Nigeria: Rising Unemployment and Food Prices Ignite Social Unrest

(15 January 2021) Rising global food prices, low local and global oil prices, and the high unemployment rate in Nigeria where 40% of the population already lives below the poverty line fueled record-high incidents of political and social unrest in 2020. While October was by far the most conflict-prone month, the year clocked in more than 1.5 times the number of conflicts recorded in 2019. And, while the world outside Nigeria may speculate automatically that Boko Haram is to blame, the terrorist group is responsible for only 30 percent of the uptick in conflicts. 

The conflict has many costs, and 2021 will see these mature further in Nigeria as the government seeks policy avenues and external support in the wake of 2020. The economy is reeling from demand and supply shocks that have translated into stagflation - a decline of economic growth amidst high inflation and unemployment rate. During Q2 2020, Nigeria's GDP decreased by 6 percent and unemployment increased to 27 percent (compared to 23% in 2018).

• Headline inflation rose from 12 percent in May to 15 percent in November 2020, propelled by food supply shortages and increasing petrol prices. Given Nigeria's high vulnerability to global grain prices—net imports of cereals constitute 24% of production—rising global food prices coupled with currency depreciation disrupted domestic food supply.
• Demand was constrained by decreased household incomes caused by high unemployment (partly resulting from COVID-19 containment measures) as well as reduced oil exports and government spending. Supply was negatively affected by food shortages caused by rising food prices (a global phenomenon) and the depreciation of the naira. 
• The government introduced a limited budget stimulus package (1.8% of GDP) because of Abuja's budget deficit and dwindling foreign reserves. However, due to the country's expansionary monetary policy, the overall economic response measures accounted for about 3 percent of the country's GDP during the spring-summer period. In October, when the protests became more frequent, the government increased the economic stimulus to 6 percent of GDP.