Nigeria is one of Africa’s most influential nations and holds significant power both economically and geopolitically. With a population of approximately 225 million people, it’s not only the most populated country in Africa but also has the continent’s largest economy. In 2022, Nigeria’s GDP reached an impressive $477.39 billion. Meanwhile, the country has been grappling with pressing challenges of poverty, crime, corruption, and overreliance on oil.

Historical Background

In the pre-colonial era (16th – 18th centuries), Nigeria’s economy thrived on diverse exports. Agriculture played a significant role, with a variety of crops like yams, cassava, and millet ensuring self-sufficiency. The country’s strategic geographic location facilitated a flourishing trade, promoting the exchange of surplus agricultural produce. Additionally, craftsmanship contributed to economic activity, enabling the production of specialised items such as pottery, textiles, and metalwork for trade.

British colonial rule (1882 – 1960) significantly impacted Nigeria’s economic direction. It put an end to slavery and human sacrifice while supporting the economy and education. However, it was accompanied by extreme violence and, overall, left a lasting negative impact. The colonial authorities prioritised cash crops (crops produced for their commercial value rather than for use by the grower), such as cocoa, palm oil, and groundnuts, for export to Britain. This shift in production has had a detrimental and long-lasting effect on Nigeria, as local industries were neglected in favour of cash crops for export, resulting in a lack of industrialisation.

The discovery of oil by Shell-BP in the Niger Delta in 1956 was a significant turning point for Nigeria. By the 1970s, oil revenue accounted for over 90% of its export earnings. Nigeria was producing approximately 2.1 million barrels per day in 1998, as reported by Statista. This historical context is crucial for understanding modern challenges in Nigeria and how the legacy of British colonial rule continues to impact the country today.

Economic Challenges

Corruption among the authorities is a pressing issue, casting significant doubt over Nigeria’s economic landscape. While figures rank Nigeria as the 31st largest economy in the world in terms of nominal GDP (without any effect of inflation), beneath these statistics lies a pressing issue: poverty. The most recent data from “Trading Economics” (August 2023) indicates an inflation rate of 25.8%. This inflation is primarily due to the Naira’s depreciation, higher fuel and food prices, logistics costs, and the growth of money. It suggests a harsh standard of living.

Turning our attention to the labour market, the unemployment rate was 5.76% in 2022, according to “Statista”, with underemployment at 13.7% in Q4 2022 as reported by ‘The Cable’. These alarming figures highlight the challenges faced by Nigeria in growing its economy. These challenges are intensified by corruption in the government, resulting in embezzlement and extreme inequality, which hinders job creation and economic development.

In the context of foreign trade, Nigeria’s trade balance in 2022 revealed a deficit of approximately $9 billion. This deficit was driven by a decline in crude oil prices in the international market.

As Nigeria continues to grapple with the challenges of infrastructure deficits, corruption, income inequality, and an unequal distribution of wealth, citizens look to the government for aid. However, these issues are intensified by leaders prioritising personal gain above public welfare.

‘The country is not oil-rich, rather it is oil-dependent’ ~ Doyin Salami

Nigeria is the 6th largest daily oil exporter, contributing 5.8% to its real GDP, 80% to its budget revenues, and 95% to its foreign exchange earnings in 2019 (Statista). However, this heavy reliance on oil has had detrimental effects on Nigeria’s economic stability. The country’s economy is highly susceptible to oil disruptions, which are caused by conflicts in the Niger-Delta, oil theft, pipeline sabotage, corruption, poor maintenance, and price fluctuations. This vulnerability was made evident during Covid-19 when a sharp decline in oil prices caused Nigeria to slip into a recession in November 2020, as the economy shrank by 1.8%.

The cycle of poverty

Despite the considerable resources available, many Nigerians have no access to basic necessities, including electricity. The 2022 multidimensional poverty index survey revealed that 63% of people living in Nigeria were living in multidimensional poverty, a measure that reflects the areas of education, health, and living standards. This reflects the challenging conditions that many citizens in Nigeria face, with inadequate healthcare and limited educational opportunities. The lack of educational opportunities makes it almost impossible for individuals to secure employment, which means they can’t spend, get paid, or contribute to the economy, trapping them in a cycle of poverty. It’s very difficult to survive long in poverty, especially in Nigeria, and that’s why the average life expectancy is 56 for women and 54 for men.

A key factor of poverty in Nigeria is inflation, with the inflation rate reaching 21.82% at the beginning of this year, driven by higher food inflation. Inflation in Nigeria had risen for 10 consecutive months at this point, prompting a series of interest hikes from the bank. Food inflation, which accounts for most of Nigeria’s inflation basket was 24.32%. Policymakers have linked these pressures to Nigeria’s infrastructure problems, and the fact that most of the consumed items are imported. As a result, the poor in Nigeria cannot afford the prices of commodities in the market, and the vulnerable cannot eat twice a day. High inflation is killing the economy and may result in the collapse of it, which was predicted to happen after the elections this year. The cost of production has risen and has been difficult in contributing to national output. High inflation can also be attributed to a decrease in the supply of agricultural products to the market, as many farmers have not returned to farming due to fear of death or rape by bandits.

From 2015 to 2021, Nigeria experienced an average GDP growth of just 1.1%. To put into perspective, a rate of 2-3% is considered normal, and in this period, Nigeria experienced two economic recessions. During this, unemployment and underemployment rates skyrocketed to a record high of 56.1% in 2020, pushing a staggering 133 million people into multidimensional poverty, as reported by the ‘National Bureau of Statistics’.

Hope for the future

The future, however, holds promise. Following the 2023 election, the new administration, led by Bola Tinubu, has launched critical reforms aimed at addressing macroeconomic imbalances. These reforms have the potential to transform the lives of many Nigerians and lay a strong foundation for sustainable growth. Key measures include the removal of the petrol subsidy and foreign exchange management reforms, as highlighted in the Nigeria Development Update. The reform package also includes a set of complementary measures: a new social compact designed to protect the poor and most vulnerable while maximising collective impacts on growth, job creation, and poverty reduction. Notably, the removal of the petrol subsidy is expected to result in fiscal savings of over 11 trillion Naira by the end of 2025, signifying a positive  step toward economic recovery and stability.

 While Nigeria has faced significant economic challenges in the past, there is optimism for the future under Tinubu. My visit to Nigeria in 2021 revealed the stark reality of poverty, limited access to resources, and income inequality. However, as Nigeria endeavours to strengthen its economy in the coming years, there is a sense of hope for a better future.