Economic problems in Nigeria are similar to those in other developing African countries. Issues like unemployment and inflation hinder development in Nigeria. This article discusses the current economic issues in Nigeria and how the government is trying to solve them. It also lists some recommended solutions.
In 2019, The National Bureau of Statistics (NBS) revealed that four out of ten Nigerians live in extreme poverty (i.e., use below $2 per day). Some economic problems in Nigeria are gradually reducing, while others are worsening. The country is steadily working on its economic challenges as it aspires to be among the top economies in the world someday.
What are the economic problems in Nigeria?
An economic problem means the government tries to satisfy the country's unlimited wants and needs, but resources are limited. People have endless desires, but the resources to meet those needs are scarce. Below are Nigeria's economic problems and solutions:
1. Inflation and debts
Inflation and debts have affected Nigeria's economy and commercial activities. The country's dependence on oil has decreased in the last few years. According to the Department of Petroleum Resources, the nation's crude oil reserves produce 37 billion barrels annually, but about 2% of this will be depleted in 49 years.
The Nigerian government has increased borrowings from the international capital market to offset the budget crunch caused by the ongoing revenue shortfalls.
The rising interest rates worldwide and Nigeria's revenue decline revenues have worsened the country's ability to pay its debts, affected its foreign currency reserves, and made it hard for the government to access foreign exchange for business.
The Central Bank of Nigeria (CBN) has not adjusted multiple exchange rates. This has caused uncertain and dynamic market conditions for the country's international businesses.
In 2020, the CBN took measures toward adjusting multiple foreign exchange rates to stabilize the Naira. However, a significant devaluation occurred in 2022 and diverged official and unofficial forex rates.
Possible solutions for inflation and debts in Nigeria
- Encourage people and organizations in Nigeria to put their savings in platforms that have high-interest rates.
- People and organizations in Nigeria should invest in securities domiciled outside Nigeria.
- They should save their money in alternate currencies like the US dollar.
- Nigeria can resolve the lingering debt burden by approaching the IMF and other lenders in the international capital market with a policy support instrument, debt conversion, and debt restructuring proposals.
- Negotiating a debt buyback with bilateral creditors can help Nigeria to use its recent oil windfall to settle its external debts at a steep discount.
2. Inadequate power supply
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Electricity becomes unreliable and expensive to citizens when there is insufficient power. Relying primarily on petroleum increases noise pollution caused by generators and machines, and oil mining can cause pollution at sea and in the air. Environmental pollution is costly to control.
Producing enough electricity reduces pollution and increases production. Nigeria also has abundant untapped renewable energy resources like hydro, biomass, wind, biogas, solar, and geothermal.
How can Nigerians overcome power supply problems?
Below are things the Nigerian government has accomplished and what it should do to improve the power supply in the country:
- The Nigerian Electricity Regulatory Commission (NERC) developed renewable energy feed-in tariffs for wind, solar, small hydro, and biomass/biodiesel to increase the power supply in the country.
- The government should upgrade power distribution and transmission equipment.
- The government should allow private companies to invest in electricity production and distribution.
3. Problems in the communication sector
Nigeria is regarded as Africa's largest ICT market. The government is doing its best to improve communication infrastructure for economic growth.
For example, Nigeria launched its communications satellite (NigComSat-1R) in 2011 and approved the 5G network in 2021. Companies are rolling out microwave and fiber-based national backbone networks, mobile network operators are installing submarine fiber cables, and telecommunications infrastructure companies (infracos) are spreading broadband countrywide, especially in rural areas.
Nigeria faces significant challenges in the communications sector despite these commendable developments. For example, cyber crimes have increased, the country has inadequate technology experts to deliver quality services, and ICT software and hardware are expensive to buy and maintain.
Electricity disruptions and criminals vandalizing installed ICT equipment make it hard for most people to stay online consistently. The internet and technology have automated many jobs. This could lead to poverty and unemployment for many.
Possible solutions for communication problems in Nigeria
Below are some ways Nigeria can solve some of the issues in the communications sector:
- The government and organizations should retain as many workers as possible even after ICT automates their services.
- The government should stabilize the power supply, especially electricity, for people to use ICT infrastructure.
- The government should provide more security for ICT infrastructure to reduce vandalism.
- The government should prosecute ICT fraudsters to curb cyber crimes.
4. State-society gap
The state-society gap is one of the biggest problems of economic development in Nigeria. The government has drifted away from its citizens by concentrating on the wants and demands of foreign interests to secure financial support and investments.
Foreign interests encourage the government to make minimal input into building institutions, policies, and strategies that can increase domestic taxation and other forms of revenue. As a result, the country relies heavily on funds from foreign entities to function.
The West (and China) helps perpetuate this state-society gap by providing international aid or Official Development Assistance. Development consultants that accompany aid money also have an external orientation. They focus on the desires and wants of the foreign entities from which they came.
These consultants influence or advise the government to focus on foreign priorities instead of its people's desires and wants. Consequently, this widens the gap between the government and its people.
Possible solutions for the state-society gap in Nigeria
Below are some of the steps the government can take to reduce the state-society gap:
- Nigeria's government should reduce foreign financial support and investments. Instead, the government should focus on building local institutions for the country's development.
- The government of Nigeria should stop relying on advice from consultants whose focus on the desires and wants of the foreign entities from which they came. Let Nigeria create independent organizations that produce actionable solutions relevant to the people.
- The government should decentralize governance to reduce the state-society gap. It should also encourage leaders in decentralized governments to promote frequent social feedback.
Corruption is among the greatest threats to Nigeria's development. The country's 2030 Agenda for Sustainable Development aspires to get over 100 million Nigerians out of poverty.
Nigeria's natural resources include petroleum, natural gas, tin, iron ore, coal, limestone, niobium, lead, zinc, and arable land. The country earns a considerable sum of money from these resources. For instance, Nigeria made about $47 billion from mineral fuels, oils, and distillation products in 2019. The amount was over 80% of the country's export value.
The natural resources in Nigeria promote corruption and poverty instead of economic development—only a few pocket income from these resources, leaving millions impoverished.
There are other forms of corruption in Nigeria. Nepotism and vote-buying have put corrupt leaders and workers in public offices. Hence, the standards of professionalism have deteriorated. Public officials solicit bribes, and citizens willingly initiate bribes in public and private offices. Citizens and officers who refuse and report bribes experience negative consequences.
How can Nigerians deal with corruption?
Nigeria is still battling corruption even though it has over five commissions, bureaus, and tribunals assigned to investigate and prosecute corrupt practices. Here are some possible anti-corruption solutions:
- The government should allow anti-corruption commissions, bureaus, and tribunals to conduct fair investigations into corruption cases without political influence.
- Corrupt leaders and citizens should be punished as per the law and taken away from their wealth obtained by questionable means.
- Citizens and officers who refuse and report bribes should be rewarded.
- Promote transparency in public procurement processes and access to information to make government officials more accountable.
6. Inconsistent economic policies
Economic policies are measures a government uses to manage its country's economy. They include monetary policy (money supply and demand), budget, taxation, job creation, etc.
There are many reasons behind inefficient and poorly executed policies in Nigeria. Unhealthy inter-ministerial rivalry causes power struggles and policy inconsistencies in the country. Several bodies control a single sector, and each wants more say in decision-making.
Policymakers who don't desire to help the citizens sway policies to fit their interests. Every new administration forms new policies and initiatives instead of working on the previous ones. As a result, policies regarded as optimal yesterday may not be executed or ideal in the present time, even if they are implemented.
Possible solutions for inconsistent economic policies in Nigeria
Here are some possible solutions to inconsistent economic policies in Nigeria:
- Leaders and public workers should stick to the nation's development plans and priorities and understand the budgeting, implementation, and monitoring processes.
- The government should create transition bodies that ensure the continuity of policies between regimes. These bodies should also enforce policy commitment from the leaders, the administrators, and the citizens.
- Organizations and people the government puts in charge of policy developments should conduct adequate consultations and research.
- The governments should look into political and bureaucratic corruption to ensure leaders and organizations do not make and enact policies for personal interests.
7. Poor human capital development
Human Capital development can be achieved through an efficient education system. It is a great risk for a country to rely on foreign aid to fund these sectors.
The Nigerian education sector receives poor budgetary allocation. For instance, in 2022, the education sector got N1.29 trillion (7.9%) out of N16.39 trillion, N771.5 billion (5.68%) out of N13.58 trillion in 2021, and N671.07 billion (6.7%) out of N10.33 trillion in 2020.
There needs to be more training for young Nigerians in vocational trades. Nigeria should participate in global human capital development through skills development and investment in new technologies to promote workforce competitiveness.
In developed nations, the rate of human capital development is relatively high since there are guaranteed rewards for self-improvement in terms of skills, knowledge, and experience. UNESCO recommended developing countries to invest 15% to 20% of their yearly budget on education.
Possible solutions for poor human capital development in Nigeria
Here are some of the measures that can help alleviate poor human capital development in Nigeria:
- Nigeria should increase budgetary allocation to the education sector to boost human capital skills that drive a knowledge-based economy.
- The government should establish agencies that can improve the skills and capabilities of students across all educational levels in the country. For example, students need internships and mentors to practice the theory they learn in class.
- The Bank of Industry, Ministry of Labour, and other government agencies should promote continuous training and re-training of workers to improve their skills.
- The government should subsidize learning to make it affordable to everyone in Nigeria.
8. The nature of the Nigerian market
Government regulations and policies affect businesses and influence the market. For instance, the Nigerian government monopolizes setting prices for products and services in almost all sectors. Frequent significant increase in fuel prices increases prices for most goods and services in the country.
Exporters in Nigeria face many problems, including high financial exchange rates, multiple levies and taxes, seaport and airport congestion, unending Apapa gridlock, and more.
Possible solutions for problems in the Nigerian business market
Here are some of the things the government does and some recommended solutions for problems in the business market in Nigeria:
- The government should support private enterprises by easing access to finances/loans, linking them to international markets and partners, and more to stimulate exports.
- The government of Nigeria should promote private businesses to reduce monopoly in setting prices for products and services. A healthy business competition between private and public organizations improves the economy.
- The government increased transport flows along the Lagos-Kano Jibiya Transport Corridor and reduced congestion at the Lagos seaport to promote trade.
- The Nigerian government has reformed and modernized the National Customs Service and built trade capacity at the Ministry of Commerce and Industry to promote business and trade.
9. Crime and terrorism
The Global Terrorism Index (GTI) rated Nigeria as the world's third worst country with insecurity in 2020. Crime and terrorism have slowed down this country's economic growth.
Terrorist attacks like bombings, destruction of property, kidnappings, and deaths have increased in Nigeria. Most are tied to Boko Haram and ISIS-WA. They use small arms, captured military equipment, and improvised explosive devices.
Possible solutions for crime and terrorism in Nigeria
Below are things the government is doing to impede crime and terrorism in the country and more suggestions of things it should do:
- The government should encourage the public to report criminal activities and suspicious people.
- The government should cut channels terrorists use to get weapons and finances.
- The government should impose stricter policies against alcohol and illicit substances to lessen violence among citizens.
- The government should create employment to stop the youth from committing crimes to get money for basic needs.
- Since 2011, UNODC has supported the Nigerian government and relevant ministries and helped them curb crime and terrorism in the country.
Unemployment is arguably the most detrimental problem Nigeria faces. Millions of people, mostly youths, are jobless. KPMG stated that the unemployment rate in Nigeria increased to 37.7% in 2022.
The ongoing economic recession, slow economic growth, corruption, and increased population are some of the reasons there are insufficient jobs in Nigeria and worldwide. Unemployment creates many problems, including increased crime rates, suicides, and reduced economic growth.
How can Nigeria deal with unemployment?
There are many ways the government can deal with the employment issue. Here are some possible solutions:
- Increase and facilitate technical training institutions. In most countries, the demand for hands-on skills outdoes the supply. Government can encourage young people to study technical courses.
- Deal with corruption to protect public funds that can be used in investments to create jobs.
- Facilitate self-employment through funding and the creation of markets for products and services.
- Facilitate the export of human capital to get skilled and educated Nigerians work opportunities abroad.
11. Ethnical and religious differences
Nigeria's population is over 221 million, and between 250 and 400 ethnic groups. Being a multi-ethnic nation has many advantages and disadvantages. Hausa, Yoruba, Igbo, Fulani, and Ibibio are the largest ethnic groups in Nigeria.
Family, educational, legal, religious, and political differences are some of the causes of communal conflicts in Nigeria. Religious violence in Nigeria refers to Christian-Muslim strife. The Boko Haram insurgency and farmer-herdsmen conflicts have sparked the most religious disputes in the country.
Boko Haram is pushing Nigeria to be an Islamic state. Violent clashes between radical Islamist Fulani herders and Christian farmers are increasing. These religious conflicts undermined traditional leadership, threatened national security, and caused huge economic losses.
Possible solutions for ethnicity and religious differences in Nigeria
The government of Nigeria can do the following things to end ethnicity and religious differences in the country:
- The government should encourage citizens to participate in each other's religious and traditional functions. It might help them understand each other better.
- The government should ban religious and traditional activities that stir violence among citizens.
- The government should enact laws to punish anyone encouraging a particular religious or ethnic group to attack the other.
12. Poor health system
Good health is the backbone of a country's economy. Citizens can only be productive if they can access quality and affordable healthcare. Most hospitals in Nigeria need more funding, have poor health infrastructure, lack enough health personnel, and have a low patient-doctor ratio.
Most parts of the country experience malnutrition, poor hygiene, and unsafe drinking water. Corruption in the health sector has increased the circulation of fake medicine and substandard hospital infrastructure.
Possible solutions for Nigeria's poor health system
The government of Nigeria can improve healthcare. Here are some recommended solutions it can use:
- Increase funds allocated to the health sector.
- Invest in medical insurance to lower the cost of medical services.
- Provide subsidies to private healthcare centers.
- Give hospitals standard healthcare facilities and infrastructure.
- Invest in tertiary healthcare education to increase the number of medical professionals.
13. Poor transport infrastructure
A country develops faster when it has a dependable transport network. Despite being one of the largest oil-producing countries in Africa, Nigeria still has inaccessible regions due to damaged roads, lack of tarmac roads, traffic congestion, insecurity, and other issues. Of the 50,000 kilometers of roads, only a little more than 10,000 kilometers are paved, with many in poor condition.
Possible solutions for poor transport infrastructure in Nigeria
A lot can be done to improve Nigeria's transport sector. Here are some solutions the government has undertaken and things it should do to improve transport in Nigeria:
- The government should build toll roads to generate more revenue.
- The government should expand roads to reduce traffic.
- In terms of road security, the introduction of CCTV cameras is necessary.
- Due to funding shortages, the Ministry of Finance developed alternative means of funding Nigeria's major roads and highways. The Road Infrastructure Tax Credit Scheme allows the private sector to build or rehabilitate roads identified by the federal government in exchange for tax credits.
- The Ministry of Finance also issues Islamic finance bonds (sukuk) for road development.
- In February 2022, the government established a $2 billion infrastructure company, InfraCredit, to focus on critical infrastructural investments.
- In August 2022, the government of Nigeria announced the concession of the Badagry Deep Sea Port under a public-private partnership at the cost of $2.59 billion.
- The government has invested in alternative means of transportation. Lagos (Apapa and Tin Can Island), Port Harcourt, and Calabar are the major sea ports in Nigeria.
- Five of Nigeria's twenty-two airports (Lagos, Kano, Port Harcourt, Enugu, and Abuja) currently receive international commercial flights.
- Nigeria's railway currently has eight lines that are slightly more than 2,000 miles long collectively. These railways require major rehabilitation, modernization, and expansion.
What are the problems of economic development in Nigeria?
There are many problems hindering Nigeria from realizing its full potential in economic growth and development. Some of the major economic problems in this country are:
- Inflation and debts
- Inadequate power supply
- Problems in the communication sector
- State-society gap
- Inconsistent economic policies
- Poor human capital development
- The nature of the Nigerian market
- Crime and terrorism
- Ethnicity and religious differences
- Poor health system
- Poor transport infrastructure
Which are the largest economic problems in Nigeria?
Nigeria's most notable economic issues are corruption, poor education, inadequate healthcare, and unemployment.
How can corruption in Nigeria be curbed?
Some possible solutions to economic problems in Nigeria include incentivizing the general population to report corruption cases, strengthening anti-corruption bodies, and promoting transparency.
What is Nigeria's current GDP?
World Bank's national accounts data shows Nigeria's current GDP is over $440 billion.
Economic problems in Nigeria are extensive. The governments and the people could have solved most of these problems, but corruption is dragging them behind.
Legit.ng explained the causes of insecurity in Nigeria. Insecurity slows down Nigeria's growth and development. It is pretty challenging for the public and the government to get a lasting solution to this problem.
Attacks and threats happen in the country almost every month. Nigeria's primary sources of insecurity are tribal conflict, poverty, diseases, bad governance and human rights abuses, and environmental degradation.