Nigeria’s economy has become more fragile in the past 12 months with rising inflation, exchange rates crisis and depleting foreign reserves threatening the economic prosperity of the over 200 million Nigerians.
The country ranked the largest economy in 2022, dropped from top spot and projected to slide to fourth position behind South Africa, Egypt and Algeria in 2024, according to the International Monetary Fund forecast in its World Economic Outlook for April.
Based on IMF’s estimates, Nigeria’s GDP in US Dollars declined from $477 billion in 2022, to $375 billion in 2023 and it is estimated to drop to $253 billion in 2024.
Also, Nigeria has been battling with exchange rate fluctuations following the two-time devaluation of the Naira by the Federal Government in less than one year.
This has made the naira lose at least 55 percent of its value, further piling pressure on individual spendings and companies balance sheets.
During this period last year, one US dollar was N633 but now exchanges at N1,483 as of Wednesday at the official market after rising to an all-time high of N1,900 per USD early this year.
Nigeria’s foreign reserves which gives the naira firepower to strengthen against the dollar has also been declining.
Though data from the Central Bank of Nigeria (CBN) revealed that external reserves grew to $33.159 billion as of June 11, 2024 from $32.447 billion in May 10, 2024, it has dropped from $34.66 billion it stood last year.
In the same token, Nigeria’s headline inflation reached a 28-year high of 33.95 percent in May 2024 while it stood at 22.41 percent in the same period last year.
Rising inflationary pressure results in low purchasing power and increased hunger which is capable of throwing millions below the poverty threshold.
More than 87 million people in Nigeria, Africa’s most populous country, live below the poverty line — the world’s second-largest poor population after India, a country seven times its size.
And punishing inflation means poverty rates are expected to rise still further this year and next, according to the World Bank.
Food prices have also skyrocketed from 24.82 percent last May to 40.66 percent, fueling a cost-of-living crisis while brewing social discontent among the people.
Food accounts for over 50 percent of Nigerians disposable income and takes chunk of the country’s headline inflation. Despite the government’s efforts toward ensuring food security, many still find it hard to get.
The country’s monetary policy rate (MPR) has also increased by a total 750 basis points to 26.25 percent up from 18.75 percent in less than a year.
The Central Bank of Nigeria in meeting its price stability mandate has continued to raise the country’s benchmark interest rate in a bid to tame the country’s accelerating inflationary trend but the World Bank has said interest rates hike might not be the silver bullet needed to rein in inflation.
Hiking lending rates, though deployed to curb inflation, hurt businesses ability to seek loans from banks which could ultimately see small businesses shut down while adding to the already rising number of jobless people.
Following the removal of some fuel subsidies, the price of a litre of premium motor spirit also known as petrol, has more than tripled, increasing from about N238 to almost N700.
Increased petrol prices has a multiple effect on the economy as transport fare will rise and other items conveyed through the means of transportation will see a rise.
Meanwhile, Nigeria’s oil production output has improved from 1.18 million barrels per day (mbpd) last year to 1.25 mbpd in May even as it falls short of the benchmarked 1.70 million bpd, including condensate $77.96 per barrel in the nation’s 2024 budget.
“Nigeria is ranked very high in the index of state fragility,” Oyebanji Oyelaran-Oyeyinka, senior special assistant to the president of African Development Bank (AfDB) said in a symposium in Lagos recently.
“Fragility is associated with a combination of systemic dysfunctions that lead to inefficiency/ailure in governance, including the inability of Nigeria to provide basic services. This has many implications for citizens, especially poor and vulnerable groups,” he said.
“Nigeria ranks as a fragile state because it fails to deliver the most basic services to both the poor and rich alike,” Oyelaran-Oyeyinka added.
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