Economic growth in Nigeria over the last eight years has been truncated to recession twice due to a steep fall in oil prices in 2016, and COVID-19 in 2020. Coming out of the recession in 2021, the federal government had forecast GDP growth of more than 4 percent in 2022. That growth forecast has been adjusted to 3.1 per cent.
While a commodity-price plunge in 2015 was part of the problem plenty of damage was self-inflicted. In 2019 the government closed Nigeria’s land borders to all goods, purportedly to stop smugglers from competing with local producers. The result was higher inflation. Efforts to prop up the exchange rate by restricting access to dollars made it hard for businesses to import basic inputs. The Central Bank was forced to repeatedly devalue the naira anyway. Then the pandemic struck.
Budget deficits have ballooned to nearly 5 per cent of GDP, more than the 3 per cent recommended by the Fiscal Responsibility Act of 2007. The act was supposed to ensure prudent management of the country’s financial resources and long-term macroeconomic stability.
Although the Nigerian economy rebounded after the difficult years of COVID-19, growing 3.5 per cent in the first three quarters of 2022, the recovery has wrought more hardship on Nigerians.
This is because the main drivers of growth in Nigeria – oil production and services – don’t usually benefit most Nigerians in terms of jobs and business opportunities.
The country’s inflation rate increased to 21 per cent in 2022, compared to an average of 10.6 per cent for emerging and developing economies and 8.8 per cent for the world.
The year 2022 has also been unkind to poor and unemployed Nigerians. Rising inflation has raised the cost of living and pushed many into poverty. About 133 million Nigerians (63 per cent of the population), are poor, as measured in multiple dimensions.
Nigerian workers will remember 2022 as a year in which their purchasing power was badly eroded. 35 per cent of them became extremely poor, 31 per cent moderately poor and 23 per cent near poor.
Only 17 per cent of Nigerian workers hold jobs that pay enough to prevent them from falling into poverty.
Nigeria spent an estimated $9.6 billion on the fuel subsidy in 2022. This is expected to exceed $16 billion in 2023.
More mundane economic matters also augur poorly. Inflation reached almost 21 per cent in September, a 17-year high. Reducing it will require higher interest rates. Servicing debt is a worry because the government generates so little tax. Even a prolonged oil-price boom may not help. It should nudge up growth, but high oil prices hurt the public purse. Nigeria subsidises fuel. But the cost of doing so outweighs the extra revenue from higher oil prices—so the net effect is “nil or negative,” said Zainab Ahmed, the finance minister. Rampant theft makes things worse.
All this will likely impel the government to ditch subsidies, so as to free money to spend on things with a better chance of boosting growth, such as infrastructure and education. In the long-term, the declining importance of oil might shift Nigeria away from its current model, in which elites squabble over oil money while ignoring ordinary Nigerians.
Expectedly, 2023 will witness halting steps, at best, toward all this. More probable is a year of sluggish growth punctuated by devastating violence.
Widespread insecurity also hampers growth. In the first six months of 2022, 6,000 Nigerians were killed in the conflict. Militias in the north-west regularly target civilians for extortion and kidnapping.
Amid the gloom, there is some beacon of hope. In 2021 and 2022 growth edged up a little, boosted by a post-pandemic rebound and a stronger oil price. Lagos, the commercial capital, throngs with startups. In the first six months of 2022 Nigerian startups raised more than twice as much as in the same period of 2021. Nollywood produces about 2,500 films a year, the second-largest film industry in the world by output. Nigerian musicians from Burna Boy to Wizkid pack out stadiums around the world. But such bright flashes are not wide enough to impact much of the economy.
Some of the factors that inhibited growth in the economy have been itemised by notable economists and social affairs analysts.
Lecturer at Dangote Business School, Bayero University, Kano, and member of the Board of Economists, NATIONAL ECONOMY, Prof. Murtala S. Sagagi, said Nigeria had experienced several growth and development policies.
“Frequently, diversification, employment, and poverty reduction were at the core of the policy interventions. Over time, the outcomes of the policies have been characterised by inconsistencies and implementation gaps. As a result, the nation continues to grapple with falling living standards, insecurity, and various forms of social and political crises. Buhari’s administration gained unprecedented support, at its inception, because of the dismal performance of the previous regimes.
“However, the limited growth focus, innovation, and decisiveness exhibited by the administration over the last 7 years have dashed the hope of many Nigerians, especially the private sector that holds the key to the nation’s prosperity. The administration’s excessive reliance on the CBN’s half-backed policies and overbearing approaches, the failure to achieve efficiency and prudence in governance have cumulatively thwarted the country’s growth prospects, pushed the country once again into a debt trap, and made the country to be crowned as the poverty capital of the world.
“It is worth noting that towards the end of its tenure, the administration has unveiled the National Agricultural Technology and Innovation Policy (NATIP) and approved the establishment of the Agricultural Development Fund (ADF), which if properly implemented could help to transform the agricultural sector and foster link between the agricultural sector and industrial sector as the first credible step towards growth and economic diversification. When backed by well-thought-out macroeconomic policies, devoid of entrenched interests, and other disciplined sectoral interventions, Nigeria would once again bounce back and reclaim its position in the comity of nations.”
Petroleum engineer, and social affairs analyst, Dr. David Yusuf, on a phone call told NATIONAL ECONOMY that the federal government’s decision to shift petroleum subsidy removal till June 2023 was a missed opportunity to grow the economy. Yusuf said fuel subsidy is a drainpipe on the Nigerian government. He stated that being in his second term, President Muhammadu Buhari had nothing to lose by removing subsidies on a product that not even the federal government knows how much is consumed by the Nigerian population.
Another social affairs analyst, Bayo Johnson, said failure to curb corruption was a missed opportunity for growth in Nigeria. He said corruption at the national and sub-national levels had not abated even though the government had harped so much on its anti-corruption drive. Johnson said with the involvement in corruption of more than N100 billion by the accountant general of the federation, it can only be imagined how much rot is in the system.
“When it comes to the issue of the fight against corruption, President Buhari has not succeeded over the past seven years of his captaincy over the affairs of the nation,” Johnson said. He argued that there is a need for a fundamental shift from subsidised fuel.
Lecturer in the Department of Banking and Finance, Nnamdi Azikiwe University, Dr. Felix Echekoba, on his part, said the country is enmeshed in debt, to the extent that 83 per cent of the government revenues are devoted to debt servicing and has put the government in a tight corner that makes it difficult to invest in the people and other infrastructural projects.
He also said Nigeria will not recover from the eight months of strike action on the part of the Academic Staff Union of Universities (ASUU). He added that as a result of a long time out of school, many students had found their way to other countries and they may never come back home to serve the motherland. He also stated that during the strike action, many academicians, including professors, left for greener pastures abroad. He stressed that such assets may never come back home.
On his part, the chief executive of Anthill Concepts, and member of the Board of Economists, NATIONAL ECONOMY, Dr. Emeka Okengwu, said the major factor hindering the growth of the Nigerian economy is low productivity. He cited factors such as energy, lack of capital, lack of allied infrastructure, transportation, and natural factors such as climate change that has created port migration, desertification, food crisis, and human factors of insurrection and insurgencies. He said all of that can be linked to low productivity that has truncated growth in 2022.
The World Bank had said Nigeria’s growth performance, and its fiscal and external buffers, have decoupled from high oil prices, and macroeconomic vulnerabilities have increased. The Bank said it is urgent to address the key drivers of this decoupling and make reforms to strengthen Nigeria’s macro-fiscal framework. The Bank said the Strategic Revenue Growth Initiative (SRGI) of the federal government is a welcome first step, reversing the previously declining trend in non-oil revenues as a share of GDP. This initial success needs to be sustained and built upon.
“Nigeria has a choice to implement critical macroeconomic and structural reforms that can reduce crisis vulnerabilities and increase growth. Doing so will lift per-capita incomes, sustainably reduce poverty and deliver better life outcomes for many Nigerians,” said Shubham Chaudhuri, World Bank country director for Nigeria. “Urgent business-unusual choices are needed to avoid a scenario in which up to 80 million working-age Nigerians do not have a full-time job by 2030 and up to 23 million more Nigerians could be living in extreme poverty,”he added.
