The African Development Bank (AfDB) has warned that an increase in prices of commodities and fuel could result in social unrest due to opposition to government policies such as subsidy removal.
This is according to the bank’s macroeconomic performance and outlook for 2024 where it projected the continent’s economy to grow higher than the 3.2% recorded in 2023.
The bank noted that increase in geopolitical tensions in Eastern Europe and the Middle East coupled with the El Nino phenomenon could trigger supply chain disruptions which could exacerbate energy and food inflation across the world with Africa more vulnerable to these shocks.
Furthermore, it warned that regional conflicts and political instability occasioned by disruptions in constitutional governments could have deleterious economic costs with resources meant for development and social support channelled into security and defence.
The report also explained that an unconstitutional takeover of the government may lead to sanctions which have negative implications for the economy.
Also, it warned that internal conflicts in countries could arise from an increase in energy and commodity prices occasioned by currency depreciation or subsidy removal referencing Nigeria, Angola, Kenya and Ethiopia where energy subsidies were removed.
It stated,
- “Internal conflicts and violence could also result from rising prices for fuel and other commodities due to weaker domestic currencies and reforms. For instance, the removal of fuel subsidies in Angola, Ethiopia, Kenya, and Nigeria and the resulting social costs have led to social unrest driven by opposition to government policy.”
Insights
- Nigeria has seen a consistent rise in the price of food and fuel in the past year. The inflation rate has increased for the 13th consecutive month to 29.90% as of January 2024.
- Food inflation which is the major driver of inflation has risen to 35.5% for January according to the CPI. This has thrown Nigerians into one of the worst costs of living crisis resulting in pockets of protests across the country.
- Across many states, transport, LPG (cooking gas) prices are at a record high of N1300 per kg while rice- Nigeria’s staple food now retails for around N70,000 per bag. This is above the earlier projection of the price of the commodity in 2023.
- The removal of fuel subsidy in May and the lethargic response from the government to provide insulators from the economic shock of the policy on the masses has worsened standards of living across Nigeria.
- Organised labour unions across the country organised protests last year to express displeasure at the increased cost of living. The Nigerian Labour Congress (NLC) already has another two-day protest on the ground to make their voices heard about the hardship across the country.