Nigeria is a multi-ethnic and culturally diverse federation of 36 autonomous states and the Federal Capital Territory. The political landscape is partly dominated by the ruling All Progressives Congress party (APC) which controls the executive arm of government and holds majority seats at both the Senate and House of Representatives in parliament, and majority of the States.
President Bola Ahmed Tinubu was sworn into office on May 29, 2023, having won the February 2023 Presidential election. Nigeria continues to face many social and economic challenges that include insecurity such as banditry and kidnappings especially in the northwest region, continued insurgency by terrorist groups in the north-east, and separatist agitations in the south-east. President Tinubu has continuously pledged to turn around the economy and ensure security across the country. Civil society, the media and other civil groups have committed to sustain advocacy for reforms and actions towards better economic and social outcomes for citizens.
Economic Overview
Between 2000 and 2014, Nigeria’s economy experienced broad-based and sustained growth of over 7% annually on average, benefitting from favorable global conditions, and macroeconomic and first-stage structural reforms. From 2015-2022, however, growth rates decreased and GDP per capita flattened, driven by monetary and exchange rate policy distortions, increasing fiscal deficits due to lower oil production and a costly fuel subsidy program, increased trade protectionism, and external shocks such as the COVID-19 pandemic. Weakened economic fundamentals led the country’s persistent inflation to reach a 17-year high of 25.8% in August 2023, which, in combination with sluggish growth, is leaving millions of Nigerians in poverty.
Following a change in administration in May 2023, the country is now at a crossroads, and has a unique opportunity to return to a sustainable and inclusive growth path. Recognizing the need to change course, the new administration has undertaken key reforms to restore macroeconomic stability by removing the gasoline subsidy and unifying and significantly liberalizing the exchange rate. These reforms, together with global oil prices remaining above their historical averages, are expected to begin to reduce fiscal pressures, and unwind the critical macroeconomic distortions that held back growth in the past. The economy is expected to grow at an average of 3.4% between 2023 and 2025, benefitting from the reforms undertaken, a recovery in the agriculture and services sectors, and, over time, increased scope for government development spending. If the reform momentum is maintained, concerted efforts to achieve fiscal and monetary policy consolidation, reduce insecurity, strengthen public services, and improve the business environment and openness to trade, could boost investments and productivity, allowing Nigeria to return to a high growth path. Yet, downside risks to the outlook are high, and include fading or reversing the reform drive, domestic and regional instability, as well as climate change effects.
Development Challenges
Despite having the largest economy and population in Africa, Nigeria offers limited opportunities to most of its citizens. A Nigerian born in 2020 was expected to be a future worker 36% as productive as they could have been if they had full access to education and health, the 7th lowest human capital index in the world. Weak job creation and entrepreneurial prospects stifle the absorption of the 3.5 million Nigerians entering the labor force every year, and many workers choose to emigrate in search of better opportunities. The poverty rate is expected to reach 37% in 2023, with an estimated 84 million Nigerians living below the poverty line — the world’s second-largest poor population after India. Spatial inequality continues to be large, with the best-performing regions of Nigeria comparing favorably to upper middle-income countries, while the worst performing states fare below the average for low-income. In most areas of Nigeria, state capacity is low, service delivery is limited, and insecurity and violence are widespread. Wide infrastructure gaps constrain access to electricity and hinder the domestic economic integration that would allow the country to leverage its large market size. Emerging problems such as the increased severity and frequency of extreme weather events, especially in the northern parts of the country, add to these long-standing development challenges.
Recent reforms offer a launching pad to a new social compact for Nigeria’s development. Strengthening macroeconomic fundamentals will allow structural reforms to be pursued and economic growth to be restored. The current low social and economic equilibrium could be switched to one marked by a better funded and more effective State that provides efficient public services, public goods, and a conducive economic environment for the private sector to flourish and create more quality jobs for Nigerians.
Last Updated: Oct 02, 2023
