For Africa’s biggest oil producer to attain the 2.5 percent gross domestic product (GDP) forecast by the International Monetary Fund (IMF) for 2021, it would need to grow by an average of 3.15 percent over the next three quarters after a tepid 0.51 percent expansion in the first quarter.
Attaining the IMF forecast in itself does not mean much for the economy, which has not grown fast enough to reduce poverty since 2015.
“What does it matter if Nigeria meets the IMF’s 2.5 percent growth rate,” Andrew S. Nevin, partner/chief economist, PwC Nigeria, asked. “As long as the economy is not growing at 6-8 percent, we are still going backwards,” Nevin said.
Nigeria’s economic growth has not only been sluggish in the last five years but the expansion rate has also been triggered by a few sectors, a painful squeeze for Nigerians who are growing progressively poorer.
Africa’s largest economy grew by a paltry 0.51 percent in the three months through March from a year earlier, a slow recovery rate that remains too slow to create sufficient opportunities for a rapidly rising population.
Economic growth in Africa’s most populous nation averaged 1.2 percent between 2015 and 2020. The problem with that is the population grew two times faster at an average of 2.6 percent per year.
Until Nigeria’s economic growth outpaces the population growth rate or at least labour-intensive sectors grow at a faster pace, its economic growth will continually fail to have an impact on its citizens, analysts say.
Economic growth means a rise in real GDP. This enables a rise in living standards and greater consumption of goods and services.
It also makes it possible for governments to cater for any increases in population without having to lower the standard of living. It can also help to reduce government borrowing as a booming economy creates higher tax revenues.
With the current realities in Nigeria, Africa’s largest economy is best described as one that is stagflated (a blend of the high inflation rate and slow economic growth), a case of poor Nigerians becoming poorer in real terms, and the middle class getting thinned out.
While one in every three Nigerians is unemployed, those that have been able to pin a job spend about 65 percent of their income on food, the main driver of the country’s inflation rate (18.12% in April).
Food prices accelerated to the highest level in 15 years at 22.95 percent in March, but slowed in April to 22.72 percent.
With a low earning capacity that is far below the rising cost of living, Nigeria’s misery index, an indicator that is used to determine how economically well off the citizens of a country are, jumped to 50.48 percent in March 2021 from 14.75 percent in 2015.
“Climbing misery index implies declining economic activity and reduced consumption,” Charles Akinbobola, an analyst at Sofidam Capital, says.
Before COVID-19, about 80 million of Nigeria’s 200 million people lived on less than the equivalent of $1.90 a day. The pandemic and population growth could see that figure rise to almost 100 million by 2023, notes the World Bank.
While the impact of COVID-19 is easily blamed for the recent economic woes in Nigeria, an evaluation of the country’s macro-economic indicators before the pandemic shows Nigeria was grappling with low growth before the pandemic triggered a recession and created large financing gaps, including dollar shortages and inflation.
“The fiscal authority needs to sustain the current momentum in supporting the economy to grow beyond the population growth rate,” Ayodeji Ebo, head, retail investment, Chapel Hill Denham, states.
Tackling insecurity, improving the ease of doing business and creating an enabling environment are areas the President’s economic advisers recommend the government to pay urgent attention to boost economic growth and lift the vulnerable out of poverty.