• Thursday, June 13, 2024
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BusinessDay

Factors driving Nigeria’s economy in 2023

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Nigeria might be considered to be the most developed country in Africa – it certainly has the largest GDP, which shows that they are at least making some money – but that isn’t the whole picture, and it pays to look at more ways that the Nigerian economy could improve as we move through 2023 and into the future.

From embracing the digital world and seeking new sources of tax revenue like online casinos to improving the employment offer by reducing reliance on low productivity industries, the Nigerian economy needs to grow to reduce the number of people that are living there in poverty.

Poverty Versus GDP

As a country, Nigeria recorded a $477 billion GDP in 2022 – working out at $2,184 per capita.
This might not seem like much, especially when compared to the GDP of the US at $20.89 trillion – but for what is known as an ‘emerging economy’ by the economists, the Gross Domestic Product of Nigeria is considerably higher in total than other countries in Africa.

What isn’t considered with this is that there are many unemployed and underemployed people in Nigeria, leading to high levels of poverty. In fact, 31% of the population of Nigeria was below the poverty line in 2018.

Unemployment and Underemployment

Inflation in Nigeria in 2021 was among the highest tin the world, with a 17% peak in urban areas – and this keeps rising. The purchasing power of the average Nigerian is lessening, which can be attributed to the lack of employment.

The total level of unemployment in 2023 so far is about 33% – and almost 23% of people in Nigeria are underemployed (which means they can only find part time or irregular work). Even with the minimum wage of 30,000 Naira becoming law in 2019, unemployment is a real issue for the economy.

Economic Drivers
Nearly 95% of the export earnings (and 40% of government revenue) comes from the oil and gas sector – and this is proving to be a contentious issue globally.

As one of the key oil producing countries globally, the price of oil is reducing – and this is obviously having a large knock-on effect on the economy – which means that the government needs to start thinking about other ways to ensure that inflation doesn’t keep growing and that more Nigerians are able to find an appropriate amount of work.

Following two economic recessions since 2015 and the pandemic, the movement into agriculture that might have been considered to be a boon to both the GDP and to employment rates hasn’t been – there is just not enough production to support local consumption, let alone export.

The Technological Revolution
Like every developed or developing economy in the world, it is technology that drives change – and a young population in Nigeria are demanding access to the same technology that other countries have got.

To make the most of the population growth – and the young minds that are seeking employment – Nigerian governments should be focusing on giving young people the tools to be able to use new technology and start to be innovative themselves.

Whether this is coding classes in schools or access to paid training, it will be the continuing effect of internet (and smartphone) penetration that will make or break the Nigerian economy.

In 2018, 28.75% of the population had access to the internet, which rose to 38.73% in 2022. This is projected to reach 48.11% in 2027 according to Statista. With nearly half the population able to get online, finding ways to utilise the digital space for more jobs (and more revenue) can only be a good thing.

Taxation
It has been mentioned that 40% of the Nigerian government income comes directly from the oil and gas sector – and there is one way that the government could make more money almost immediately – regulating and taxing existing entertainment like online casinos.

Nigerians already use online casinos to play games like slots and blackjack, and place bets on sporting events like international soccer matches – and the industry is largely unregulated.

By following the actions of other countries, like the UK and parts of the USA, the Nigerian government could increase their revenue by creating legislation designed to regulate and license operators who want to provide an online casino experience to people living in Nigeria.

This legislation would mean that operators would need to pay for a license to allow Nigerian customers to have access to the online casino, and they would be expected to pay tax on their income, too.

Aside from the taxation income, there is also the growth of employment – roles in customer service, for example – so, it’s a winner all round – and that is just one example of how digital acceptance could drive the Nigerian economy upwards and improve the outcomes for those living under the poverty line.