Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 by -1.8% in 2020 (IMF). Economic growth rebounded to 2.6% in 2021, supported by government policy support, rising oil prices and international financial assistance (IMF). According to IMF estimates, it is projected to reach 2.7% in 2022 and 2023. Economic activity will benefit from higher oil prices and an increase in oil production. Among the downside risks are high inflation, security issues, a potentially sharper-than-expected slowdown in China and a low vaccination rate (Focus Economics).

In 2021, Nigerian economy recovered from the recession caused by the combined impacts of the Covid-19 crisis and the oil price shock. However, despite the recovery in oil prices, the fiscal deficit widened to an estimated -6.3% GDP in 2021, from -5.7% GDP in 2020 due to higher security spending and fuel subsidies (IMF). According to IMF projections, it should further increase to -6.4% GDP in 2022, although the 2022 budget optimistically targets a 3.4% GDP deficit. Euler Hermes and Coface also expect the fiscal deficit to hover around -5.5% GDP in the medium term. Public debt increased from an estimated 35% GDP in 2020 to 35.7% GDP in 2021, and is forecast to further rise to 36.9% GDP in 2022 and 37.7% GDP in 2023 (IMF). Even if public debt remains low, debt accumulation has increased sharply, and interest payments will absorb 40% of the country’s scarce resources (Coface). Inflation reached a peak of 18.2% in March 2021, before declining thanks to new harvest season and opening of land borders (IMF). From an estimated 13.2% in 2020, it rose to 16.9% in 2021, and it is forecast to remain in double-digit territory in 2022 (13.3%) and 2023 (11.8%) (IMF). Fuelled by elevated food prices, high domestic energy prices, accommodative monetary policy and imports restrictions, it has constantly exceeded the central bank’s inflation target range of 6% over the past few years (Euler Hermes). Fiscal consolidation, economic diversification, inclusive growth and security issues are the main priorities. The main obstacles to development in Nigeria are the unappropriate energy supply, deficient transport infrastructures, inefficient judiciary system, widespread corruption, together with high inflation. The gap between the official value of 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. Concern regarding this potential boom is 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 rate soared to 33.3% in Q4 2020 due to the pandemic. Food insecurity and poverty have increased, and purchasing power deteriorated. 

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