Nigeria’s economy improved after the pandemic-caused recession in 2020, but macroeconomic stability declined. Inflation is soaring and plunging millions of Nigerians into poverty as a result of global commodities shocks, the falling value of the currency, trade restrictions, and monetization of the deficit. Since 2021, Nigeria is also unable to benefit from the surging global oil prices, as oil production has fallen to historic lows and petrol subsidy continues to consume a larger share of the gross oil revenues.

In 2018, 40% of Nigerians (83 million people) lived below the poverty line, while another 25% (53 million) were vulnerable. With Nigeria’s population growth continuing to outpace poverty reduction, the number of Nigerians living in extreme poverty is set to rise by 7.7 million between 2019 and 2024.

While the economy is projected to grow at an average of 3.2% in 2022-2024, the growth outlook is subject to downside risks including further declines in oil production and heightened insecurity. Meanwhile, continued scarcity of foreign exchange and tighter liquidity could affect the economic activity in the non-oil sector and undermine the overall macroeconomic stability. The uncertainty is also expected to be accompanied by high inflation and continued fiscal and debt pressures. 

An important examination of the six critical sectors of the GDP and how they either grew or declined undeniably gives mixed insights. While ICT grew by a whopping 11% in the period under review, mining and quarrying surged by 4.43%; agriculture with its massive impact only rose by 2.58%, the manufacturing sector limped by 0.77%, while trade and real estate declined by 0.38% and 2.36% respectively.

Agriculture remains the major driver of the Nigerian economy and the sector employs over 56% of the people living in rural areas.38 However, it is important to analyse what constitutes the agricultural sub-sectors to guide where our investments should be. For instance, 88% per cent of agriculture’s contribution to the economy is tied to crop production. This sub-sector of the economy grew at 2.51%, which is representative of where Nigeria’s GDP growth for the year ended. Policymakers understand that to increase the GDP, they would have to rigorously review the pertinent issues that ail Nigeria’s crop production. While other aspects such as animal production are important, the critical element of Nigeria’s agriculture that needs a drastic spike in growth is crop production. This important sector has not seen significant improvement beyond the blitz of increased agricultural funding, which could be changed significantly with the quality of inputs —seeds, fertilizers or pesticides—, improved yield per hectare and combating post-harvest losses with improved funding and storage options. Hence, the output from production would not be solely for internal consumption but primed for export growth thereby creating above-the-poverty – line jobs through the modern application of tools and practices.

The decline in real estate also calls for questioning. In the heat of the economic recession in 2016, it recorded one of the steepest declines in the broad sector, dipping by almost 7%. While real estate has been a safe haven Trade which makes up 16% of Nigeria’s economy has been declining, recording negative growth for seven consecutive quarters between 2017 to 2019 and the outlook remains unfavourable as a result of declining oil prices and low demand for non-oil exports. Policymakers need to be curious about the challenges of this sector because trade has a positive trickle-down effect on all individual economic agents within the economy.

In the context of shared prosperity, it is inadequate for the niched sector for oil and gas to grow. What really transforms lives
is increased trade—a component that constitutes most urban and semi-urban economies. When Nigerians talk about “money not circulating”, it is mainly due to depressed demand and weak activity at either the wholesale or the retail end of the trade. Stimulating the economy is tied to activating other sectors to provide jobs and create new spending capacity. While other sectors have mildly recovered, the trade sector has been posting negative growth since 2016. This is a situation where aggregate growth might be happening, but development still eludes the country.

The decline in real estate also calls for questioning. In the heat of the economic recession in 2016, it recorded one of the steepest declines in the broad sector, dipping by almost 7%. While real estate has been a safe haven for investment, the recent slump in disposable income has not expanded the opportunities for Nigerians to own their homes. The absence of a robust mortgage policy has dampened interest in the sector, leaving space for those with liquidity, and those who are not looking to monetise the investment in the short-term. Nigerians cannot keep making full payments or using short-tenor lending facilities for housing. What exactly is the point of long-term pension funds if they cannot be used as an opportunity for citizens to invest in real estate?

In the manufacturing sector, the myriad of problems is the reason why the sector is in decline. It remains a shame that manufacturing contributes only 9% to the economy. What Nigeria needs is an industrial strategy for the world and not a protectionist approach. This would require long-term thinking for at least five years, which aggregates more manufacturing entities into hubs and eases their path to either domestic or external markets.

For Nigeria to leapfrog into a middle-income economy with shared prosperity, she has to raise the contribution of manufacturing to GDP to at least 15%. South Africa’s manufacturing contributes 13% to GDP, while Egypt’s contributes 23% to GDP. Nigeria needs to understand the elements and aspects that will constitute its growth, based on the current structure of its economy. It also needs to accelerate other sectors such as professional services and the construction sector that contributes 3.57% and 3.72% to GDP respectively, and have the propensity to create jobs and raise the skill level of its population. If Nigeria seeks growth, it has to either steer the economy in a new direction over a long period of time—like in the arts and entertainment, which contributes 0.23% to the GDP but grew by 4.12% in 2019—or look for ways to x the challenges of the main sectors in agriculture, real estate, manufacturing that constitute its current dynamics. While oil might be central to Nigeria’s export economy, expanding the capacity of the non-oil sector contributes 91% to the GDP is the pathway to resolving Nigeria’s existential question of relying on hydrocarbon revenues. It is ironic that in the 2019 GDP analysis, the oil sector grew by 4.59% while the non-oil sector grew by 2.09%. The Nigerian government has the responsibility of easing the participation of the private sector in the Nigerian economy but must be strategic and guided by data when doing it. As scrupulously enunciated in this book, sustainable growth will happen when Nigeria is able to attract domestic and foreign investment, expand income levels that enable consumption and strengthen its competitiveness through an export-led approach.

BudgIT Analysis and Excerpt from Existential Questions by Oluseun Onigbinde