Economic analysts are concerned that the undesirable trends will persist without much effort from the government as the biggest economy in Africa experiences a significant distortion. As a result, economic indicators—particularly those related to inflation, unemployment, debt, subsidy payments, and poverty rate—appear to be very unsettling.
These difficulties have been linked to the Russia-Ukraine conflict and the COVID-19 pandemic, with some analysts asserting that the world economy is also experiencing some difficulties.
But a close examination of the data reveals that Nigeria faces more difficulties than other emerging economies. Despite acknowledging that external factors like the war in Ukraine and COVID-19 have added insult to injury, poor handling and bad economic policies have contributed to Nigeria’s never-ending economic woes.
In a recent report, the National Bureau of Statistics revealed that Nigeria’s inflation rate had risen to 17.1 percent. All areas of the economy are affected by an increase in the market price of goods and services. The value of the naira has decreased as a result, and household income and purchasing power have both significantly decreased. Saving money has become meaningless due to inflation, and consumption has fallen as a result of constant income levels.
Nigerians struggle to survive with a monthly minimum wage of N30,000 due to the high rate of inflation. This has repercussions in a number of different industries. As production costs rise, businesses will find it harder to turn a profit or even break even. As a result, businesses would close, people would lose their jobs, and the government would receive less revenue. Increased inflation could cause the economy to contract and put it at risk of going into another recession.
Youth employment currently stands at 42.5%, while unemployment is currently estimated at 33.3%. An unproductive economy’s record unemployment rate would have a more catastrophic impact. Lack of foreign investment in the economy, high transaction costs, insecurity, an unstable business environment, among other factors, are all contributing factors to this unemployment.
Insecurity, youth unrest, low output, slow economic growth, and a decline in Nigerians’ standard of living are all being fueled by a persistent rise in unemployment. Youth underemployment is 21.0 percent, while underemployment overall is very high at 22.8%. Young Nigerians are leaving the country in search of better opportunities and higher wages as a result of unemployment and underemployment.
Since 2015, Nigeria’s debt load has increased. It has increased from N12.5 trillion in 2015 to N42 trillion in 2022, according to the statistics that are currently available. While borrowing may not always be a bad idea, it should be done to support the real economy by funding infrastructure. Instead, political office holders in Nigeria have stolen and mismanaged debt and repatriated Abacha loot intended for social investment programs, with little to no economic impact.
Salary payments and other expenses associated with the high cost of governance that has characterized Nigeria’s political system have been made with borrowed money. Furthermore, a significant portion of our revenue from crude oil sales and taxes has gone toward servicing our massive domestic and foreign debt, leaving little money for spending on infrastructure and important policy initiatives.
Nigerian petroleum products are no longer eligible for subsidies. The growth of the sector has also been hampered by the Petroleum Industry Act’s non-implementation. Nigeria has already budgeted N4 trillion for subsidy payments in 2022, with the possibility of higher amounts. As a result, despite an increase in crude oil prices on the global market, oil revenue has decreased.
In a stagnant economy where there are long lines for petroleum products in almost all of Nigeria’s cities, subsidizing petroleum products makes no financial sense.
Furthermore, Nigeria is losing a lot of foreign exchange due to the government’s inability to maintain the four government-owned refineries and the Dangote refinery’s uncertain completion. Foreign exchange is used to pay for the refining of goods that could be refined elsewhere in Nigeria. It has been difficult to stop the subsidy payment because the public lacks confidence in the government to invest the money from the subsidy payment.
According to the World Bank’s Nigeria Development Update for June 2022, an additional 7 million Nigerians will live in poverty, defined as earning less than $1.9 per day. By the end of 2022, there will be 90 million destitute, homeless, and economically hopeless Nigerians, adding to the country’s current 83 million poor residents.
If these numbers are accurate, they will make up over 45% of Nigeria’s population, resulting in an economic crisis, hunger, and starvation, as well as the possibility of worsening already-existing insecurity.
Planners and drivers of the economy have become disconnected from it. Nigeria’s economic compass is thus missing, and the nation is regressing at an unprecedented rate. In order to prevent the economy from completely collapsing, the government must take swift action.