Nigeria and Pillars of its economy
A key player in West Africa, Nigeria accounts for half of West Africa’s population with 202 million people and 1 of the largest populations of youth in the world. With an abundance of natural resources, it is Africa’s biggest oil exporter, and has the largest natural gas reserves on the continent.
The country held presidential elections in 2019 and Muhammadu Buhari was sworn in for a 2nd term. He identifies fighting corruption, increasing security, tackling unemployment, diversifying the economy and boosting the living standards of Nigerians as main priorities until 2023.
Fall in Nigeria’s Economy and Recession
Between 2000 and 2014, Nigeria’s GDP grew at an average rate of 7% per annum. Following the oil price collapse in 2014-2016, combined with negative production shocks, the GDP dropped to 2.7% in 2015. In 2016 during its first recession in 25 years, the economy contracted by 1.6%.
Since 2015, economic growth remains muted with 1.9% in 2018 and 2% in 2019. Domestic demand remains constrained and on the production side, growth in 2019 was primarily driven by telecoms. Agricultural growth remains below potential due to insurgency between groups. The growth is too low to lift the bottom half of the population out of poverty and the weakness of the agriculture sector weakens prospects for the rural as well as urban poor.
While Nigeria has made some progress in socio-economic terms in recent years, its human capital development remains weak due to under-investment and the country ranked 152 of 157 countries in the World Bank’s 2018 Index. Despite expansion in some sectors, employment rates remain weak (23% in 2018). The country continues to face developmental challenges, need to reduce dependency on oil and diversify the economy, address insufficient infrastructure, and build strong and effective institutions.
Nigeria is home to over 10 million out-of-school children and it is hardly coincidental that the country with the world’s highest number of out-of-school children is home to the highest number of people living in extreme poverty.
Solutions for Poverty
Without significant structural policy reforms, Nigeria’s growth is projected to remain at 2%. Given that the economy is expected to grow more slowly than the population, living standards are expected to worsen. Growth is constrained with high persistent inflation, multiple exchange rates and forex restrictions. The government has the opportunity to accelerate the pace of structural reforms to build an institutional and policy framework capable of managing the volatility of the oil sector and supporting the growth of the non-oil economy. Bold reforms and elimination of forex and trade restrictions could have a significant impact on the economy’s trajectory.
Ending poverty in Nigeria will entail improving the country’s economic productivity and opportunities for its citizens by investing in human potential and creating job opportunities. If Nigeria wants to rise with flying colours in terms of its economy – it needs solve its inter-state disputes, promote education, and find ways to boost its economy than depend on its oil reserves! For as the famous quote goes, no economy can succeed without a high-quality workforce, particularly in an age of globalization and technical change.