Nigeria Grapples with Solutions Amidst Contracting Economy 

Nigeria’s economy has experienced a continuous downturn over the past few years, with little sign of improvement. The economy’s value has shrunk from $546 billion in 2015 to just $477 billion in 2022, according to a report.

This decline in economic size translates into a smaller economic pie to distribute among the country’s massive population of 200 million people. This situation has created a challenging predicament for Nigeria, a nation that is home to the world’s largest number of impoverished individuals.

This predicament sheds light on the skepticism among many Nigerians regarding the unemployment figures reported by the National Bureau of Statistics (NBS). Wale Lawal, a Nigerian youth who has been without a job since 2015, highlights how these statistics often fail to resonate with the real struggles faced by people on the ground.

What some experts have to say about the grappling economy 

Experts have noted that Nigeria’s divided political establishment is grappling with the challenge of addressing both persistent long-term issues and pressing short-term crises, which has resulted in an increasing feeling of discontent and unease.

Kelvin Atafiri, CEO of Cavazanni Human Capital Limited, expressed that over the last decade, there has been extensive dialogue but minimal progress in terms of economic growth. He also noted that the nation is presently relying on its historical achievements.

According to a research report by the World Bank, Nigeria experienced a significant increase in its middle-income population between 2004 and 2014. This growth was largely attributed to a shift in economic activities from the traditional agricultural sector to the service sector, driving rapid economic expansion.

However, the fortunes of the once-dynamic ‘Giant of Africa’ have taken a downturn as many households are increasingly vulnerable due to the country’s unstable economy. This is evident in the World Poverty Clock report, which designated Nigeria as the world’s poverty capital for three consecutive years, only recently passing the title to India.

Luqman Agboola, head of research at Sofidam Capital said, “Since 2015, Nigeria’s economy has been grappling to survive as its overvalued currency continues to translate into a persistently high inflation rate alongside a high rate of unemployment and poverty that has defied all economic interventions.”

Some experts argue that Nigeria’s excessive reliance on oil has left it exceptionally susceptible to recent worldwide disturbances, including disruptions in supply chains, the COVID-19 pandemic, escalating energy costs, increases in inflation, and rising interest rates, all of which have contributed to a global economic slowdown.

Africa Polling Institute reports a high relocation rate

In a 2022 survey conducted by the Africa Polling Institute, a remarkable 69 percent of Nigerians expressed their willingness to relocate with their families if they had the opportunity. This figure has surged significantly since 2019 when only 39 percent were open to emigrating. Furthermore, nearly 80 percent indicated their intention to leave in 2023, reflecting a stark change in sentiment.

Ola Alokolaro, partner at Advocaat Law Practice said, “The middle class has disappeared due to lack of jobs or shrinking wages.” 

In light of Nigeria’s current economic conditions, the existing minimum wage of N30,000 appears significantly inadequate. Back in 2019 when this wage was established, the inflation rate stood at 11.40 percent.

At present, Nigeria grapples with an inflation rate of 22.79 percent, sparking widespread concern. The World Bank has emphasized the urgent need for Nigeria to implement comprehensive economic reforms that can effectively tackle growing fiscal challenges, stimulate private investment for job creation, and devise policies aimed at improving the living standards of its citizens.

“Priority expenditure will need to be protected. While capital expenditure boosts growth, it is necessary to reduce the amount of recurrent expenditure,” he added.

Agora Policy’s suggested solutions

Agora Policy, a think tank located in Abuja focused on offering practical solutions to pressing national issues, has put forth recommendations for the newly formed Nigerian government to address the nation’s economic challenges.

According to the paper, the foremost concern for the Federal Government is the deficiency in revenue. It highlights that the Fiscal Responsibility Act stipulates that revenue-generating agencies are required to transfer 80 percent of their operational surpluses to the Consolidated Revenue Fund while maintaining the remaining 20 percent in their reserve fund.

Agora Policy said, “There are many revenue-generating agencies that either fail to remit any revenue, or remit a very small fraction to the government”.

The think tank’s suggestion entails amending the Fiscal Responsibility Act to discontinue the practice of financing revenue-generating agencies through the Federal budget. Furthermore, they propose implementing penalties for agencies that do not remit their mandated operating surpluses.

The report also reveals Nigeria’s ongoing struggle with trade deficits, with a substantial deficit of N1.9 trillion recorded in 2021.

In addressing this issue, Agora Policy suggests that “the distortionary non-tariff measures need to be urgently reviewed and/or phased out”.

“These include the foreign exchange restrictions on 42 products by the CBN; review of the import prohibition and absolute import prohibition lists and perhaps replacing these trade policy tools with tariff duties or import quotas; change in government policy on border closure from partial reopening to the full reopening of closed land borders”.

The organization contends that an immediate priority should be to boost investments in digital technology within rural regions, thereby fostering job growth and expanding economic prospects.

The report further underscores that in order to generate more employment opportunities, the government must address issues such as rural insecurity, enhance access to financing, and take resolute actions to combat corruption, bureaucracy, and administrative inefficiencies within government processes.

A  senior chief economist said in response to questions that, An all-out effort is needed to diversify Nigeria’s fiscal base away from oil. In the context of an economic downturn, raising revenue will be difficult. Fiscal reforms, especially creating a more stable revenue base, will be necessary for long-term sustainability.