Nigeria, Africa’s fourth-largest economy and most populous nation, stands at a critical crossroads. Despite its vast natural and human resources, the country faces a plethora of macroeconomic challenges and a growth trajectory that struggles to keep pace with population expansion and the yearnings of the teeming inhabitants. For many Nigerians, this paradox of abundance and adversity raises a pressing question: why has prosperity remained elusive? As Nigeria embarks on a transformative journey towards unlocking its vast economic potential, the pathway to shared prosperity should, by now, become increasingly clear.
“The 2024 macroeconomic happenstance revealed a mixed bag of headwinds and temperate optimism: inflationary adjustments, shifts in the monetary and fiscal policy mix, and heightened geopolitical unrest.”
On this date, January 29, 2025, we stand at a critical juncture where strategic reforms and innovative policies formulated with appropriate sequencing can pave the way for sustainable growth and inclusivity. With projections indicating a modest recovery fuelled by stabilising inflation and improved global demand, the opportunity to harness our resources and talents has never been more promising. This piece explores the key challenges holding back Nigeria’s economic potential while uncovering the immense opportunities that, if leveraged wisely, could set the nation on a path to sustainable growth and shared prosperity.
Nigeria’s one-year micro and macroeconomic dashboard
In 2023, Nigeria found itself on the brink of a fiscal crisis. A weak revenue base, an unsustainable petroleum subsidy, and large fiscal deficits—exacerbated by a dangerously high debt service-to-revenue ratio—pushed the country to the edge of financial instability, necessitating urgent fiscal reforms to avert a full-blown crisis.
Following the removal of the petroleum subsidy and the managed float of the naira, alongside external shocks from the Russia-Ukraine and Israel-Hamas conflicts, Nigeria’s economic outlook remains uncertain. Despite these challenges, the World Bank projects a 3.3 percent GDP growth rate for Nigeria in 2024, while the Nigerian government anticipates a more optimistic expansion of 3.76 percent as we await the official figure before the end of 2025 Q1.
The pursuit of stability and growth in both macro and microeconomic landscapes will significantly influence the policies and programmes of economies worldwide in 2025. The 2024 macroeconomic happenstance revealed a mixed bag of headwinds and temperate optimism: inflationary adjustments, shifts in the monetary and fiscal policy mix, and heightened geopolitical unrest.
For Nigeria, the macro and micro dashboards also showed a mixed sentiment of obstacles and prospects influenced largely by the shifting monetary and fiscal policy dynamics. While the monetary policy has leaned towards contractionary measures, relying on orthodox strategies that may distort risk assessments, the fiscal policies have adopted an expansionary approach that necessitates careful evaluation. One can then submit that the success or otherwise of both policy decisions is its reflection in the core segment of microeconomic agents’ welfare—households and businesses as depicted below.
Nigeria’s GDP growth has been closely tied to fluctuations in oil prices, reflecting periods of oil booms, crises, recessions, pandemics, recoveries, and reforms from 2014 to Q3 2024. Data from the NBS highlights that low oil prices, particularly during the 2016 recession and the 2020 pandemic, significantly hindered economic growth. Conversely, recovery phases driven by rising oil prices have shown improvements in GDP figures. With recent reforms and stable oil prices in 2024, Nigeria’s economic outlook for 2025 will depend on deepening economic diversification, fostering new growth sectors, implementing impactful reforms, and creating resilience across industries to mitigate the risks of future oil price volatility and external shocks.
Read also: Building Nigeria’s circular economy: A framework for sustainable growth
Challenges hindering Nigeria’s inclusive growth
Nigeria’s economic growth is hindered by several critical challenges that require urgent attention. The country’s overreliance on oil revenue makes it highly vulnerable to fluctuations in global oil prices, as seen during the 2016 recession and the 2020 pandemic when declining prices significantly constrained growth. Efforts to diversify the economy have been slow, leaving other sectors like agriculture, manufacturing, and technology underdeveloped and unable to drive sustainable growth.
Another major issue is the severe infrastructure deficit. Chronic power shortages force businesses to rely on costly diesel generators, while inadequate and poorly maintained road networks, ports, and railways raise logistics costs and hinder economic activities. Additionally, limited access to high-speed internet and digital infrastructure restricts the growth of the technology sector and prevents businesses from fully participating in the digital economy.
Policy inconsistency and governance issues further exacerbate the situation. Frequent changes in policies create uncertainty for investors, while bureaucratic inefficiencies and weak institutional frameworks hinder the effective implementation of reforms. Governance weaknesses also contribute to an unpredictable economic environment, discouraging both local and foreign investment.
Corruption and economic leakages are significant barriers to progress. Pervasive corruption diverts funds meant for public services and infrastructure projects into private hands, undermining public trust and reducing the efficiency of government spending. Revenue leakages, such as unaccounted oil revenues and inefficiencies in tax collection, further deplete resources that could be used for development.
Youth unemployment and brain drain are also major concerns. With one of the highest youth unemployment rates globally, many young Nigerians struggle to find jobs that match their skills, fuelling poverty, insecurity, and social unrest. At the same time, a significant number of skilled professionals leave the country in search of better opportunities abroad, depriving Nigeria of the talent needed to drive growth and innovation.
Nigeria is also grappling with a deepening crisis of confidence in public policy, driven by a long-standing absence of clear fiscal direction, inconsistent policies, and a predominantly reactive approach to governance. The lack of transparency and accountability in government finances has fostered an environment of uncertainty, encouraging speculative behaviours and survival-driven strategies among businesses and households. These issues have further compounded economic challenges, resulting in escalating inflation, currency devaluation, and sluggish economic growth.
Addressing these challenges is essential for Nigeria to unlock its economic potential and achieve sustainable development.
BDI commentary: How do we turn the corner?
What then is the crystal ball portending for the nation in 2025? Nigeria is set to face challenging times in 2025, not because of ill fate but due to a misaligned economic structure and poor policy sequencing. The government has been overly fixated on short-term income statement concerns, neglecting the potential opportunities on the balance sheet—the asset side of the nation’s financial position. A decline in average oil prices, driven by factors such as increased U.S. oil production and sluggish global economic growth, would significantly reduce government revenues. However, costs are unlikely to decrease at the same rate, leading to a widening budget deficit as revenues lag behind expenses. As a result, the federal government will struggle to meet its fiscal obligations, inevitably turning to increased borrowing to bridge the gap.
To bridge economic gaps and drive prosperity, several key enablers must be prioritised. An efficient mobility system enhances productivity by improving transportation networks and facilitating seamless trade through a more efficient customs service. Reducing business costs, particularly through enhanced security measures, is crucial for fostering a stable investment climate.
Technology and internet services play a vital role in economic transformation, requiring strategic investments in digital literacy, connectivity, and data oversight to enhance productivity. Strengthening infrastructure funding instruments for sectors such as health, education, and rail is essential, alongside leveraging public-private partnership (PPP) models and deal books to drive large-scale projects.
Tax policies and subsidies should be designed as productivity incentives, while intellectual property rights, innovation incentives, and patent protections must be enforced to encourage creativity and maintain a competitive edge. The capital market should be positioned as a key platform for financing infrastructure projects, ensuring broad-based ownership and returns.
Security investments are also critical, necessitating increased funding for a modernised security architecture and expanded opportunities in military hardware procurement. Additionally, curriculum reforms must align with evolving industry demands, incorporating new funding models and setting minimum standards to bridge the gap between academia and industry.
By integrating these enablers, Nigeria can create a robust economic framework that fosters innovation, enhances productivity, and drives long-term prosperity.
Nigeria stands at a pivotal point with immense opportunities to drive economic transformation and achieve sustainable growth. To unlock this potential, the country must leverage its vast resources and strategic position.
Achieving the needed transformation requires sound policy implementation and proper sequencing. Diversifying the economy, investing in infrastructure, fostering public-private partnerships, and promoting ease of doing business are crucial steps. Additionally, empowering SMEs and strengthening anti-corruption efforts will ensure resources are effectively utilised. All stakeholders must play their part. The government must provide a stable regulatory framework and consistent policies, while the private sector drives innovation and investments. Civil society should advocate for inclusive growth, and international partnerships can bring in resources and expertise.
With bold reforms and strategic action, Nigeria can transition from its current challenges to a thriving, diversified economy, unlocking prosperity for all.
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