According to the IMF World Economic Outlook report released in April 2024, nine of the fastest-growing economies in the world in 2024 will be African countries. Conspicuously missing was Nigeria which up to a decade ago was amongst the fastest growing economies in Africa and until very recently the biggest economy in Africa.
Ironically the same IMF report projected that Nigeria would drop to become the fourth biggest economy with a GDP of $253 billion by the end of 2024 which is less than 50% of the peak GDP of $574 billion that Nigeria achieved in 2014 as the biggest economy in Africa. One begins to wonder what is responsible for Nigeria’s declining economic fortunes at a time when other less-endowed African countries are stepping up their game and growing their economies at a rapid rate.
The story of Nigeria’s recent economic history begins after the return to civil rule in 1999 after several years of military rule had stagnated the economy of the country. As of 1999, Nigeria was the fourth biggest economy in Africa with a GDP of just $59 billion while the GDP growth rate was 0.58% and the country had an excruciating external debt stock of $35 billion which was extremely difficult to service as at then and foreign reserves of less than $3 billion.
However, the Obasanjo administration got to work and introduced several economic reforms that stimulated the growth of the economy. Amongst the policies introduced were the privation policy which generated billions of dollars for the government while absolving them of the responsibility of maintaining moribund enterprises and liberalization of the telecoms sector which attracted billions of dollars’ worth of investments and created millions of jobs in the process.
Other economic policies introduced include the banking sector reforms which increased the total capitalization of Nigerian banks by over 300%. The pension reforms policy birthed the pensions industry which serves as a platform for aggregating long-term capital and remains the largest pool of funds in the Nigerian financial services industry to date was also successfully implemented. We also have the cement industry policy which transformed Nigeria from a country that imported over $3 billion worth of cement annually to become a net exporter of cement and the biggest cement manufacturing country in Africa.
The oil industry’s local content policy was also introduced. In the process, billions of dollars worth of oil service contracts were retained locally and given to indigenous contractors instead of foreign contractors while building the capacity of our local oil service operators.
The government also to giant strides to fight corruption with the establishment of the Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices Commission (ICPC) while the National Agency for Foods and Drugs Administration and Control (NAFDAC) was reinvigorated and strengthened to fight the menace of fake drugs in the country.
To reduce the cost of governance, a Budget Monitoring and Price Intelligence Unit (AKA due process unit) was established to cut down the cost of inflated contracts in the country, and hundreds of billions of naira were saved in the process while a Monetization policy was also implemented to reduce the overhead costs of running the government.
As a result of these policy reforms, Nigeria was able to achieve an economic growth rate of 15.33% by 2002 which made it the fastest-growing economy in Africa while an average growth rate of 7% was sustained over the next decade which resulted in Nigeria being recognized as the biggest economy in Africa with a GDP of $540 billion when the GDP was rebased in 2013. Before that, Nigeria had paid off its foreign debt while negotiating a huge discount in the process and built up its foreign reserves to an unprecedented level of $60 billion. In this same period, Nigeria’s per capita income increased from $494 in 1999 to $2,977 by 2013 with a corresponding increase in the standard of living of the average Nigerian.
After a decade and a half of rapid economic growth which cemented Nigeria’s reputation as the “Giant of Africa”, the current economic decline started in 2014 as a result of falling oil prices which was the country’s main source of foreign exchange revenue and was also responsible for up to 70% of government revenue at the time. Sadly what was expected to be a temporary decline was exacerbated further when the new government that took over in 2015 demonstrated a total lack of interest in addressing the economic challenges the country was facing at the time as a result of this, Nigeria slid into recession by the last quarter of 2016.
Between 2015 and 2023, the Nigerian economy virtually stagnated with an economic growth rate that averaged less than 2% which was considered as negative growth since it was less than the country’s population growth rate of 2.6%. This economic stagnation can be largely attributed to the lack of interest the then president had for economic issues which resulted in the government not making any serious attempts to solve the country’s economic problems while zero efforts were made towards growing the economy of the country.
In 2023, a new administration that was more interested in the economy came to power but the focus of the administration was to increase the government’s revenue rather than grow the economy. As a result of this, the petrol subsidy was removed which led to a 200% hike in petrol prices, the Naira was floated which resulted in an over 300% decline in the value of the Naira while electricity tariffs were also raised by upwards of 200%.
As if the economic disruptions caused by the decline in the value of the Naira and increased energy costs were not bad enough, in a bid to attract more funds to the government, the Central bank increased the Minimum Rediscount Rate (MRR) which determines the lending rate in the country from 18.75% to 26.75% while increasing the Cash Reserve Ratio (CRR) of banks thus making it more difficult and costlier for businesses to obtain loans. The CBN also in their desperate attempts to increase government revenue introduced a new levy on online payments under the guise of enhancing cyber-security but it led to a public outcry and the new levy was rescinded.
As a result of the poorly thought out and haphazardly implemented economic policies of the current administration, Nigerians experienced unprecedented levels of inflation brought about by increased food and energy prices whilst the government seemed clueless about how to manage the situation as every effort they made seemed to worsen the crisis instead of abating it.
The economic policy direction of the current administration indicates that they are more focused on increasing money available for government expenditure by reducing subsidies and widening the tax net while little or no consideration is being given to growing the economy and creating wealth which should eventually lead to more tax earnings by the government. Effectively speaking, the government is too much in a hurry to increase its tax revenue and it’s doing so at the detriment of the economy instead of supporting the economy to grow.
As a result of the poor and non-existent economic policies in Nigeria for the past ten years, the Nigerian economy has continued to wobble and decline, resulting in Nigeria losing its place as Africa’s biggest economy to become the fourth biggest economy in Africa. At the same time that Nigeria has been in a deep slumber, its poorer neighbours like Benin Republic and Niger Republic now find themselves amongst the fastest growing economies in Africa while other countries like Rwanda, Ethiopia, and Botswana have maintained high growth rates above 6% over the past decade that Nigeria’s economy has been declining.
Nigeria no doubt has what it takes to regain its position as the biggest economy in Africa and even compete favourably with some European and Asian countries given the quality and quantity of human and natural resources that are available to the country, all that is needed is a visionary leadership that has the capacity and is willing to harness these resources for the benefit of the country.
The Obasanjo administration proved that with good visionary leadership, Nigeria could be amongst the fastest-growing economies in the world. Nigeria certainly has no business lagging behind its less-endowed contemporaries in Africa.
Oshobi, a development economist, management consultant, and author writes from Lagos, Nigeria.