Former head of the Nigerian Bureau of Statistics (NBS), Dr. Yemi Kale, has voiced his concern over the federal government’s move to secure a $800 million World Bank loan to be disbursed among poor Nigerians.
Kale, who is now a partner, Chief Economist, and Head of Research at KPMG Nigeria, said the move may compound the nation’s inflation.
The move by the federal government to secure additional loan days before President Muhammadu Buhari leaves office is facing heavy backlash.
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The Socio-Economic Rights and Accountability Project (SERAP) , among other concerned Nigerians, has asked the World Bank to decline the loan request as Buhari has no justification for seeking the loan. The non-governmental organization said there is a transparency concern to be addressed and asked the World Bank to wait on the incoming administration.
Kale’s statement came on the heels of a report by the NBS that headline inflation has climbed 22.22% in April.
Also, the budget office lamented last week that Nigeria now has a limited borrowing space due to its poor debt-to-revenue ratio, which will spell trouble for the country if it exceeds its limits.
Against this backdrop, Kale said borrowing $800 million to be disbursed among 10 million poorest households in the country will further stoke inflation.
Buhari had approached the Senate, seeking approval for the loan which he said will be disbursed to cushion the effect of fuel subsidy removal, previously scheduled for June, 2023.
Kale said that besides exacerbating Nigeria’s public debt stock, another challenge with the loan will be how to properly identify the 10 million households.
“Minus the obvious debt issue and the inevitable challenges with properly determining, targeting, and disbursing to the 10 million “poorest” households, this could worsen inflation. Why not more non-cash-based palliatives? Eg., tech-based transport vouchers or health/education support, etc,” he said.
Given how the Central Bank of Nigeria has consistently raised interest rate in the past months, Kale said it is now obvious that the country’s inflation is not driven by demand but by the cost of transportation.
“Both inflation and the money supply appear to have been unaffected by MPR since September 2021. Rather, inflation has surged and the money supply is unbothered, suggesting the drivers of inflation are not demand. Seems to be more transport cost-driven. We are just increasing finance costs and squeezing growth,” he said.
The former Statistician-General of Nigeria advised the government to deploy the fund to issue tech-based transport vouchers to Nigerians or use the fund for education or health support rather than distributing cash.
There is concern that the loan, if approved, will never reach the “poorest” Nigerian households as claimed by the federal government as it will be diverted by corrupt government officials.