According to the World Bank’s ‘Macro Poverty Outlook for Nigeria: April 2024’, rising inflation coupled with weak earnings resulted in 10 million Nigerians slipping into poverty in 2023.

The report paints a grim picture of an economy where nominal earnings have failed to keep pace with soaring inflation rates, leading to a decline in living standards across the country.

“Nominal earnings have not kept up with inflation, pushing another 10 million Nigerians into poverty in 2023,” it said.

The report reveals alarming statistics regarding poverty rates in Nigeria across various economic thresholds. Notably, 30.9% of the population falls below the international poverty rate of $2.15 per day. Even more concerning is the fact that 63.5% live in poverty according to the lower middle-income threshold of $3.65 per day, while a staggering 90.8% fall below the upper middle-income poverty line of $6.85 per day.

Root Causes of Economic Strain

The dire economic situation is attributed to a combination of weak macroeconomic fundamentals and deep-seated structural constraints. The overreliance on the oil sector is identified as a significant factor, with its deteriorating performance contributing to macroeconomic instability. Low state revenues, driven by factors such as an expensive petrol subsidy and ineffective tax rates, further exacerbate the challenges faced by the government in providing essential public services.

Additionally, high levels of inflation, fueled by loose monetary policies and depreciating exchange rates, continue to erode purchasing power and hinder economic growth. Structural issues such as inadequate infrastructure, high trade costs, insecurity, weak institutions, and low levels of human capital development further compound Nigeria’s economic woes.

“Nigeria’s economic growth has been insufficient to raise living standards, weighed down by weak macroeconomic fundamentals and several structural constraints. Overreliance on the oil sector for fiscal revenues, exports, and FX inflows led macro stability to erode with the sector’s deteriorating performance in recent years,” the report noted.

“Low revenues—including due to a costly petrol subsidy, low tax rates, and weak tax administration—have limited state capacity and public service delivery.

“Inflation has remained high and escalating on the back of a relatively loose monetary policy and exchange rate depreciation. Structural factors holding back the country’s growth potential include lack of adequate energy and transport infrastructure, high domestic trade costs and foreign trade protectionism, widespread insecurity, weak institutions, and low levels of human capital development.”

Outlook and Projections

The World Bank noted the urgent need for ambitious reforms centered around macroeconomic stabilization to address these challenges. Economic forecasts predict an average growth rate of 3.5% between 2024 and 2026, slightly outpacing the population growth rate. However, poverty rates are expected to continue rising in 2024 and 2025 before stabilizing in 2026, driven by ongoing reforms and persistently high inflation.

Since 2015, Nigeria’s inflation rate has been on an upward trend, reaching 33.2% in March 2024. Food inflation has surged to 40.01% year-on-year, driven by rising prices of essential items such as garri, millet, and yam.

Moreover, the cost of Housing, Water, Electricity, Gas, and Other Fuels has soared by 27.64% over the past year, further burdening Nigerian households amidst escalating inflation and declining incomes.

Against this backdrop, more Nigerians are finding it difficult to cope, as the cost of goods and services outweighs their earning power. This suggests a likelihood of more Nigerians falling into abject poverty in the next two years.

Efforts to stabilize the economy are expected to gradually moderate inflation to 15.1% by 2026, supported by tightened monetary policies and exchange rate stabilization initiatives.

The report highlights the urgent need for comprehensive reforms to address Nigeria’s economic challenges and alleviate the growing burden of poverty on its population.

The periwinkle rarely drops the precious gems until it is cracked. For years, China has possessed latent capabilities in the semiconductor industry. But magically, to unlock those abilities, US sanctions were needed. So, when the sanctions came, China abandoned US chips and looked inwards.

Today, it is having a moment: “In the wake of US trade restrictions on advanced chip-making equipment, China’s integrated circuit (IC) output witnessed a remarkable surge of 40% to 98.1 billion units in the first quarter of the year, per SCMP.”

When I wrote my book – Nanotechnology and Microelectronics: Global Diffusion, Economics and Policy – which won the IGI Global 2010 Book of the Year award, the ingredients of greatness were visible in China. The United States used sanctions to move China years ahead, and today, those sanctions have created immense competitions for American companies.

You can ask Apple: “The new Pura 70 series offers four phones at price points similar to the iPhone’s, and it’s presumed to run on an advanced, China-made chip, though Huawei has not revealed that information. The company’s smartphone shipments in China jumped 64% year over year in the first six weeks of 2024, per Counterpoint Research; iPhone sales dropped 24% over that same period.”

Due to those chips, very soon Apple will become history in China, and you can add Tesla, and many other US companies. Semiconductor sanctions woke a sleeping dragon, and now it is devouring everything on the path. Do not find ways to motivate your enemies.

The periwinkle rarely drops the precious gems until it is cracked. For years, China has possessed latent capabilities in the semiconductor industry. But magically, to unlock those abilities, US sanctions were needed. So, when the sanctions came, China abandoned US chips and… pic.twitter.com/N7HWl0mdKB

— Ndubuisi Ekekwe (@ndekekwe) April 18, 2024

In the wake of US trade restrictions on advanced chip-making equipment, China’s integrated circuit (IC) output witnessed a remarkable surge of 40% to 98.1 billion units in the first quarter of the year, per SCMP.

This expansion emanates from the country’s focus on boosting the production of older-generation chips while grappling with constraints imposed by international trade dynamics.

March alone witnessed a staggering 28.4% jump in national IC output, reaching an unprecedented high of 36.2 billion units, as reported by the National Bureau of Statistics (NBS) on Tuesday.

The NBS highlighted the accelerated growth in China’s hi-tech manufacturing sector, reflecting the robust expansion of the semiconductor industry, which is increasingly localized. Haitong Securities echoed this sentiment in a recent report, forecasting a strong rebound in China’s IC production for the year.

The surge in China’s IC output is attributed in part to robust demand from downstream sectors, notably new energy vehicles and smartphones. Government data revealed a 29.2% increase in new-energy-vehicle output in the first quarter, reaching 2.08 million vehicles, while smartphone production expanded by 16.7% during the same period.

In recent years, China has significantly expanded its IC production capacity, with output nearly tripling in the first quarter of 2024 compared to the same period in 2019. However, under the US embargo on advanced chip technologies, Chinese investments have predominantly focused on mature semiconductors, leading to concerns about potential overproduction.

The Centre for Strategic and International Studies highlighted this trend, suggesting that US export controls may inadvertently drive state-backed investments in legacy-chip production, potentially paving the way for Chinese dominance in this sector.

“An unintended consequence of US export controls on advanced chip technology to China may be a wave of state-backed investment leading to overproduction and, potentially, Chinese dominance of global legacy-chip production,” researchers wrote.

Taiwan-based IC research company TrendForce projected that China’s global share of mature-process capacity could reach 39% by 2027, further underscoring the country’s growing influence in the semiconductor industry.

China’s efforts to achieve self-reliance in core technologies have intensified, particularly with initiatives such as the Xinchuang campaign, aimed at developing local alternatives to foreign chips, systems, databases, and software. Beijing aims to bolster the Chinese tech sector, targeting an annual output of 100 billion yuan (US$13.9 billion) by next year.

Despite these ambitious initiatives, China remains heavily reliant on chip imports, with IC imports growing by 12.7% to 121.5 billion units in the first quarter. IC exports also edged up by 3% to 62.4 billion units, according to data released by the General Administration of Customs.

Semiconductors continue to rank as China’s largest import item, surpassing even crude oil in the previous year. This highlights the challenges, amid the country’s ongoing efforts to overcome the impacts of US trade sanctions and build self-sufficiency in semiconductor production.