Abuja — the federal capital of Nigeria

 

Nigeria in a Strange Paradox – Second Edition

Nigeria is home to nearly one in six Africans and has a mixed economy characterized by both expansion and recession. The country boasts an emerging, diverse economy, with growth across sectors including manufacturing, financial services, communications, technology, and entertainment. Currently, Nigeria ranks 27th in nominal GDP and 24th in purchasing power parity. According to recent statistics, Nigeria’s nominal GDP in 2022 was $477.38 billion, making it the largest economy in Africa.

Nigeria’s manufacturing sector is the largest in Africa. It accounts for a significant share of the region’s output. However, as with every nation, Nigeria has faced economic recessions in recent years, and its GDP has not kept up with population growth, leading to a decline in per capita income. Additionally, the country ranked below the sub-Saharan African average across all key indicators of health and well-being, including the World Bank Human Capital Index. 

The nation’s regional economies have distinct characteristics. The Southwest region boasts the fastest GDP growth in the country, while the Southeast region is resource-rich and among the wealthiest. However, the northern states are mainly agricultural and have the lowest GDP per capita.

While the federal government promotes economic growth and development, it is essential that these regional governments also diversify their economies in the most effective ways possible, reducing their over-reliance on oil revenue sharing and creating sustainable economic growth and job opportunities for their citizens.

Lagos Island, Lagos State, Nigeria

Nigeria’s growing economy, notwithstanding, has continually encountered resistant challenges: Stagnant incomes, soaring inflation, inadequate infrastructure, and increasing poverty are harsh realities for many citizens. Nigeria invests only $220 per person annually in public spending—one of the lowest amounts in the world, accounting for just 12% of GDP. This inadequate public expenditure is not without serious consequences, as it leads to persistently poor development outcomes.

Alarmingly, Nigeria ranks 167th out of 174 nations on the World Bank’s Human Capital Index, positioning it among the eight economies with the most severe human capital deficits globally. Therefore, Nigeria is indeed facing a paradox: its economy is growing, yet most citizens still struggle to access basic amenities.

Although Tinubu’s government has taken significant steps to reduce waste, it has neither fully prioritized investing in infrastructure, education, and health services, nor adequately developed its human capital, both of which are crucial to improving Nigerians’ quality of life and driving the country’s economic growth.

President Bola Ahmed Tinubu of Nigeria

Increase Revenue and Decrease Wasteful Spending

The efficient use of public funds is crucial for the development of any nation.  The federal government, led by President Bola Tinubu, has eliminated multiple exchange rates and petrol subsidies—the proper steps in the right direction.  While these measures may pose short-term economic challenges, they will yield long-term benefits for the country. Eliminating untargeted and distortive subsidies and reducing inefficiencies in the management of public funds are essential to freeing up resources, enabling improved infrastructure development and enhanced social services for every citizen.

The nation must reevaluate its priorities to create a healthier, more prosperous future for all its citizens. The government must balance investments with a steady, effective monetary policy to reduce inflation, sustainably raise revenue, and incentivize foreign investment. The country’s youthful population and entrepreneurial spirit hold the key to a brighter future; the government must enable a suitable environment for their development and nurturing.   

Traffic Jam in Lagos – the financial capital of Africa

The ever-present big elephant in the room

Corruption is the biggest elephant in the room, without which the analysis of sustainable growth is incomplete. Despite the presence of financial watchdogs like the ICPC and EFCC, corruption continues to pose a significant challenge in Nigeria. Corruption is deep-rooted, not only in government, but also in the private sector.

Undoubtedly, graft in Nigeria has become a significant obstacle to economic growth, good governance, law enforcement, business growth, public service, and the overall well-being of the people, thus significantly hampering the import of urgently needed foreign investment into the country.

However, without addressing the impact of corruption and finding a solution, no nation can achieve economic excellence, even if it gets everything else right. For instance, shifting funds from wasteful subsidies only to be illegally siphoned off by inept politicians is counterproductive. Therefore, the government must implement functional internal controls to ensure accountability and integrity.

Ensuring transparency in public procurement, law enforcement, the judiciary, and even in the private sector is crucial for economic excellence.

Nigeria has struggled with corruption for decades, starting with military rulers and continuing with politicians.

However, it is a grave mistake to assume that the government alone can solve Nigeria’s corruption problem.  Fighting corruption and promoting transparency and accountability require collaboration among all stakeholders, including the government, civil society, and citizens at large. These collaborative efforts can significantly reduce graft, unleash Nigeria’s full potential, and pave the way for a brighter future for the nation.

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Nicholas A. Owoyemi, CFA

President & CEO (Author)

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