year, countries such as Nigeria, Ethiopia, Malawi, Sierra Leone, and Zimbabwe experienced a notable rise in food inflation, highlighting the ongoing economic challenges in the region. The report underscores that nearly two-thirds of Nigeria’s population (133 million people) were multidimensionally poor in 2022, lacking access to essential services like healthcare and education, alongside high unemployment rates.
The report states, “Sub-Saharan Africa has faced challenges in deepening and prolonging episodes of growth. Growth in the region tends to be volatile, and recessions, when they occur, are more severe and extended compared to other regions. This has significantly impacted the broad-based growth of people’s consumption spending in the region.”
Furthermore, the report highlights that despite recent economic growth, the region’s pace of poverty reduction remains below that of the previous decade (2000–2014), indicating that economic expansion alone is insufficient to significantly alleviate poverty.
The World Bank also points out that Sub-Saharan Africa is the second-most unequal region globally, with inequality levels surpassing those in countries with similar income levels. The report notes the region’s challenges in translating economic growth into poverty reduction effectively, citing high inequality as a significant barrier.
Regarding market distortions, the report mentions disparities in prices between imported food and non-food products across Africa, indicating a lack of market integration. The lack of connectivity and market integration hampers firms and farms from scaling up their production, further contributing to income inequality.
Food inflation and currency depreciation continue to be significant factors driving inflation across the region, accounting for 50% of the overall inflation rate. The report indicates that about one-third of Sub-Saharan African countries experienced double-digit year-on-year rates of food inflation by February 2024, with countries such as Ethiopia, Malawi, Nigeria, Sierra Leone, and Zimbabwe facing the fastest increases.
Looking ahead, the World Bank projects that Nigeria’s inflation rate may decrease to around 15.1% by 2026, attributed to the tightening of monetary policy and exchange rate stabilisation measures. However, the report notes that the rate may still hover around 24.8%. Nigeria’s headline inflation rate rose for the 14th consecutive time in February, reaching 31.70%.
The report emphasises that without adequate structural reforms, growth in Nigeria’s non-oil sector will remain sluggish. It projects a growth rate of 3.3% in 2024 and 3.6% in 2025–26, highlighting the need for sustained macroeconomic and fiscal reforms to achieve higher growth rates.
In recent months, the Central Bank of Nigeria has raised its monetary policy rate in efforts to combat inflation, increasing it by 200 basis points to 24.75%. The report notes that inflation in Nigeria has been on the rise due to federal government reforms, including the removal of petrol subsidies and currency devaluation.
Despite these challenges, the World Bank emphasises the potential for growth and poverty reduction in Sub-Saharan Africa with the implementation of effective policy measures, structural reforms, and improved market integration.