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How To Develop Nigerian Economy

JEROME MICHAEL EBRUPHIYO Friday, November 26, 2021 Basis

 

Introduction

This article will provide information on how to develop Nigerian economy and also provide answers to questions regarding how Nigeria can become a developed country.

The Growth and Development Challenge In Nigeria So Far

In Nigeria the usual point of reference is 2020 along with the curious notion of 20-2020 which refers to Nigeria’s aim to join the twenty countries with the largest economies by that date. It is unlikely that Nigeria will leapfrog over more than twenty countries that are ahead of it in the next eleven years. More realistically, we should speak of 2025 as a target year for Nigeria to have made substantial progress towards achieving the Millennium Development Goals (officially slated for 2015), and more pertinently, to have undergone the transformations needed to build a productive economy that can provide remunerative employment for most of its adult citizens. Over the past ten to fifteen years, Nigeria has made significant progress in certain economic sectors, notably banking, telecommunications, and the airline industry. However, the two sectors for which there is enormous scope, and which can provide the level of employment growth desperately needed, namely agriculture and manufacturing, are weakened by the infrastructural deficiences identified by President Yar’Adua, especially power and transportation. Building on the achievements of former Governor Bola Tinubu, the major achievements being made by the Administration of Governor Babatunde Fashola are recognized by any regular visitor to Lagos state. Economic transformation and developmental governance are taking place before our very eyes, creating models for emulation by other states in the Federation. Do not be surprised if government officials from other large cities in the world who confront the multiplicity of urban challenges, from Caracas in Venezuela to Cairo in Egypt, soon appear in Lagos to borrow ideas and practices. It is interesting that President Yar’Adua acknowledged that Nigeria may begin losing potential investors to Angola because of that country’s greater stability and the continuing violence and uncertainty in the Delta region. Angola was given high marks by a few panelists for the progress being made in the management of its oil industry. One speaker even raised the prospect of Angola making such progress in key economic areas that it could be in line to becoming a “success case”. Angola’s official daily petroleum exports have moved past Nigeria’s even though Nigeria’s reserves and potential production significantly exceed Angola’s. And the reason for this progress is not only because of the organizational advantages that Sonangol, the national oil company, enjoys over Nigeria’s complex and underperforming petroleum bureaucracy. Persistent violence in the Delta has led to a significant loss of petroleum exports from Nigeria. If the unknown amount of crude oil lost to theft (or bunkering) were added to the barrels legally exported, Nigeria would still be Africa’s leading oil exporter with a potential capacity of three million barrels a day (bpd). The recent military actions against the armed militias in the Delta might succeed in bringing oil exports just over the two million bpd mark, where it has stood for decades. Nevertheless, severe institutional and governance deficiencies would still leave Nigeria unable to build the level and density of productive activities required for sustained economic growth. In 2020, Nigeria experienced its deepest recession in four decades, but growth resumed in the fourth quarter as pandemic restrictions were eased, oil prices recovered, and the authorities implemented policies to counter the economic shock. As a result, in 2020 the Nigerian economy experienced a smaller contraction (-1.8 percent) than had been projected when the pandemic began (-3.2 percent). As part of its response, the government carried out several long-delayed policy reforms, often against vocal opposition. Notably, the government:
  • began to harmonize exchange rates
  • began to eliminate gasoline subsidies
  • started adjusting electricity tariffs to more cost-reflective levels
  • cut nonessential spending and redirected resources to COVID-19 (coronavirus) responses at both the federal and the state levels
  • enhanced debt management and increased public-sector transparency, especially for oil and gas operations
By creating additional fiscal space and maximizing the impact of the government’s limited resources, these measures were critical in protecting the economy against a much deeper recession and in laying the foundation for earlier recovery. However, several critical reforms are as yet incomplete, which threatens Nigeria’s nascent recovery. In the baseline scenario, Nigeria’s economy is expected to grow by 1.8 percent in 2021. Despite the current favorable external environment, with oil prices recovering and growth in advanced economies, reform slippages would hinder the renewed economic expansion and undermine progress toward Nigeria’s development goals. In a risk scenario, in which the government fails to sustain recent macroeconomic and structural reforms, the pace of economic recovery would slow, and GDP growth couldbe just 1.1 percent in 2021. 2015 has been a momentous year for Nigeria. The general elections held in March brought about the first democratic transition of power from a ruling party to an opposition party, heightening expectations for meaningful political change. The new Government is taking power during a very challenging time, however, marked by a sharp decline in global oil prices and continuing violence in the country’s northeast. This creates a difficult context for realizing the new administration’s ambitious reform agenda for job creation, the power sector, oil and gas, agriculture, and public administration. Chapter two of the report analyzes the costs and benefits of Nigeria’s fuel subsidy, including their implications for low-income households. Fuel subsidy costs are expected to amount to 18 percent of government oil revenues in 2015, and this share could increase to more than 30 percent by 2018 even if oil prices remain low. There is a general consensus that increasing the supply of power in Nigeria is critical to the future development of the country. The success of the current plans to boost generation capacity will hinge on the development of the natural gas sector. Nigeria is endowed with substantial natural gas reserves, but major reforms will be necessary to attract the investment necessary to harness the potential of the natural gas sector to supply the domestic energy market. Chapter three of this report summarizes the current regulatory situation in the natural gas sector and outlines potential avenues for reform.

Nigeria's COVID Response

In 2020, Nigeria’s economy is expected to experience its deepest recession since the 1980s due to the COVID-19-related disruptions, notably lower oil prices and remittances, enhanced risk aversion in global capital markets, and mobility restrictions. In our baseline scenario which assumes further macroeconomic reforms and a gradual recovery in oil prices Nigeria’s gross domestic product (GDP) is projected to contract by about 4 percent in 2020, growing modestly by 1.1 percent in 2021, and then recovering gradually towards the estimated population growth rate of 2.6 percent. With the rate of economic growth remaining below the population growth rate, per-capita incomes would continue declining and better full-time jobs will be much harder to find. Below, we provide highlights on how the COVID-19 crisis has impacted Nigeria’s economy.

Nigeria's Recovery from Recession

Nigeria continues its recovery from the 2016 recession, sustaining an estimated 2 percent growthrate in 2019. The collapse of global oil prices during 2014–16, combined with lower domestic oil production, led to a sudden slowdown in economic activity. Nigeria’s annual real GDP growth rate, which averaged 7 percent from 2000 to 2014, fell to 2.7 percent in 2015 and to -1.6 percent in 2016. Growth rebounded to 0.8 percent in 2017, 1.9 percent in 2018, and then plateaued at 2 percent in the first half of 2019.

How To Develop Nigerian Economy

  • Strengthening democratic institutions
  • Preventing conflict
  • Fostering sustainable economic growth
  • Combating health pandemics, climate change, food insecurity, narcotics trafficking, and maritime security
  • Helping design a Nigeria Project on sustainable growth and development that would draw on the extensive technological resources, notably in the United States, to address key economic and infrastructure challenges
  • Advancing analyses of Africa’s mighty problem which is the failure in many countries to create a universalistic, legitimate, and capable state
  • Providing policy advice regarding key development and democracy challenges in Africa
  • Enhance factor quality by investing in infrastructure, strengthening land tenure security, improving educational outcomes, liberalizing the trade regime and enhancing trade and transport facilitation to help develop value chains and facilitate the efficient reallocation of factors of production, making Nigeria more cost-competitive
  • Ensure policy transparency and predictability, which will be critical to reduce investment risk and promote growth outside the extractive industry
  • Reduce regulatory discretion to help attract foreign and domestic investment to the non-oil sector, encourage competition, and promote formalization
  • Improve access to finance, which could enable new firms to compete with incumbents and allow more productive firms to scale up their operations

How is Nigeria developed?

Nigeria continues its recovery from the 2016 recession, sustaining an estimated 2 percent growthrate in 2019. Nigeria's annual real GDP growth rate, which averaged 7 percent from 2000 to 2014, fell to 2.7 percent in 2015 and to -1.6 percent in 2016.

What are the problems of development in Nigeria?

What are the factors affecting Nigeria economy? The major factors hurting the Nigerian economy include inflation, unemployment, government policy, monetary policies, inadequate infrastructures and power supply, inadequate health facilities, insecurity, ineffective leadership and corruption, and over-reliance on oil.

s Nigeria very developed?

As of 2019, Nigeria's HDI (Human Development Index) is ranked 161st at 0.539. The comparative value for Sub-Saharan Africa is 0.547, 0.926 for the US, and 0.737 for the world average.

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