Nigeria has the largest economy in the whole continent of Africa. The country has an expanding market in all sectors to include manufacturing, financial, communication, technology, service and entertainment sectors. Nigeria’s economy is also ranked as the 27th-largest economy in the world in terms of nominal GDP. The calculation of nominal GDP does not take into account differences in the cost of living in different countries and often does reflect the standard of living of the country’s population. Nigeria’s economy grows on an average of 2% while the population grows on an average of about 3.0 percent. This explains the low standard of living, alarming rate of poverty, unemployment rate, and the wide disparity in the socio-economic status of the Nigerian population. This article is on the economic problems of Nigeria, read on below:
Major Economic Problems facing Nigeria
Unstable Policies and Initiatives
Nigeria has suffered instability of government in time past which has resulted in unorganized government policies and implementation. Even now, every new government administration in Nigeria often comes on board with its own policy and initiative, they then abandon the previous policies set up by the previous government. Hence, the country is left with a long trail of poorly executed policies. Economic plans and policies are supposed to be sustainable and flexible so that any government that comes into power can keep on with its implementation. However, this has not been the case in Nigeria, the non-continuity of government projects is a major hindrance to economic growth.
Poor human development
Human resources play a significant role in the success or failure of the economy and development of any nation or organization. Nigeria has very poor human development. This is evident in poor educational systems, poor remuneration and unemployment rate. Most of the problems facing the Nigerian economy reflect the poor state of human development. When the government does not make the development of the people its priority, it reflects in the country’s economic growth. Major background issues such as poor educational system, initiatives for the development of the population need to be put in place and effectively too, for there to be economic growth in Nigeria.
Nigeria suffers from a culture of corruption. It has been woven into the various sectors of the Nigerian economy and continues to eat it up. For many years, Nigeria has profited a huge sum of money from crude oil, this money, which is supposed to be used for the development of the nation’s economy have gone down the drain due to corruption. Nigeria is such a wealthy nation due to the abundance of oil resources, however, the problem is that money from oil is looted by the top public officials. Revenue generated from oil can be used to create further sources of wealth such as industries to employ labour and other national investments, instead, what we have in Nigeria are public officials who heap up stolen public funds for themselves and fill their pockets.
Lack of interaction between the government and the private sector
The government needs to foster interaction with the private sector. The contribution of the private sector is crucial to building a lasting economy. The government should initiate policies and mechanisms for citizens and private organizations to articulate their interests and work together with the government.
Over-reliance of crude oil
Nigeria largely depends on oil for the bulk of its revenue. Recently, there has been a fall in expected revenue in Nigeria due to the fall in crude oil prices. The decline in projected revenue always affects the funding of the country’s plans and projects. In 1973, there was an increase in world oil price which produced rapid economic growth in Nigeria and all around the world. In Nigeria, this also led to a great influx of rural people into cities, thus agricultural production went to a halt to such an extent that cash crops such as palm oil, peanuts (groundnuts), and cotton were no longer significant export commodities for the Nigerian economy. Nigeria was now forced to import basic food commodities such as rice and cassava which can be grown locally. The government neglected the agricultural sector. Although much of the population remained engaged in subsistence farming, too little food was produced for the country’s rapidly growing population, this therefore increased costs of imports. This system (reliance on crude oil) would have worked well if revenue generated from oil was constant or increasing, but recently, there has been a dip in oil price. The country finds itself in a regrettable position where it over-relied on crude oil.
Lack of economic diversification
Most Nigerian governments have had very little commitment to diversification of the economy. Nigeria is endowed with natural resources in the sector of agriculture and solid mineral resources. Nigeria has a large expanse of land (77.7 percent of Nigeria’s total land area), of this total, 37.3 percent is arable land. One then wonders why there is very little generation of revenue for the government, as well as employment from the agricultural sector. Also, the agricultural sector in Nigeria is still largely labor-intensive rather than capital. This explains the low global demand for the country’s products globally and the very little foreign exchange earnings from the agricultural sector. Consequently, the Nigerian economy suffers loss because it lacks the capacity for ensuring long term growth and sustainability.
Low export earnings
The oil sector accounts for less than 10% of the country’s export earnings yet even the non-oil sector that contributes about 90% of the country’s GDP records less than 10% of the country’s export earnings. This means Nigeria’s products are not globally competitive enough to go beyond the country’s borders and fetch the country significant foreign exchange earnings. The Nigerian government needs to invest in the agricultural process to ensure the production process reaches world standards so Nigeria can record higher foreign exchange and expand the economy.
Nigeria has struggled with various security challenges such as terrorist attacks in the north and increased violence among the constituent units and militancy group in oil-producing states. The lack of security has affected the economy as economic activities are drastically halted and investors lose confidence in the nation.
Lack of Infrastructure
Nigeria lacks basic amenities and infrastructures that will help businesses thrive. For example, Nigeria still suffers from inadequate power and water supply. Those in the manufacturing sector find production very difficult under these kinds of conditions. Foreign companies also find it hard to invest in Nigeria due to lack of basic amenities.