Over the past decade, Nigeria’s economy has faced a tumultuous journey, characterised by periods of growth, stagnation, and decline. The phrase “slouching towards sustainability” aptly captures the nation’s ongoing struggle to achieve economic prosperity amidst persistent challenges.
The boom years and the oil dependency
In the early 2010s, Nigeria’s economy was on an upward trajectory, boasting an impressive GDP growth rate averaging 8.01 percent. According to macrotrends, the country’s GDP reached approximately $366.99 billion in constant 2010 U.S. dollars, largely driven by soaring global oil prices.
As Africa’s largest oil producer, Nigeria’s economic fortunes were closely tied to its oil exports, which accounted for over 90 percent of its foreign exchange earnings and about 60 percent of government revenues.
This period of economic buoyancy fuelled ambitious national goals, including extensive infrastructure projects and poverty alleviation efforts. However, the economy’s heavy reliance on oil made it vulnerable to global price fluctuations.
“When oil prices eventually plummeted, the fragility of Nigeria’s economic structure was starkly revealed. Government revenues and foreign exchange reserves suffered significant declines, underscoring the risks of over-reliance on a single commodity.”
When oil prices eventually plummeted, the fragility of Nigeria’s economic structure was starkly revealed. Government revenues and foreign exchange reserves suffered significant declines, underscoring the risks of over-reliance on a single commodity.
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Further data from Macrotrends shows that in 2011 and 2012, Nigeria’s GDP values rose to $414.47 billion and $463.97 billion, respectively. Despite these increases, the growth rate began to decelerate, dropping to 5.31 percent in 2011 and 4.23 percent in 2012. Although GDP per capita increased to $2,505 and $2,728 during these years, the slowing growth highlighted the urgent need for diversification.
This scenario exposed the structural weaknesses in Nigeria’s economy, emphasising the necessity for more resilient and diversified economic policies to sustain long-term growth and stability.
The 2014 oil price collapse
Between mid-2014 and early 2016, the global economy experienced one of the largest oil price declines in modern history, with prices dropping by 70 percent. This decline, driven by a supply glut—including booming U.S. shale oil production—receding geopolitical concerns and shifting OPEC policies, was one of the three most significant drops since World War II, as reported by World Bank blogs.
This added to Nigeria’s economic woes. The situation was further exacerbated by the Boko Haram insurgency in the northeast, which diverted resources away from economic development and further strained the economy. The government’s inability to quickly diversify the economy left the nation reeling from the effects of the oil price collapse.
Recession and recovery efforts
In 2016, Nigeria entered its first recession in over two decades, with a GDP of $404.65 billion, a GDP per capita of $2,145, and a GDP growth rate of -1.62 percent, according to Macrotrends data. This downturn was driven by collapsed oil prices, militant attacks on oil infrastructure in the Niger Delta, and severe foreign exchange shortages.
In response, President Muhammadu Buhari’s administration introduced the Economic Recovery and Growth Plan (ERGP). This initiative aimed to diversify the economy, reduce dependence on oil, and encourage private sector investment.
Although the ERGP led to improvements in agriculture and solid minerals, its overall impact was limited by ongoing structural issues, corruption, and inadequate infrastructure.
The COVID-19 pandemic and economic resilience
The COVID-19 pandemic in 2020 further deepened Nigeria’s economic challenges. The global economic slowdown, combined with lockdown measures, resulted in a significant drop in oil demand and prices, severely impacting Nigeria’s oil-dependent economy.
During this period, Nigeria faced its second recession in just five years. The country’s GDP fell to $430.20 billion, with a GDP per capita of $2,075 and a GDP growth rate of -1.79 percent, according to Macrotrends data. The government’s response was constrained by limited fiscal resources, complicating efforts to mitigate the economic fallout.
Despite these severe challenges, the pandemic highlighted the resilience and potential of certain sectors. Digital services, including e-commerce and remote work solutions, demonstrated significant growth and adaptability during the crisis.
Similarly, the agriculture sector showed promise, emphasising its role as a critical component of Nigeria’s economic recovery and future growth. These sectors emerged as beacons of hope, suggesting that with targeted support and investment, they could drive sustainable economic development in the post-pandemic era.
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The Trio: Inflation, unemployment, and poverty
Throughout the decade, Nigeria has grappled with severe economic issues, including high inflation, persistent unemployment, and escalating poverty. Inflation surged dramatically from 13.25 percent in 2020 to 28.92 percent by 2023.
As of June 2024, it reached a staggering 34.19 percent month-on-month, the highest level since March 1996, according to the National Bureau of Statistics (NBS). This surge has been driven by a mix of factors, including food shortages, currency devaluation, and significant fuel price hikes.
These inflationary pressures have created a challenging environment for businesses and consumers alike, eroding purchasing power and increasing the cost of living. The unemployment rate, particularly among the youth, reached unprecedented levels, contributing to social unrest and fuelling movements such as #EndSARS, which sought to address systemic issues in law enforcement and governance. The International Labour Organisation highlights that this youth unemployment crisis exacerbated economic hardships and contributed to growing dissatisfaction and social instability.
Despite being Africa’s largest economy at the time, Nigeria became a hotspot for extreme poverty. The United Nations Development Programme (2023) reports that over 40 percent of Nigerians were living on less than $1.90 a day, reflecting the severe depth of poverty affecting the nation.
This extreme poverty underscores the broader economic struggles and the urgent need for comprehensive policy interventions to address these challenges.
Tinubunomics: Economic reforms
Amid the ongoing economic crisis, the quest for sustainability has become increasingly difficult. The bold measures introduced by President Bola Tinubu—such as removing fuel subsidies and unifying the exchange rate system—have, unfortunately, pushed millions into a severe hunger crisis.
As the repercussions of these policies unfold, it has become clear that the path to recovery is neither simple nor straightforward. Transitioning from crisis to stability requires substantial sacrifices from all levels of society, particularly from those in power.
The focus must be on implementing cohesive and effective policies that align with the government’s broader goals, rather than adopting measures that may exacerbate the very issues they seek to resolve.
The Road ahead: Challenges and opportunities
Looking forward, Nigeria’s path to economic stability and prosperity is fraught with challenges. Ongoing issues such as corruption, poor governance, and insecurity continue to hinder economic progress. Additionally, the population is expected to double by 2050, placing further strain on resources and infrastructure.
However, significant opportunities for growth also exist. The African Continental Free Trade Area (AfCFTA) offers a chance for Nigeria to become a manufacturing and trade hub in Africa.
The country’s youthful population, if effectively harnessed, could drive innovation and entrepreneurship. Furthermore, investment in infrastructure, education, and healthcare will be crucial in building a more resilient and diversified economy.
Nigeria’s economic journey over the past decade has been marked by setbacks and slow progress. Despite enduring numerous challenges, the nation remains hopeful for a diversified and prosperous economy.
The phrase “slouching towards sustainability” accurately describes Nigeria’s arduous and slow progress towards economic stability. Moving forward will require collective sacrifice, transparency, and accountability. Addressing political fractures across the country, starting from the top, will be essential to achieving the economic success that has long eluded the nation.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
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