The State of the Nigerian Economy

Nigeria has the 30th largest economy in the world.
It grew by 3.25% in 2023.
Nigeria is Africa’s largest country in terms of population, and one of the largest in terms of GDP. But the last few decades have seen lower than expected development, and a stagnant growth in Gross Domestic Product (GDP).

With solid growth in 2023, the Nigerian economy took a turn for the better. But with a more complicated 2024, there are uncertain times ahead. A steady growth was expected in 2024, with increases in foreign investment, however the waters are murky.

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What do the Statistics Say About the Nigerian Economy?

According to Nigeria’s National Bureau of Statistics, the country had a 2.54% quarter-on-quarter economic growth in 2023, which ended with a 3.46% expansion in GDP. This was largely the result of the oil sector ending a period of three years of contraction.

The Nigerian Government has explained that the country’s oil sector expanded by 12.1%, or 1.55 million barrels per day: a significant increase from the previous 1.34 million barrels per day. They are aiming to grow this number to 2.6 million by 2026. The stabilising of oil prices was a significant contributing factor in the steady growth of the GDP.

A $30 billion dollar investment has also been announced, in a promising development for the Nigerian economy. Doris Uzoka-Anite, the Minister of Industry, Trade and Investment explained that both foreign and domestic investors will invest the money. She said “the investors are going to bring in the money or a promise to bring in the investment. So the money, investment, proposal, and every other thing is done. Some have already started building and the investments will come in over a period of five to eight years. Some of the monies will come in the form of equipment, direct investments into manufacturing, and into the facilities. So that fund is here already,” she said.

This development has been largely assisted by a bilateral agreement with India, which will see $14 billion dollars of Foreign Direct Investment (FDI) alone. Uzoka-Anite confirmed that $10 billion in investment commitments for the oil and gas sector had been secured. Such large investments in a range of sectors and industries will likely mean growth both in terms of overall GDP, and job opportunities for Nigerians.

Interactions have also been made with representatives from countries like Germany, the Netherlands, the UAE and South Africa, with potential for further investments and agreements. In one such interaction, back in November, Nigeria was able to sign a trade agreement with Germany involving the export of liquid gas; 850 thousand tons each year. The first export is expected in 2026, with the possibility of increased gas exports in the future. This was just two weeks after agreeing a deal with Saudi Arabia to revive nonfunctional refineries

Investments are also flowing from inside Nigeria. For example, the Nigerian Bottling Company, who have invested $1.3 billion in the last decade, plan to invest a further $1 billion in the next five years alone.

The 2024 Trajectory of the Nigerian Economy

PwC Nigeria, a leading professional services firm, believes that seven key trends will shape Nigeria’s economic growth in 2024. They have predicted a small decline in inflation, and an overall rise of 3.1% GDP growth; but balancing their fiscal reforms with “effective budget implementation” will be crucial.

Should these fiscal reforms be implemented successfully, PwC expects to see improved sectoral growth, explaining “the main drivers of GDP growth in the last 12 months have been the financial services, information and communication, and utilities sectors. The firm expects these sectors to continue to drive growth in the short term.“ But other sectors need to grow as well, and in some cases, there are extenuating circumstances out of Nigeria’s control.

For example, oil revenue will be significantly influenced by OPEC production quotas, as well as international oil prices, and increasingly unpredictable geopolitical realities. Nonetheless, if Nigeria is able to effectively manage factors within their control, non-oil revenue can shape their economy.

Further investments might be influenced by uncertainties in the market. FTSEL Russel recently reclassified Nigeria from Frontier to Unclassified Market Status, due to delays in capital repatriation. Whilst FDI flows are still expected to improve from last, optimism should be cautious. Poverty rates are expected to increase slightly in 2024, and despite a low unemployment rate, purchasing power is still a significant issue, as wages are not keeping up with inflation rates. On the more positive side, PwC says “private consumption is expected to be marginally better than 2023”, by the end of 2024.

Plans to Re-energise the Nigerian Economy

Nigerian President Bola Ahmed Tinubu plans on creating millions of jobs. According to arise.tv, he plans to unlock “the value of Nigeria’s vast public assets with a view to optimising and doubling the country’s Gross Domestic Product”. He aims to raise in excess of $10 billion “to increase foreign exchange liquidity that will, in turn, stabilise the Naira.” Tinubu’s Vice President Shettima explained the plan: “At the core of this is ensuring optimal management of the assets and investments of the Federal Government towards unlocking their revenue potential. This includes our bold and achievable plan to double the GDP growth rate and significantly increase the GDP base over the next eight years.”

But after a long period of hindered economic growth, President Tinubu has stated that transparency and accountability are non-negotiables. He explained that attracting new investment capital will increase returns, which can then be directed towards “crucial funding for education, healthcare, housing, power, roads and other areas vital to lifting millions out of poverty”. Should this be achieved, sustainable economic development becomes manageable, as well as job creation for Nigerian youth.

Conclusion

It seems as though the best way to view the future of the Nigerian GDP is with cautious optimism. Statista is currently predicting a yearly growth rate of just over 3% each year through to 2028.

With effective moves made to increase growth, and careful, strategic planning going into the future, things should continue to steadily improve.

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