Nigeria, the most populous country in Africa, is getting ready for what is expected to be a fiercely contested presidential election in February, and whoever wins is expected to inherit a lot of burdening economic problems.
Throughout most of the North, bloodshed and banditry as well as the destruction of oil assets in the South have been hallmarks of President Muhammadu Buhari’s administration. Roads between large cities have been plagued by kidnapping gangs, and the mass abduction of schoolchildren, such as the Chibok girls, has become common.
Thus, the future prospects for the next president are beginning to look ugly due to mounting debts, little or non-existing oil savings, soaring petrol subsidy bills, cost of living crisis, and insecurity.
Below are the hurdles ahead of Nigeria’s next president
Increasing debt service
Data from the Budget Office of the federation show that every year since 2015, the federal government has spent more money servicing debt, and the trend is set to stretch for the ninth straight year, according to the 2023 budget which shows that the government is budgeted to spend N6.31 trillion on debt servicing, 75 percent higher than the amount in the 2022 budget and 50 percent more than the actual amount spent in 2021.
Furthermore, Fitch Ratings and Moody’s Investor Service have downgraded Nigeria’s long-term foreign-currency issuer default rating (IDR), on account of high debt service.
Fitch announced on Friday that it cut Nigeria’s foreign currency IDR to ‘B-‘ from ‘B’, saying the outlook is stable stating that “High debt service drives downgrade: The downgrade to ‘B-‘ reflects continued deterioration in Nigeria’s government debt servicing costs and external liquidity despite high oil prices in 2022.”
The fiscal deficit, which has over the years become burdensome, was estimated at N8.17 trillion in 2022, inclusive of the supplementary budget, but as of the end of November, it was recorded at 6.37 trillion. The deficit was totally financed by borrowings, mostly from domestic sources.
In the 2023 budget, the fiscal deficit to GDP amounts to 4.78 percent, and according to Section 12 (1) of the FRL 2007, the fiscal deficit should not exceed 3 percent of the estimated GDP except there is a clear and present threat to the national security and sovereignty of Nigeria.
Zainab Ahmed, minister of finance, budget, and national planning hinted at plans to amend the 2007 Fiscal Responsibility Act to accommodate a possible further raise of the statutory fiscal deficit from the current 3 percent of GDP, saying this is no longer feasible, considering current realities.
“We are already working with the National Assembly on this,” she said.
Crude oil production (revenue problem)
Nigeria has struggled to meet its budgeted oil production over the years due to oil theft, and pipeline vandalism, and in 2022, it lost its status to Angola as the largest oil producer for six months straight due to rampant crude oil theft, according to OPEC.
The National Bureau of Statistics (NBS) recently released its Multidimensional Poverty Index (MPI) report which it stated that 133 million Nigerians are multidimensionally poor.
It said of the total 133 million, 86 million affected persons live in the North while nearly 47 million live in the southern part of the country.
“The 62.9 percent of people (133 million) who are multidimensionally poor means that they experience deprivations in more than one dimension, or in at least 26 percent of weighted indicators,” the NBS said.
It said the average deprivation score among poor people, which shows the intensity of poverty, is 40.9 percent. “Nigeria’s national MPI is 0.257, showing poor people experience just over one-quarter of all possible deprivations.”
The country’s unemployment rate surged to 33 percent in the fourth quarter of 2020. Although unemployment numbers for 2021 are yet to be released, the Presidential Economic Advisory Committee projected that the rate had increased further to 40 percent.
“The labour market has become extremely weak following the economic recession of 2016 and the COVID-19-induced economic crash of 2020,” Temitope Omosuyi, investment strategy analyst at Afrinvest Limited, said.
According to Omosuyi, the condition merely reflects the prolonged less inclusive growth, which is a fallout of the underperforming real sector of the economy.
On the back of the Russia-Ukraine war, global inflation has been the order of the day, and Nigeria is not left behind. The country’s inflation rate hit its highest in 17 years in July of 2022 at 19.64 percent and has persistently risen to 21.47 percent as of November 2022, further fueling the cost-of-living crisis currently eroding the country.
Slow Economic Growth
Nigeria’s economy grew at a slower pace in the third quarter of 2022, compared to the previous quarter, official data released by the National Bureau of Statistics (NBS) show.
Africa’s biggest economy saw its Gross Domestic Product (GDP) grow by 2.25 percent (year-on-year) in real terms in Q3 2022, down from 3.54 percent in Q2 and 4.03 percent in the same period last year, according to the NBS.
“The reduction in growth is attributable to the base effects of the recession and the challenging economic conditions that have impeded productive activities,” the NBS said.
Emigration (Japa wave)
In seek of greener pastures, Nigerians in numbers have increasingly fled the country, therefore leading to a shortage of skilled labour in many workplaces and made it difficult for companies to find the talent they need.
On account of Nigeria’s growing insecurity, the country has been unable to attract the foreign investment it needs to boost its economic activities and farmers have been unable to go to their farmlands to produce exportable crops, hence the inability ot meet both local and export demands.
Declining external reserves
With oil production declining, Nigeria has been unable to meet oil prices which hit record highs during the year 2022 on the back of the Russia-Ukraine war. Hence, with the absence of the much-needed foreign exchange its needs, the country has been unable to properly grow the external reserves account.