Nigeria’s economy is now at a higher risk despite the bold reforms in 2023 that have worsened living conditions and led to the closure of many businesses, according to a new report by SB Morgen Intel.
The SBM Intel 2024 Africa Country Instability Index revealed that the most populous nation in the continent is fraught with rising food inflation, persistent insecurity and increasing poverty levels, raising the vulnerability risk of the country.
The Lagos-based data gathering and analytics firm also noted that Nigeria has become even more polarised now than ever, following the outcome of the 2023 election which has raised its political risk index.
Read also: World Bank projects Nigeria’s inflation to fall to 14.3% on reforms
“Nigeria’s economy continues to worsen, with rising food inflation, persistent insecurity across all geopolitical zones, and many people falling into extreme poverty,” SBM Intelligence said.
“It is more polarised now than ever after the 2023 election and the unpopular reforms of the new government, such as the removal of petrol subsidies, which has worsened living conditions and led to the closure of businesses,” it noted.
This is however a downgrade of the stable status the country had in 2023, indicating a deteriorating economic environment stoked by some unpopular reforms made by the President Bola Tinubu administration.
The president kicked off his first four-year term by immediately eliminating costly and unsustainable fuel subsidy programs which has kept prices artificially low.
This move was met with high inflation which is now at a 28-year high and sparked a cost-of-living crisis, heightening social tension and widespread protests as citizens kick against the rather rapid change in their purchasing power.
Read also: Nigeria’s economic reforms not yielding desired results – Report
Also in June last year, the Tinubu-led government unified the exchange rate and floated the naira, making the market more driven by fundamentals. But this has made the local currency shed over 70 percent of its value in the past 18 months.
The volatility of the exchange rate coupled with high energy prices, soaring inflation and hiking of key interest rates mean businesses will have to part ways with substantial profits and may struggle to stay afloat, evidenced in the exodus of multinationals and closure of local firms.
Nigeria dropped six points on the Risk Index this year, scoring 45 compared with 39 in 2023. According to SBM Intelligence, a higher score in the risk index means a higher level of political risk to business.
Other African nations sharing this risk status include Ethiopia, Comoros, Côte d’Ivoire, Benin, and Togo, reflecting broader economic and governance concerns across the continent.
A further analysis of the report shows that Sub-Saharan Africa recorded an average of 45.4 percent in 2024, an improvement from 47.7 percent in the previous year.
Out of 48 countries, 31 reported improved performance, while the rest deteriorated. Angola, Burundi, Chad, Togo, and Madagascar were the biggest gainers.
A cutback on governance costs drove Angola’s performance, while Madagascar’s GDP growth improved to 4.4 percent in 2023 from 4.3 percent in 2022.
Botswana, Seychelles, Nigeria, Namibia, and Zimbabwe were the biggest losers, the report indicated.
Botswana experienced a GDP decline of nearly two percent in the first quarter of 2024, and Zimbabwe experienced economic challenges such as debt and currency crises.
“The worst-performing entities are shared by Eastern and Southern Africa, at 40 per cent each–represented by countries such as Seychelles, Kenya, Mauritius, and Comoros on the East side and Botswana, Namibia, Zimbabwe, and Zambia on the South,” SBM Intel stated.
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