Africa’s largest economy wobbles through seven years

Faced with two difficult recessions since 2015, Nigeria’s economy has wobbled through seven whole years, and even faces a bleak outlook as the Russia – Ukraine war lingers, coupled with the downside risks from the continued spread of the COVID-19 Pandemic.

Nigeria’s economy grew the fastest in eight years in 2021 by 3.40% and is forecast to grow in 2022 by 3.24%, according to CBN estimate; 4.2% federal government estimate; and 3.40 percent, according to the International Monetary Fund (IMF).

However these estimates look progressively bleak, and if achieved, would be about the best since 2015 that President Buhari and his All Progressive Congress ruling party took over the leadership of the Africa’s largest economy.

Before 2015, Nigeria’s economy averaged an annual growth of 6 to 7 percent, and in fact was reported to have expanded by 6.3 percent in 2014, according to World bank numbers. But the economy quickly took a dive to 2.7 percent in 2015; and later slid into a recession, after shrinking by 1.6 percent by the second quarter of 2016 -as slump in crude prices dealt a blow on public finances and battered the naira. According to the National Bureau of Statistics, the economy contracted by 1.51 percent that year.

But with a weak recovery from recession, it grew 0.8 percent in 2017; 1.9 percent in 2018; 2.2 percent in 2019 before it again, shrank by a record 1.8% in 2020, its deepest decline since 1983. The contraction was majorly as a result of the negative impact of COVID-19, while the external context was marked by capital outflows, intensified risk aversion, low oil prices, and shrinking foreign remittances.

In its Vision 2020 document, Nigeria had projected to become one of the largest 20 economies by 2020, but could not make the first 25. It only made 27th and 29th by 2021, reports say.

In terms of size, Nigeria’s GDP which progressively rose from 2010 was reported to be at over $546 billion in 2014 after an interesting rebasing which pushed it to the largest economy on the continent, overtaking South Africa. But by 2015, the economy’s size had reduced to $486.8bn and then to some $404.65bn in 2016; $375.75bn in 2017. It, however picked up to $397.19bn in 2018; $448.12bn in 2019; but slid again to $432.29bn in 2020, according to the World Bank. It is projected to have reached about $440bn by the end of 2021.

GDP per capita progressively dropped from $3,099 in 2014 to about $1,968 in 2017 before it peaked to $2,229 in 2019 and down to $2,097 in 2020 – making it 17th on the list of African countries

During his campaigns, first inauguration and subsequent re-election in 2019, President Buhari repeatedly made a lot of promises particularly on security, economy and anti-corruption.

In his June 12, 2019 speech for instance, the President had admitted that Nigeria possesses all the ingredients of a major economic power on the world stage, and that all that is required “is the will to get our acts together.” But citizens, many of who now live below the poverty line, without electricity and crashed purchasing power as the local currency continuously weakens are asking what has happened?

“We have water, arable land, forests, oil and gas and vast quantities of solid minerals. We are blessed with an equable climate,” Buhari had acknowledged in one of his speeches.

According to him, “no single cause can be identified to explain Nigerian’s poor economic performance over the years than the power situation.

“It is a national shame that an economy of 180 million generates only 4,000MW, and distributes even less.”

Read also: Nigeria’s economy to grow average of 3.2% till 2023- AfDB

But today generation of power – a critical input to both wealth generation and job creation hardly reaches 4,000MW for a country of well over 200 million, while even transmission and distribution of what is available has become very difficult, as industry players continue blaming one another.

Fuel scarcity and attendant queues in the oil rich nation country has become a norm, while farmers can hardly access their farms on account of persisting insecurity – kidnapping and banditry in the country.

The President equally promised to to attack unemployment frontally through revival of agriculture, solid minerals mining as well as credits to small and medium size businesses to kick – start these enterprises.

But today unemployment has risen to a record 33 percent and analysts expect it to be higher.

Beyond high unemployment and poverty levels and hunger, the surge in diesel prices is frustrating both homes and businesses everywhere in the country. Kerosene, which is synonymous with the poor now sells for almost N600 per liter, while where available, price of diesel, which have been deregulated have almost tripled to well over N800 per liter from just January prices.

Available data on Nigeria’s key macroeconomic indicators now indicate a bleak and suggest a likely subdued output growth for the economy for most of 2022, and even next year if urgent actions are not taken.

There are wide concerns that domestic and global headwinds, including frequent power and fuel shortages, covid-19 uncertainties, as well as potential negative outcomes from Russia-Ukraine war which have seen supply disruptions present downside risks to the already fragile economy.

Central Bank Governor, Godwin Emefiele had explained in March that the anticipated slowed growth “is hinged on the dampening impact to growth of rising energy prices in the domestic economy, tightening external financial conditions as some advanced economies pursue interest with liftoff as well as the persistence of legacy security and infrastructural problems.”

CBN authorities are particularly worried over the impact which the global price increase in petroleum and other products is already having on the Nigerian economy, especially imported inflation.

Apart from the CBN, many analysts are equally concerned about the unprecedented rate of oil theft in recent times, and its debilitating impact on government revenue and accretion to reserve. And according to them, Nigeria’s economic managers needs to wake up.