Nigeria: Economic and Political Overview
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Africa’s leading economy, Nigeria - in close competition with South Africa - has a population of more than 219 million people (CIA). Worldwide, it is the 25th-largest economy by GDP volume. However, Nigeria's economy is highly dependent on oil and is therefore very vulnerable to fluctuations in crude oil prices and production. If over the past decade economic growth reached 2.5% on average, the Covid-19 pandemic and the fall in oil prices caused the economy to contract in 2020. Nevertheless, economic growth rebounded in 2021 (+3.6%) and 2022 (+3.2%) supported by a buoyant services sector and increased revenues from oil and gas exports. Crude oil production averaged 1.3 mbpd in 2022 and is expected to increase slightly to 1.4 mbpd in 2023, although the sector will continue to be affected by the combination of oil theft, pipeline vandalism, and ageing infrastructure. For 2023 and 2024, the IMF forecasts growth at 3% and 2.9%, respectively. Among the downside risks are high inflation and security issues.
Higher oil prices have brought an improvement in oil export receipts, resulting in a small surplus of the current account in 2022, from a deficit of 0.4% in 2021 (Fitch Ratings). Falling reserve levels (estimated at USD 36.3 billion in 2022, down from USD 40.2 billion one year earlier) have contributed to tight foreign-currency liquidity. The 2022 general government fiscal deficit was estimated at 6.1% of GDP by Fitch Ratings, as the subsidy on petrol cost the government approximately NGN 5 trillion (2.4% of GDP) in foregone revenue from the Nigerian National Petroleum Corporation (NNPC). Lower subsidy costs and a marginal improvement in oil production should contribute to a narrowing fiscal deficit in 2023 (still above 5%). Public debt increased from an estimated 36.6% GDP in 2021 to 37.4% GDP last year and is forecast to further rise to 38.6% GDP in 2023 and 39.8% GDP in 2024 (IMF). Even if the public debt remains low, debt accumulation has increased sharply, and interest payments absorb around 40% of the country’s scarce resources (Coface). According to Fitch Ratings, the government is expected to have to repay USD 2.4 billion in external debt in 2023 and USD 2.7 billion in 2024. To meet these payments, the government will likely rely on a mix of drawing down reserves and obtaining new external borrowing, most likely through syndicated loans. Fuelled by elevated food prices, high domestic energy prices, accommodative monetary policy and import restrictions, the inflation rate has constantly exceeded the Central Bank’s inflation target range of 6% over the past few years and reached a 17-year high in 2022, at 18.9%. Over the course of the year, the monetary policy rate was increased three times by a total of 450 basis points by the CBN, and the cash reserve ratio was utilized to periodically eliminate liquidity from the domestic banking sector. Nevertheless, inflation is expected to remain high over the forecast horizon, at 17.3% this year and 12.6% in 2024, according to the IMF.
Fiscal consolidation, economic diversification, inclusive growth and security issues are the main priorities. The main obstacles to development in Nigeria are the inappropriate energy supply, deficient transport infrastructures, inefficient judiciary system, widespread corruption, together with high inflation. The gap between the official value of the naira and its value on the black market is substantial and the banking system is fragilized by the deteriorating quality of assets.
Despite the country's dynamism, the real challenge for Nigeria is the risk of a demographic explosion: according to the United Nations, the population of Nigeria could reach 730 million inhabitants in 2100. Concerns regarding this potential boom are exacerbated by the fact that half of the inhabitants live below the poverty line; pandemics are rampant (HIV, tuberculosis), infant mortality is high and the country struggles with significant levels of inequalities. According to the Nigerian Bureau of Statistics, unemployment stood at 33.3% in 2022 (42.5% for youth), and 22.8% of the active workforce is under-employed. In 2021, Nigeria returned to positive real GDP per capita growth after five years of negative per capita growth. The overall GDP per capita was estimated at USD 5,884 in 2022 by the IMF.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 429.42 | 441.42 | 477.38 | 506.60 | 553.67 |
| GDP (Constant Prices, Annual % Change) | -1.8 | 3.6 | 3.3 | 3.2 | 3.0 |
| GDP per Capita (USD) | 2,083 | 2,088 | 2,202 | 2,280 | 2,431 |
| General Government Gross Debt (in % of GDP) | 34.5 | 36.5 | 38.0 | 38.8 | 39.0 |
| Inflation Rate (%) | 13.2 | 17.0 | 18.8 | 20.1 | 15.8 |
| Unemployment Rate (% of the Labour Force) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Current Account (billions USD) | -15.99 | -1.85 | -3.46 | -2.96 | -2.57 |
| Current Account (in % of GDP) | -3.7 | -0.4 | -0.7 | -0.6 | -0.5 |
Source: IMF – World Economic Outlook Database, October 2021
The Nigerian economy is dominated by crude oil, which accounts for half of the government revenue and more than 75% of the country's total export earnings (Coface). Nigeria is among the first ten oil exporters, and its oil reserves are estimated at 37 billion barrels (OPEC). The country also has become one of the lead exporters of liquefied natural gas, which accounts for an additional 13% of exports (ITC). The country also extracts tin ore and coal for domestic use. Nigeria’s other natural resources include iron ore, limestone, niobium, lead, zinc and arable land.
Another key sector of the Nigerian economy is agriculture, which employs 35% of the workforce and contributes to about 23.4% of the GDP (World Bank). Crop production in Nigeria is dominated by food crops such as cassava, yams, maize, rice, sorghum, and millet, which are mainly grown by small-scale farmers. Other important crops grown in the country include cocoa, palm oil, rubber, groundnut, and cotton. Nigeria is the world's largest producer of cassava and the third-largest producer of tomatoes and groundnuts. The livestock sub-sector in Nigeria includes the production of cattle, sheep, goats, pigs, and poultry. The sector is also characterized by small-scale farmers, and the production is mainly for subsistence and commercial purposes. Nigerian agriculture is mainly centred on subsistence farming. According to the National Bureau of Statistics (NBS), the agricultural sector grew by 3.16% (year-on-year) in real terms in the first quarter of 2022, 13.8% in the second quarter, and 1.3% in the third quarter.
The industrial sector makes up 31.4% of the GDP and employs 12% of the workforce. The largest subsector in the country is the petroleum industry, which currently suffers from oil theft that is believed to cost the country potential revenues valued as much as USD 10.9 billion. Significant oil losses are also recorded due to oil spills. The total annual contribution of oil to aggregate GDP in 2022 was 5.67% (data NBS). The manufacturing sub-sector is the largest component of Nigeria's industrial sector and includes the production of textiles, food and beverages, chemicals, cement, paper, and automobiles. However, the sector has been facing challenges such as inadequate infrastructure, high production costs, and limited access to finance and raw materials. Overall, the manufacturing sector is estimated to account for 15% of GDP (World Bank). The construction industry in Nigeria is also a significant contributor to the industrial sector, driven by the demand for new infrastructure, housing, and commercial buildings. The sector has been growing rapidly in recent years, and the government has been investing in infrastructure projects such as roads, airports, and railways to support its development.
Services represent 43.8% of the GDP and employ 53% of the population. Financial sectors, telecommunications and retail especially, are very dynamic. The finance sub-sector is a significant component of Nigeria's services sector, driven by the growth of the banking industry, insurance, and capital markets. Nigeria's banking industry is one of the largest and most sophisticated in Africa, with local and international banks operating in the country. Tourism is also a significant sector, but it struggles due to the country's poor power supply, insufficient road infrastructure, and poor water quality. The Covid-19 pandemic had a huge impact on tourism as well as the entertainment industry, but vaccination programmes enabled activity to rebound in 2022. To address the challenges facing the services sector, the Nigerian government has implemented various policies and initiatives such as the National Digital Economy Policy and Strategy, the Nigerian Tourism Development Master Plan, and the Nigerian Postal Service Reform. These initiatives aim to promote digitalization, improve infrastructure, increase productivity, and create employment opportunities.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 35.0 | 12.0 | 53.0 |
| Value Added (in % of GDP) | 23.4 | 31.4 | 43.8 |
| Value Added (Annual % Change) | 2.1 | -0.5 | 5.6 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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Latest Update: November 2023
