The Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kyari, recently stated that the rise in oil prices was hurting Nigeria, as the country relies heavily on fuel imports for its needs. Nigeria has four refineries with a combined nameplate capacity of 445,000 b/d, which are all offline after years of neglect, making the country fully reliant on refined product imports.
Dissecting Africa’s economic outlook, Nigeria can be identified as the largest economy on the continent, ranking top on the list of African countries by Nominal Gross Domestic Product (GDP) with $466B, followed by Egypt with $374B, and South Africa with $317B, Algeria and Morocco make up the top five with $147B and $112B respectively. GDP is the market value of all final goods and services produced in an economy within a period; usually a year.
A quick look at the list of African countries based on GDP at Purchasing Power Parity (PPP) shows that Nigeria comes second to Egypt, closely followed by South Africa at third place, and Algeria with Ethiopia making up the top five places. Purchasing Power Parity (PPP) is a measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries’ currencies. In many cases, PPP produces an inflation rate that is equal to the price of the basket of goods at one location divided by the price of the basket of goods at a different location.
Checking another critical economic metric, the Human Development Index provides a more balanced periscope on this issue. The Human Development Index is a summary measure of average achievement in key dimensions of human development: a long and healthy life, knowledge, and a decent standard of living. It is a standard means of measuring well-being. It is used to distinguish whether the country is a developed, developing, or underdeveloped country, and also to measure the impact of economic policies on quality of life.
Out of 53 African countries captured in the measurement provided in the Human Development Index (HDI) report for countries in Africa as included in the United Nations Development Programme’s Human Development Report, released on 15 December 2020 and based on data collected in 2019, Nigeria ranked 28th on the continent (low human development) and 161st globally. This clearly shows that the country is lagging remarkably in the development of its most critical asset- the citizens.
Despite having the biggest GDP in Africa, it is irrefutable that Nigeria is enmeshed in serious economic travails as most economic indicators allude to this fact.
The unemployment rate in Nigeria rose to an unprecedented 33.3% in the three months from December 2020 to March 2021, according to a report published by the National Bureau of Statistics in its March 2021 report. That’s up from 27.1% in the second quarter of 2020, the last period for which the agency released labor-force statistics.
More than 60% of Nigeria’s working-age population are younger than 34. Unemployment for people aged 15 to 24 stood at 53.4% in the fourth quarter, and at 37.2% for people aged 25 to 34. The jobless rate for women was 35.2% compared with 31.8% for men.
Nigeria’s unemployment rate has more than quadrupled over the last five years as the economy went through two recessions, casting a shadow over the efforts to implement policies to drive growth and create jobs by President Muhammadu Buhari’s administration. The economic crisis has led to many of the nation’s vast jobless populace seeking for alternative avenues to make ends meet, with most deviating into criminal ventures and unscrupulous activities.
Nigeria’s inflation rate for March 2021, rose to 18.17% from 17.33% recorded in February 2021. This represents 0.82% points higher than the February figures.
This is according to the Consumer Price Index report, recently released by the National Bureau of Statistics in its March 2021 report. The galloping nature of Nigeria’s inflation is an indication of the dwindling purchasing power of Nigerians. This implies that Nigerians spent more on purchasing goods and services in March, compared to February. The last time Nigeria recorded an inflation rate higher than 18.17%, was in January 2017 when headline inflation stood at 18.72%. In June 2021, it was down to 17.75%.
A high unemployment rate coupled with rising inflation leads to an economic situation known as Stagflation; which best describes Nigeria’s economic reality. Stagflation is typically characterized by an increase in prices which occurs when there is an increase in the inflation rate, rising unemployment, high misery index, and lower economic output.
The Nigerian economic environment in recent times witnessed several shocks, the consequences of which the country is suffering from due to inappropriate structural policies. Some of these setbacks include: the instability in the price of crude oil in the international market and the attendant pressure on the Nigerian Naira due to drop in foreign reserves; the World, and Nigeria in particular, are still grappling to recover from the huge economic losses suffered from the lockdown and general decline in business activities enforced by the COVID-19 pandemic.
The impact of this COVID -19 on the Nigerian healthcare sector is massive and it include pressures on already weak medical facilities, and medical personnel; capital flight resulting in reduced activities in the local stock market; weak state of infrastructures, and over-dependence on oil revenue; widespread insolvency among governments at the various levels across the country; instability in fiscal and monetary policies at all levels of government; the rising wave of insecurity and ethnic tension nationwide; unfriendly business environment which continues to undermine the capacity of investors to maximize business opportunities in the country; and increasing sovereign debt and debt service obligation amongst others.
In the short term, it’s a bumpy ride for Nigeria as the recovery from the economic losses suffered from the Covid-19 pandemic is steady but slow. The government’s swift macroeconomic interventions and scaling up of efforts to deal with the economic crisis have been timely, even though the country remains hugely exposed. Oil and non-oil revenues are the major sources of government finances.
Government must do more to empower the real sector and raise its contribution to national earnings. Gains recorded through agricultural reforms are being eroded due to the heightened insecurity all over the country. Farmers from Benue to Adamawa to Zamfara to Ondo to Delta to Ebonyi must be adequately looked after and protected. With the rising food inflation, their contribution to the overall food security in the country cannot be over-emphasized.
During the current administration’s first term in office, the economic management team of the administration was led by the Vice President, who also doubles as the Chairman of the National Economic Council (NEC) a constitutional body composed of all the state governors and key members of the government’s economic management team. During the second term, however; seeing the downward spiral of the economy and the pressing need to engage specialists for recovery and growth, the President in September 2019 assembled an Economic Advisory Council (EAC) a team of eight economic experts led by Prof. Doyin Salami, a renowned economist.
The team is to advise the President on economic policy matters, including fiscal analysis, economic growth, and a range of internal and global economic issues working with the relevant cabinet members and heads of monetary and fiscal agencies.
The first report the Council provided to the President perfectly encapsulates the sorry state of our economy. The council raised concerns that the rate of the growth of the economy is slower than the rate the country’s population is growing; harped on the need to strengthen national statistical agencies; reform procurement processes; improve education and the need for job planning in training offered by academic institutions while also creating an environment that will attract and stabilize investment.
Close to two years since the inauguration of the council; Nigerians are still anxiously anticipating tangible results and an improved economic base; which will be a clear departure from the usual rhetoric and platitudes of government.
The economy is in dire need of massive infrastructural investments all over the country. Remarkable progress is being recorded in railway infrastructure but more is needed in areas of basic social amenities, road networks, power supply, and other essential public infrastructure.
As part of efforts to stimulate infrastructural development across the country, the Central Bank of Nigeria (CBN) in July 2020 revealed that the federal government has approved the take-off of the establishment of an N15 trillion infrastructure development company (Infraco).
Infraco would leverage local and international funds for the rebuilding of critical infrastructure as part of efforts to reposition the Nigerian economy and insulate it from external shocks after the COVID-19 pandemic. Set up in partnership with the private sector, Infraco is expected to grow its capital and assets to 15 trillion Naira over time to fund public projects like roads, rails, and power. Nigerians are still waiting for the infrastructure fund to rapidly translate to reality.
Nigeria’s import-based model has caused various damages and setbacks too to our economy, with our currency’s weak purchasing power getting worse by the day; coupled with declining production.
Mechanized production must be made attractive to positively exploit the immense human capital resource at Nigeria’s disposal; with a population growing at an astronomic proportion and forecasted to be World’s third-largest by 2050; it is expedient for them not to be left idle; as idleness leads to a heightened tendency of a huge number of people available for crime, terrorism and other societal ills.
The economy thrives only in a safe and secure environment; the deteriorating condition of our security has contributed a lot to the exacerbation of our economic problems. Every region in the country is grappling with existing and new security challenges daily; with its attendant effects on investor confidence and ease of doing business.
Many countries are leveraging technological advancements to chart the path for future economic development. Nigeria must not be left in the lurch; all attention must not be fixated on oil revenue alone; a factor accounting for lots of under-development in many other potential revenue streams. A huge proportion of Nigerian youths are making giant strides in entrepreneurial ventures in different areas (ICT, Fashion, Fast Foods, Entertainment, Sports, Trading, etc.). Government must take action to assist its youths to stay empowered.