According to the National Bureau of Statistics (NBS) data, Nigeria’s economy failed to attain its pre-pandemic state in 2021 due to the rise in inflation, unemployment, and a rising debt profile. This was also due to the COVID-19 pandemic effect on the country’s economy.
However, Nigeria rebounded from its economic slowdown faster than expected, registering 0.11% real growth in Q4 2020, reversing negative figures recorded in Q2 and Q3 2020.
According to the Lead Director of the Centre for Social Justice, CSJ, and a Financial Expert, Eze Onyekpere, the country experienced no economic governance in 2021n 2021. To buttress his point, he talked about micro-economic indicators and how they affected and shaped Nigeria’s economy in 2021.
In 2021, Nigeria’s official exchange rate fell by 6.03% and closed at N435 to $1 on the last day of the year after the Central Bank of Nigeria adjusted the exchange rate. This was done despite a year-long average of N410.3 to $1.
After devaluing by 4.82% on December 30, 2021, the Naira is at risk of another round of devaluation, which may cause a re-enacting of what happened in 2020.
On the final trading day of 2020, the official currency rate declined by 4.12% to close at N410.25 to $1, indicating the rate for the year. This suggests that the official rate could be heading towards N435 to $1.
On the other hand, the black market saw tremendous devaluation, with the Naira closing the year at N565 to $1, thus having a 22.8% drop against the US dollar. Due to the instability of this market, the market differential increased to N140.74 from N49.75 the previous year.
With approximately $32 billion transacted in the year, the Central Bank of Nigeria (CBN) continues to get involved in the Investors & Exporters window to safeguard the stability of the Nigerian currency. However, negative trade balances, falling diaspora remittances, reducing capital inflows, a drop in crude exports, and more continue to put downward pressure on the exchange rate.
The drawbacks in Nigeria’s economy are often attributed to inadequate capital rather than excessive spending and mismanagement of funds. However, this is still not looking good due to the poor performance of the government’s oil revenue purse.
The Federal Government of Nigeria got N1.84 trillion revenue in May 2021. This fell by 33.3% to the prorated amount of N2.77 trillion. This was primarily due to the oil revenue’s performance during the evaluation period.
The oil income was calculated at N423 billion, signifying a performance rate of 50.5% as compared to the prorated number of N837.9 billion. Non-oil revenue, on the other hand, dropped the prorated target, with CIT and VAT exceeding targets by 2.4% and 24.7%, respectively.
With Nigeria unable to attain its OPEC+ output quota and the petrol subsidy consuming a large portion of the limited resources, Nigeria’s oil revenue is affected by shortages.
Nigeria’s unemployment rate rose to 33.3% in March 2021, equating to 23.2 million unemployed people.
Nigeria’s economy has been battling this issue, and according to the National Bureau of Statistics, it is the highest rate in at least 13 years and the second-highest in the world in 2021.
The COVID-19 pandemic, however, made Nigeria’s economy worse, thereby increasing the figure from 27.1% in the second quarter of 2021. Also, Nigeria’s labour force population dropped by over 10 million in the fourth quarter of 2020, to 69.7 million.
Also, the number of people working full-time reduced by 14% from 35.6 million in the second quarter of 2020 to 30.6 million. This indicates the rate people lost jobs during the COVID-19 pandemic and its effect on the working-class percentage of the country.
Although employment creation was a crucial part of the current administration’s promise, the government has done little to address it. Nigeria’s jobless rate has more than tripled between 2015 and 2021.
Gross Dometic Product (GDP)
In Q1, Q2, and Q3, Nigeria’s economy expanded by 0.51%, 5.01%, and 4.03%, respectively, in 2021. However, the growth was attributable to a favourable base period. The increase was from the non-oil sector, telecommunications, and trade sectors.
Simon Harry, the Statistician-General of the Federation of Nigeria, said the negative GDP figures in 2020 due to the COVID-19 epidemic significantly impacted GDP figures in the second and third quarters of 2021.
In recent years, inflation in Nigeria’s economy has been steadily rising, and 2021 has its fair share of it. Inflation rose from 17.33% in February 2021 to 18.17% in March 2021.
According to the Consumer Price Index report provided by the National Bureau of Statistics, this was 0.82% higher than February’s figures. The bureau in April reported that the inflation rate stood at 18.12%.
Declining foreign investment
Apart from crude oil exports, soliciting international investments, mainly through the Foreign Direct Investments(FDIs), is another source of foreign currency inflow for Nigeria.
As a result of the downslide in Nigeria’s economy, there was a massive capital flow difficulty in 2021. According to NBS statistics, foreign investment was minimal in 2021 due to the awful figures recorded during the COVID-19 pandemic.
Nigeria registered $551 million in foreign portfolio investments and $77.97 million in direct investments. These are very low compared to the pre-pandemic levels.