What are key economic issues in Nigeria?

Introduction

Nigeria, Africa’s most populous nation and once its largest economy, is currently grappling with its worst economic crisis in decades. The country faces several key economic problems that have led to widespread hardship and anger among its citizens:

Soaring Inflation

Nigeria is experiencing its highest inflation rate in nearly three decades, with overall annual inflation close to 30%. The cost of food has risen even more dramatically, by 35%. This has severely impacted the purchasing power of Nigerians, making it difficult for many to afford basic necessities.

Currency Devaluation

The Nigerian naira has significantly depreciated against major foreign currencies, particularly the US dollar. This devaluation has led to increased costs for imported goods and has contributed to the overall rise in prices across the economy.

Fuel Subsidy Removal

President Bola Tinubu’s decision to end the long-standing fuel subsidy has resulted in a dramatic increase in petrol prices. A liter of petrol now costs more than three times what it did nine months ago, leading to higher transportation costs and contributing to overall inflation.

Unemployment and Underemployment

Nigeria faces alarmingly high unemployment rates, particularly among its youth population. The combined unemployment and underemployment rate reached 56.1% in 2020. This has contributed to increased poverty levels and social unrest.

Dependence on Oil

The Nigerian economy remains heavily reliant on oil exports, which account for about 90% of the country’s export earnings and over 50% of its government revenue. This dependence makes the economy vulnerable to fluctuations in global oil prices and hinders diversification efforts.

Infrastructure Deficit

Inadequate infrastructure, particularly in power supply and transportation, limits the competitiveness of key sectors like manufacturing. This infrastructure gap hampers economic growth and development.

Budget Deficits and Rising Public Debt

Nigeria has been grappling with persistent budget deficits, leading to increased borrowing and a rise in public debt. As of 2020, Nigeria’s public debt stood at $86.39 billion, putting pressure on the country’s finances and limiting resources for public services.

Low Productivity in Key Sectors

The economy faces challenges of lower productivity, particularly in sectors with high employment potential. Agriculture and non-tradable services, which employ 80% of workers, have low levels of productivity, limiting income growth and poverty reduction efforts.

Conclusion

Addressing these economic problems requires a comprehensive approach, including diversification of the economy, effective implementation of fiscal reforms, alignment of monetary and fiscal policies, and significant investments in infrastructure and human capital development.