Nigeria’s economy in the last 10 years has moved from being one of the fastest growing economies in the world to one facing a downturn due to policy missteps, a report by VerivAfrica, a data-driven company has shown.
Data from the last decade shows that Nigeria’s gross domestic product (GDP) grew by just 1.93 percent while GDP per capita, which represents the economic prosperity of a country, experienced a growth rate of -0.57 percent for a country whose population growth averaged 2.5 percent in the same period under review.
“Before 2015, the Nigerian economy experienced a GDP growth of 7.15% between 2000 and 2014. GDP per capita growth also averaged 4.3%,” the report stated.
In what will place Nigeria as the fourth largest economy in Africa, the International Monetary Fund (IMF) revealed in April that Nigeria’s GDP will fall to $253 billion this year due to naira devaluation.
Meanwhile, the country’s national income is projected to rise in naira terms from N234.4 trillion in 2023 to N296.4 trillion in 2024.
Africa’s largest economy began to witness a slope in its economy right from the global fall in crude oil prices in 2016 to the closure of borders in 2019, the naira redesign, devaluation and fuel subsidy policies.
Here are the seven events that have shaken Nigeria’s economy
Fall in global oil prices
For a country that generates over 80 percent of its revenues from oil and gas proceeds, the fall in prices of crude oil in 2016 was a blow to Nigeria’s oil-dependent economy.
As the country grappled with shortages in prices of crude oil which fell from $100.4 to $48.81 in 2016 according to the CBN, disruptions of its production in the Niger-Delta worsened the situation.
Africa’s largest oil producer output averaged 1.82 million barrels per day (bpd), a decline from 2.2 millions bpd produced in 2014. This posed dire consequences as Nigeria’s GDP could not consolidate its gains.
Dollar liquidity began to decline and naira depreciated as Nigeria gets over 80 percent of its revenue through the oil and gas sector. “This depreciation contributed to higher inflation and dampened productivity, further straining the Nigerian economy,” the report said.
Growing insecurity
Persistent insecurity in Nigeria in the last 10 years has slowed down the pace of the economy, especially in the agricultural sector. Many investors who left the country had also cited security reasons for their exit.
According to VerivAfrica, farmers-herders conflict across Nigeria has resulted in a decline in farm activities, which has constrained agricultural productivity. This has resulted in food inflation soaring to 40.8 percent in June 2024.
“The rise in food inflation was due to low agricultural productivity, poor logistics and insecurity in the food producing regions of the country,” PwC, a tax and advisory firm, said in Nigeria’s economic outlook released in June.
Border closure
While insecurity concerns are on top gear especially in the food producing regions of the country, the federal government under President Muhammadu Buhari closed the land borders in August 2019 with the aim to spur agricultural productivity.
But the move, which many critics termed as “ill-planned” pushed more people into hunger and poverty as food prices went up because local production could not meet people’s demands.
According to the World Bank, the number of the poor in Nigeria rose from 79 million in 2018 to 104 million in 2023, with urban poor—more exposed to inflation—increasing from 13 to 20 million. Meanwhile, poor people in rural areas increased from 67 to 84 million.
“For Nigeria, the closure of the land borders only led to increased food prices,” VerivAfrica noted.
COVID-19 pandemic
The land border closure coupled with the outbreak of the coronavirus stunted Nigeria’s economic growth. The pandemic disrupted supply chains, both domestically and globally, affecting the availability and prices of goods.
It was also characterised by import and export delays, halts in production, and business closures that saw GDP growth drop to -1.795 in 2020, according to data from the World Bank.
Ukraine-Russia war
The over two years ongoing conflict between Russia and Ukraine have disrupted the supply of wheat, fertilisers and oil. Both countries account for about 30 percent of global wheat exports.
Russia is also a key oil and natural gas supplier, contributing 11 percent to crude oil exports and 20 percent to natural gas exports.
“The war resulted in an increase in global food and energy prices, limiting Nigeria’s growth potential through the increase in both the cost of production and food prices,” the report said.
Naira redesign policy
The naira redesign which was implemented by the Godwin Emefiele led central bank was aimed to reduce money in circulation and improve the effectiveness of monetary policy. But it caused a shortage and created black markets for selling naira, piling pressure on businesses and households.
The policy contributed to the decline in the growth rate of GDP, from 3.5 percent in Q4 2022 to 2.3 percent in Q1 2023.
Fuel subsidy removal and devaluation of the naira
The removal of the costly but popular gasoline subsidies and the floatation of the naira by President Bola Tinubu last year have thrown the country into an unprecedented economic crisis. While subsidy was removed to divert the over N400 billion injected monthly to other resources, the naira was devalued to stop arbitrage.
“It (the naira devaluation) led to an increase in the cost of imports, which fed directly into the increased cost of production and inflation numbers. In 2022, Nigeria’s import bills stood at about N27.1 trillion, revealing the overdependence of the domestic economy on imports,” VerivAfrica noted.
Meanwhile, the removal of fuel subsidies increased transportation costs, which led to an increase in price levels. This has impacted every sector of the Nigerian economy by increasing production and costs, and it has also affected consumer spending and its patterns, limiting economic growth.
