Nigeria: Economic and Political Overview
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Africa’s leading economy, Nigeria - in close competition with South Africa - has a population of more than 219 million people (CIA). Worldwide, it is the 25th largest economy, by GDP volume. However, Nigeria's economy is highly dependent on oil and is therefore very vulnerable to fluctuations in crude oil prices and production. If over the past decade, economic growth reached 2.5% on average, the Covid-19 pandemic and the fall in oil prices caused the economy to contract by -1.8% in 2020 (IMF). Economic growth rebounded to 2.6% in 2021, supported by government policy support, rising oil prices and international financial assistance (IMF). According to IMF estimates, it is projected to reach 2.7% in 2022 and 2023. Economic activity will benefit from higher oil prices and an increase in oil production. Among the downside risks are high inflation, security issues, a potentially sharper-than-expected slowdown in China and a low vaccination rate (Focus Economics).
In 2021, Nigerian economy recovered from the recession caused by the combined impacts of the Covid-19 crisis and the oil price shock. However, despite the recovery in oil prices, the fiscal deficit widened to an estimated -6.3% GDP in 2021, from -5.7% GDP in 2020 due to higher security spending and fuel subsidies (IMF). According to IMF projections, it should further increase to -6.4% GDP in 2022, although the 2022 budget optimistically targets a 3.4% GDP deficit. Euler Hermes and Coface also expect the fiscal deficit to hover around -5.5% GDP in the medium term. Public debt increased from an estimated 35% GDP in 2020 to 35.7% GDP in 2021, and is forecast to further rise to 36.9% GDP in 2022 and 37.7% GDP in 2023 (IMF). Even if public debt remains low, debt accumulation has increased sharply, and interest payments will absorb 40% of the country’s scarce resources (Coface). Inflation reached a peak of 18.2% in March 2021, before declining thanks to new harvest season and opening of land borders (IMF). From an estimated 13.2% in 2020, it rose to 16.9% in 2021, and it is forecast to remain in double-digit territory in 2022 (13.3%) and 2023 (11.8%) (IMF). Fuelled by elevated food prices, high domestic energy prices, accommodative monetary policy and imports restrictions, it has constantly exceeded the central bank’s inflation target range of 6% over the past few years (Euler Hermes). Fiscal consolidation, economic diversification, inclusive growth and security issues are the main priorities. The main obstacles to development in Nigeria are the unappropriate energy supply, deficient transport infrastructures, inefficient judiciary system, widespread corruption, together with high inflation. The gap between the official value of naira and its value on the black market is substantial and the banking system is fragilized by the deteriorating quality of assets.
Despite the country's dynamism, the real challenge for Nigeria is the risk of a demographic explosion. According to the United Nations, the population of Nigeria could reach 730 million inhabitants in 2100. Concern regarding this potential boom is exacerbated by the fact that half of the inhabitants live below the poverty line; pandemics are rampant (HIV, tuberculosis), infant mortality is high and the country struggles with significant levels of inequalities. According to the Nigerian Bureau of Statistics, unemployment rate soared to 33.3% in Q4 2020 due to the pandemic. Food insecurity and poverty have increased, and purchasing power deteriorated.
| Main Indicators | 2020 | 2021 | 2022 | 2023 | 2024 |
| GDP (billions USD) | 429.42 | 441.54 | 504.20 | 574.27 | 651.34 |
| GDP (Constant Prices, Annual % Change) | -1.8 | 3.6 | 3.2 | 3.0 | 2.9 |
| GDP per Capita (USD) | 2,083 | 2,089 | 2,326 | 2,585 | 2,860 |
| General Government Gross Debt (in % of GDP) | 34.5 | 36.6 | 37.4 | 38.6 | 39.8 |
| Inflation Rate (%) | 13.2 | 17.0 | 18.9 | 17.3 | 12.6 |
| Unemployment Rate (% of the Labour Force) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Current Account (billions USD) | -16.98 | -1.85 | -0.95 | -3.73 | -2.99 |
| Current Account (in % of GDP) | -4.0 | -0.4 | -0.2 | -0.7 | -0.5 |
Source: IMF – World Economic Outlook Database, October 2021
The Nigerian economy is dominated by crude oil, which accounts for about 10% of the country's GDP, 50% of government revenue and more than 75% of the country's total export earnings (Coface, ITC). Nigeria is the world’s 8th oil exporter, and its oil reserves are estimated at about 37 billion barrels (OPEC). The country also has become one of the lead exporters of liquefied natural gas, which accounts for an additional 13% of exports (ITC). The country also extracts tin ore and coal for domestic use. Nigeria’s other natural resources include iron ore, limestone, niobium, lead, zinc and arable land. Another key sector of the Nigerian economy is agriculture, which employs 35% of the workforce and contributes for about 24.1% of GDP (World Bank). The Southern and Central regions of the country produce yam, rice, and maize while the Northern regions produce sorghum, millet, rice, and livestock farming. Other major crops include beans, sesame, cashew nuts, cassava, cocoa beans, rubber, soybeans, and bananas. Nigerian agriculture is mainly centered on subsistence farming.
The industrial sector makes up 28.2% of the GDP and employs 12% of the workforce. Its development has been constrained by power shortage. The largest industries in the country are the petroleum industry, tourism, agriculture, and mining. The petroleum industry currently suffers from oil theft, which is believed to cost the country potential revenues valued as much as USD 10.9 billion. Significant oil losses are also recorded due to oil spills.
Services represent 46.4% of the GDP and employs 53% of the population. Financial sectors, telecommunications and retail especially, are very dynamic. Tourism is also a significant sector, but this sector still struggles due to the country's poor power supply, insufficient road infrastructures, and poor water quality. The Covid-19 pandemic had a huge impact on tourism as well as the entertainment industry, but vaccination programmes enabled activity to rebound in 2021.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 35.0 | 12.0 | 53.0 |
| Value Added (in % of GDP) | 23.4 | 31.4 | 43.8 |
| Value Added (Annual % Change) | 2.1 | -0.5 | 5.6 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: March 2023
