As Nigeria celebrates her 60 years of independence, it is important to examine how the economy has fared in these past decades.
A cursory look at data (spanning 40 years) obtained from both the CBN and the National Bureau of Statistics (NBS) showed that despite the huge growth potential in Nigeria, the nation’s economy only grew at an average rate of 3.33% between 1982 and 2020 (Year to date).
Oil exploration and price fluctuations
Since Nigeria switched to oil exploration as the mainstay of the economy, export earnings from the commodity have risen to over 90%. Meanwhile, the dependency on oil may be doing more harm than good, as growth remains on the ebb.
For instance, the collapse of world oil prices from an average of $117 per barrel in 1980, to an average of US$23.57 per barrel in March 2020, has highlighted the precarious nature of the country’s economic and financial positions.
In 1983, Nigeria’s economy plunged into recession, contracting at -10.93%. The contraction recorded in 1983 remains one of the biggest in our history; this was on the back of oil supply glut following the 1970s energy crisis, causing oil prices to tank.
In order to rescue the Nigerian economy in 1986, Nigeria adopted the IMF’s Structural Adjustment Programme (SAP), under the regime of General Babangida (Rtd), which signaled a radical departure from the previous austerity measures of General Buhari.
Among two other objectives, SAP was specifically introduced to restructure and diversify the productive base of the economy, in order to reduce dependency on the oil sector and imports, with a US$450 million trade policy and export diversification loan support from the World Bank.
Forty years later, despite other development plans introduced by several administrations, effective diversification to other productive sectors remains elusive to the Nigerian economy. Scholars have often posited that Nigeria is a ‘resource-cursed’ economy. Basically, this refers to the paradox that countries with an abundance of natural resources tend to have less economic growth and worse development outcomes.
Analysis of data showed that in the last 40 years, Nigeria’s economic growth has largely depended on changes in oil prices (Fig 1.). This implies that despite the diversification policy drive that has been mooted by several regimes and administrations, the Nigerian economy has remained a largely mono-cultural economy, undermined by distortions in global oil prices.
Low purchasing power amidst double-digit inflation & falling naira
The Nigerian economy continues to battle with the rising Inflation rate, with persisting structural issues undermining the purchasing powers of consumers. Nigeria remains an import-dependent economy, and import remains a pass-through for rising domestic inflation, as manufacturers depend on the importation of input materials to produce final goods.
In the last four decades, Nigeria’s exchange rate plunged from a yearly average of N0.67/$1 to N379/$1, further stressing the fragility of the economy. On the other hand, rising inflation is partly driven by inherent structural issues, which continue to raise the cost of doing business in the country.
Despite moves by the Central Bank in recent years to manage the country’s currency, a sustained decline in oil prices may further stoke pressure on the nation’s currency.
It was an ambitious plan by the administration of former President Yar’Adua, to make Nigeria one of the top 20 economies in the world by 2020. Nigerians welcomed this Vision 2020, which also aimed to increase the average life expectancy to 70 years, and boost GDP to $900 billion.
A cursory look at World Bank data in 2007 shows that the Nigerian economy ranked 31st globally, estimated at $236 billion. However, fast forward to 2019, despite the Nigerian economy growing to $488.1 billion, it only moved up four places to rank 27th in the world.
Similarly, according to the United Nation Development Programme (UNDP), Life expectancy in Nigeria dropped to 54.3 years in 2018, one of the lowest in the world. This further validates that the Nigerian economy failed to achieve goals set out in the Vision 2020 development plan.
On the back of the outbreak of the COVID-19 pandemic, fresh development plans and frameworks are currently being introduced to abate the impact on the Nigerian economy. Whilst this is laudable, Nigeria needs more than just developing plans to achieve inclusive growth.