By Lawan Musa Danlami (Baba Lawan)
November 7, 2024
Nigeria, the giant of the African continent, is a multi-ethnic and culturally diverse federation comprising 36 autonomous states and the Federal Capital Territory. The political landscape is partly dominated by the ruling All Progressives Congress (APC), which controls the executive arm of government, holds a majority in both the Senate and House of Representatives, and governs the majority of states.
President Bola Ahmed Tinubu was sworn into office on May 29, 2023, following his victory in the February 2023 presidential election. Nigeria continues to face numerous social and economic challenges, including insecurity such as banditry and kidnappings, particularly in the northwest region, continued insurgency by terrorist groups in the northeast, and separatist agitations in the southeast. President Tinubu has pledged to turn around the economy and ensure security across the country. Civil society, the media, and other groups remain committed to advocating for reforms and actions to improve economic and social outcomes for citizens.
Economic Overview of the Country
Between 2015 and 2022, growth rates decreased, and GDP per capita flattened, driven by policy missteps compounded by various shocks. Monetary and exchange rate policies became increasingly distortive, eroding confidence; fiscal deficits increased due to lower oil production and costly subsidies for electricity, gasoline, and maintaining an overvalued official exchange rate. Trade protectionism also increased. The economy was further affected by external shocks, including the COVID-19 pandemic, higher global food and fertilizer prices following Russia’s invasion of Ukraine, as well as domestic shocks, such as a destructive demonetization policy in early 2023 and severe floods in October 2022 and September 2024.
Since the change in administration in May 2023, the country has been pursuing bold reforms to reestablish macroeconomic stability and foster growth. The gasoline subsidy has been largely removed, and the exchange rate has been unified and made market-reflective, eliminating the parallel market premium and generating substantial fiscal and economic benefits. The Central Bank of Nigeria has appropriately tightened monetary policy, focusing on price stability, aided by the government’s commitment to end deficit monetization. Although these measures are helping to turn the economy around, inflation remains high, increasing hardship and poverty. To support the most vulnerable, the government has been implementing temporary cash transfers, reaching 15 million households.
Sustained and expanded macroeconomic reforms create a foundation for growth and poverty reduction, calling for deep structural changes. Current reforms are enhancing Nigeria's international competitiveness, increasing its attractiveness for domestic and foreign investments, reducing fiscal risks related to debt, and creating fiscal space. However, addressing longstanding constraints to growth remains crucial. This includes reducing trade barriers, improving trade facilitation, increasing access to reliable power supply, and enhancing the business environment. Transport infrastructure investments, led by the private sector, could integrate the domestic market, allowing businesses to benefit from economies of scale. Improving competitive forces to boost productivity requires not only lowering import barriers but also enhancing competition policy and its enforcement. Reducing insecurity—from banditry to informal checkpoints along trade corridors—is essential to increase production across sectors such as agriculture and oil.
Social Development Challenges
Despite having Africa’s largest economy and population, Nigeria offers limited opportunities to most of its citizens. Nigerians born in 2020 are expected to be only 36% as productive as they could be if they had full access to education and health—the seventh lowest human capital index in the world. Weak job creation and limited entrepreneurial prospects prevent the absorption of the 3.5 million Nigerians entering the labor force each year, prompting many to emigrate in search of better opportunities. The poverty rate was estimated to have reached 38.9% in 2023, with 87 million Nigerians living below the poverty line, making it the world’s second-largest poor population after India.
Spatial inequality remains significant, with the best-performing regions comparable to upper middle-income countries, while the worst-performing states fall below the average for low-income nations. In many areas of Nigeria, state capacity is low, service delivery is limited, and insecurity and violence are widespread. Infrastructure gaps restrict access to electricity and hinder domestic economic integration, preventing the country from leveraging its large market size—a challenge further exacerbated by trade protectionism. Emerging problems, such as the increased severity and frequency of extreme weather events, especially in the northern parts of the country, compound these longstanding development issues.
Recent reforms provide an opportunity for a new social contract to drive Nigeria’s development. Strengthening macroeconomic fundamentals will enable the pursuit of structural reforms and restore economic growth. The current low social and economic equilibrium could shift to one marked by a more effective and well-funded state that provides efficient public services, public goods, and a conducive environment for the private sector to thrive, creating quality jobs for Nigerians.
Today, almost all Nigerians face hardships caused by the government’s economic policies. Consequently, many political and economic analysts are calling on the government to reconsider its previous stance to alleviate the suffering of ordinary citizens grappling with inflation, hunger, banditry, and other challenges.
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Opinion