In the past few weeks, the Nigeria election has been the talk of people, organisations and countries far and wide. The seventh general election, held on the 25th of February 2023, was particularly anticipated and observed by many for diverse reasons. Most importantly, Nigeria is the continent’s most populous country, and because of its size, its election could have significant implications for the continent and beyond.

Yesterday, Nigeria’s ruling All Progressives Congress (APC) candidate Bola Tinubu emerged as the winner of the presidential election. But as congratulatory messages fly around, so are the resounding thoughts that he would inherit the world’s toughest job upon his swearing-in on the 29th of May. Truly, the reasons for this declaration are not far-fetched. 

The Nigerian economy is presently ill, and already at a tipping point. According to a World Bank report titled: January 2023 Global Economic Prospects, Nigeria’s 2023 growth was downgraded by 0.3 percentage points to 2.9 per cent from its previous projection of 3.2 per cent. It is projected to remain at that pace in 2024, barely above population growth. The Bank said the downgrade was due to production challenges in the oil sector, rising insecurity, and flooding. In an earlier article, we discussed that while projections from the World Bank and similar organisations are not always entirely accurate, their projections can not be dismissed. And going by the present economic realities in the country, the figures are worth the concern. 

For example, Nigeria has been neck-deep in debt over the years, and with almost every new administration comes a new layer of debt burden. As of Q3 2022, its public debt stock, which includes external and domestic debts, stood at N44.06 trillion ($101.91 billion) from the N42.84 trillion ($ 103.31 billion) recorded in Q2 2022, according to the National Bureau of Statistics (NBS). Debt figures are estimated to run into about N77 trillion at the expiration of the tenor of the present administration in May 2023. Debt servicing is currently the highest expenditure item, gulping 80.6% of 2022 revenue, and a large share of expenditure items in the country’s budget. This figure could hit 160 per cent of revenue by 2027, meaning that the government will be spending more than it is earning on servicing its debt.

Removal of fuel subsidy is another hurdle the president may have to scale because Nigeria has come a long way in this regard. Different administrations have tried to remove it totally, but as a politically sensitive issue, it has always stirred polarised reactions from citizens, with the majority tilting towards disapproval. Many criticise it for potentially increasing the cost of living for many Nigerians. 

But fuel subsidy is unsustainable. Africa’s biggest economy spent N2.91 trillion ($7 billion) on fuel subsidy between January and September 2022, a cost the government has blamed for dwindling public finances. There are plans for the removal of fuel subsidy in mid-2023 by the present administration, but implementation after the expiration date may be problematic.

Fuel subsidy funds are supposed to be pumped into vital areas of the economy, such as education, health, entrepreneurship, and infrastructure upgrades that have suffered funding deficits for a long time. However, years of failed promises do not make an average Nigerian believe these intentions.

On another end, Nigeria, as an oil-dependent economy, has not not been making the expected proceeds from oil sales. Although oil-rich, the country imports refined petrol due to a lack of functional refineries, which comes at a huge cost. In a similarly disadvantageous trend, oil theft has become an institutionalised evil in the sector costing the country 470,000 bpd of crude oil, amounting to $700 million monthly. 

All these and more have dwindled oil production, thereby reducing the amount Nigeria would have made in times of high oil prices. Because Nigeria’s economy relies heavily on oil exports for foreign exchange earnings, increased production is paramount. Increased foreign exchange earnings could be used to settle debts, strengthen the Naira and reduce inflation which has since been on an upward trend. As of January, the headline inflation was at 21.82 per cent, representing an increase of 0.47 per cent compared to the 21.34 per cent recorded in December 2022.

Also important is the growing poverty and unemployment in the country. Highlights of the 2022 Multidimensional Poverty Index survey revealed that 63 per cent of persons living in Nigeria (133 million people) are multidimensionally poor. 

Furthermore, Nigeria has been facing high unemployment rates for several years, with a significant portion of its population struggling to find jobs. Nigeria’s population is predominantly young, and a significant number are unemployed. The widely used unemployment figure used in Nigeria is 33.30 per cent, recorded in the fourth quarter of 2020. The Nigerian Economic Summit Group (NESG) projects that the country’s unemployment rate will hit 37 per cent in 2023.

Interestingly, Nigeria’s economic challenges are more than the aforementioned. But solving them particularly will impact the Nigerian economy significantly. 

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