Tuesday, Aug 03

Nigeria, In A State Of Stagflation As "Twin Evils” Threaten Recovery

Nigeria, Africa’s largest economy and most populous country, is in a state that can best be described in Economics as Stagflation. Currently, the country is experiencing a slow pace of GDP growth, coupled with high inflation and rising unemployment rate. At this juncture, policy makers are stuck in a dilemma, since attempts to reduce inflation may exacerbate unemployment rate.

Nigeria, an oil dependent economy, has been struggling to recover from the oil crash of 2014, but saw its recovery efforts crumpled by another economic shock of a much higher magnitude, the COVID-19 pandemic. Overall, the World Bank has commended the government’s policy interventions to contain the spread of the virus and to protect lives and livelihoods. Yet, for some citizens, hope is almost lost in the government’s economic management prowess due to rising insecurity, poverty, unemployment, and inflation in the country; the last two challenges often described in macroeconomics as the "twin evils”.
According to the World Bank, Nigeria’s economy shrank by 1.8 percent in 2020, its deepest decline since 1983. This was as a result of the COVID-19 crisis which slowed down growth in the global economy, crushed oil prices, and shrunk foreign remittances.

“Without key reforms, Nigeria’s economy will remain anemic, expanding little more than 2% this year and next, still below the population growth rate”, the International Monetary Fund (IMF) has warned.

Estimates show that Africa’s largest and most populous nation, is home to over 90 million poor people, more than India, which has a population seven times greater. According to the World Bank, COVID-19 will cause personal incomes to fall to their lowest in four decades, pushing an additional 11 million people into poverty by 2022.

This notwithstanding, the Nigerian economy has begun to gain some momentum with recent vaccine rollouts and a rebound of global economic activity. According to the IMF, growth has picked up marginally in Q1 2021 as the economy expanded 0.5 percent year-on-year, driven mainly by the agriculture and services sectors. Just like the IMF, the World Bank expects Nigeria to see a marginal growth of 1.8 percent in 2021, driven mainly by a rise in oil exports and in domestic demand. Fiscal deficit is forecast to hover around 5.5 percent of GDP this year due to resurfacing of fuel subsidies, additional spending for COVID-19 vaccines, and the need to address security challenges, the IMF noted.

However, both the World Bank and the IMF have warned that high inflation and high unemployment rates pose a major risk to Nigeria’s outlook. Inflation rose to 18.17% in March 2021, the highest rate observed in the past four years. But, the good news is that, inflationary trends are gradually easing in the country, even though still very high. Recent data from the National Bureau of Statistics (NBS) show that Nigeria’s inflation rate has dropped for the second consecutive month to 17.93% in May 2021 from 18.12% recorded in April 2021.

Rising Unemployment Rates

Nigeria is one of the countries with the highest unemployment rates in the world with approximately one in three Nigerians in the workforce unemployed. According to Nigeria’s National Bureau of Statistics, the unemployment rate has increased from 27.1% in Q2 2020 to 33.3% in Q4 2020. Of major concern is the rising youth unemployment rate which currently stands at 42.5% as of Q4 2020, up from 34.9% in Q2 2020.

Most Nigerians believe the rising unemployment canker is as a result of policy blunders by the Buhari-led administration. Amina Ado, one of Buhari’s oil advisers from 2017 to 2020 said “the government made so many mistakes even before the pandemic made things worse. We need to urgently change course because we are big enough to matter in the world”.

Buhari Agrees To Address Reps On Insecurity
H.E Muhammadu Buhari President of The Republic of Nigeria

In 2015, President Muhammadu Buhari pledged to create 12 million jobs in his first four-year term. However, halfway through his second term, unemployment has more than quadrupled in the country.

“There is a lot of frustration because there are a lot of overqualified people unemployed. When Buhari came to office, people were expecting things to change. But it’s not just Buhari that failed; the system is broken”, said Chioma Okafor, a 32-year-old public health-care expert.

Corruption, The Major Canker

Also, another major evil haunting Nigeria’s economic progress is corruption, just like most countries in the world. Nigerians believe the surge in corruption wrested away resources needed for infrastructure and a reliable power supply. With these amenities lacking, it is very difficult for businesses to thrive, more so, in the midst of the pandemic.

“In a lot of countries, people are used to officials skimming something off the top, but ultimately delivering something. In Nigeria, everything is skimmed off the top and nothing is delivered”, said Matthew T Page, an associate fellow at Chatham House in London.

Insecurity, A Rising Concern

Another major challenge facing Nigeria is the security meltdown. The insecurity in North-West region of the country still remains a major challenge despite the government’s announcement that it had defeated Boko Haram militants in 2015. Many experts believe the rising insecurity is due to the high unemployment rates in the country.

A study conducted in Nigeria in 2018, shows that insecurity affects economic growth by drying-out investments, increases unemployment and dwindles government revenue. Despite these effects, government’s capital expenditure on internal security is currently not at par, the deficit still exist which needs to be fixed.

Meanwhile, official estimates show that disorder is a huge impediment for growth, costing the Nigerian economy $10.3 billion in 2020, more than the federal government’s total revenue that same year.

“The situation is getting worse. The government has completely failed to provide even basic security”, said Banu, a financial consultant.

Nigeria-Twitter Tussle, Derailing Economic Gains

‘When two elephants are fighting, it’s the grass that suffers’, goes the old cliché. This perfectly reflects the current state of affairs between the Nigerian government and the social media giants, Twitter.

On June 4, 2021, the Nigerian government announced an indefinite suspension of Twitter’s operations in the country just two days after Twitter removed a post by President Muhammadu Buhari that threatened to punish regional secessionists. According to the government, the ban is necessitated over “the persistent use of the platform for activities that are capable of undermining Nigeria’s corporate existence”.

Most telecommunications sites have since been blocked. However, the ban, whether lawful or unlawful, shouldn’t have come at this crucial time when Nigeria still battles the devastating effect of the pandemic.

One major tool that emerges for businesses to weather the storms of the pandemic is digitization, which has now become indispensable across the globe. As a result, businesses are leveraging digitization to enhance their operations as the fight against COVID-19 still intensifies and remains uncertain.

Nigeria is home to the highest number of internet users in Africa as of December 2020 with more than 154 million users, according to Statista. Estimates from an NOI Poll show that about 39 million Nigerians use Twitter. According to the polls, 20% of Nigerian Twitter users use it for business advertisement and 18% to look for employment.

Experts have warned that the lack of availability of Twitter could have damaging effect on the economy. Muda Yusuf, Director-General of the Lagos Chamber of Commerce, said "the ban has significant collateral damage” because a "sizeable number of citizens" use Twitter to make a living.

Revenue Loss

Already, Parliament's minority caucus have warned that the suspension is costing Nigerians "billions of naira on a daily basis”. On his part, a research analyst with the Financial Derivatives Company, Dumebi Iyeke, expects the ban to hit young Nigerians, among whom there is about 45% unemployment rate, the hardest. According to Iyeke, "we are looking at a potential loss in their revenue”, adding that it could further lower living standards amid high inflation.

"Social media is where I eat. I depend on social media for my livelihood”, said a Lagos-based entrepreneur, Ogechi Egemonu.

According to her, she was selling more than 500,000 naira ($1,219) worth of watches, shoes and handbags on Twitter per week. The ban has however cast shadows on the survival of her once booming social media-anchored business.

Moreover, scores of small and medium-sized businesses across Nigeria are bearing the brunt of the indefinite suspension of the social media site.

Rising Unemployment Threatens National Security In Nigeria

Rising Unemployment Threatens National Security In Nigeria

Nigeria’s economy has had two recessions in the last five years, inflation is at a near four-year high, insecurity in the north of the country is rife and getting worse. Meanwhile, attempts to diversify the economy away from oil have largely failed. All these accounts to the current challenges confronting Africa’s biggest economy, Nigeria.

The recession in 2020 reversed three years of recovery (2016 -2019) due to a fall in crude oil prices on account of falling global demand and containment measures to fight the spread of COVID–19. The containment measures mainly affected aviation, tourism, hospitality, restaurants, manufacturing, and trade. The expansion in demand-driven sectors of financial, and information & communications technology was not enough to offset the contraction in these other sectors.

Estimates from the African Development Bank show that overall real GDP shrunk by 3% in 2020. According to the Bank, the contraction would have been massive, but for the mitigating measures in the Economic Sustainability Program (ESP).

Meanwhile, the AfDB Group has forecast Nigeria’s economy to grow by 1.5% in 2021 and 2.9% in 2022. The projections are hinged heavily on an expected recovery in crude oil prices and production. Stimulus measures outlined in the ESP and the Finance Act of 2020 could boost non-oil revenues. Also, Fitch Solutions expects Nigeria’s economy to strengthen in H2 2021 on account of the vaccination program. This is likely to lead to further easing of social distancing measures, alongside rising consumption and investment. As a result, the rating agency forecasts growth to increase slightly to 1.8% in 2021.

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According to the AfDB, inflation rose to 12.8% in 2020 from 11.4% in 2019, fueled by higher food prices due to constraints on domestic supplies. The pass-through effects of an exchange rate premium that widened to about 24% also contributed to the rise in inflation. The AfDB indicated that the reopening of borders will increase access to inputs, easing pressure on domestic prices and inflation is projected at 11.4% in 2021.

Meanwhile, inflation continued its run in 2021, rising to 17.3% in February, up from 16.5% in January and 2021. This was on the back of sharp rises in food and transport inflation, registering 21.8% and 14.1% respectively in February. The struggling exchange rate also continued to weigh heavily on the prices of goods and services due to increasing import costs.

Food supply inadequacies continue to underlie the rising food prices. Also, this has been exacerbated by rising food insecurity in food-producing areas. Fitch Solutions expects inflation to continue unabated over the ensuing quarters, attributing to rising import costs and food supply challenges.


The fiscal deficit, financed mostly by domestic and foreign borrowing, widened to 5.2% in 2020 from 4.3% in 2019. The AfDB said this was a reflection of pandemic-related spending pressures and revenue shortfalls. Total public debt stood at $85.9 billion (25% of GDP) on 30th June 2020, 2.4% higher than a year earlier. Domestic debt represented 63% of total debt, while external debt, 37%. High debt service payments, estimated at more than half of federally collected revenues, pose a major fiscal risk to Nigeria. The current account position was expected to remain in deficit at 3.7% of GDP, weighed down by the fall in oil receipts and weak external financial flows.

Moreover, the AfDB has warned of several downside risks including reduced fiscal space, should oil prices remain depressed. Besides, flooding and rising insecurity could hamper agricultural production. A potential relapse in COVID–19 cases could exacerbate these risks. High unemployment, poverty, and growing inequality remain a major challenge in Nigeria.


The World Bank has been warning Nigeria even before the coronavirus pandemic began that it could become home to a quarter of the world’s destitute within a decade. According to a recent Bloomberg report, the country is one step away from breaking another record; the highest jobless rate. A third of Nigeria’s labor force is without employment or working only a few hours a week. Among 82 countries tracked by Bloomberg, Nigeria ranked second only behind Namibia in terms of high unemployment rates.


Nigeria’s unemployment rate stood at 33.3% as of End-December 2020, up from 27.1% recorded as of Q2 2020. Statistics show that about 23.2 million Nigerians remain unemployed. Further statistics on the Nigerian Labour market show that a total of 30.57 million individuals were fully employed as of Q4 2020, that is, people who work 40 hours and above weekly. Meanwhile 15.9 million of Nigeria’s population work between 20 and 39 hours. Also, 11.03 million individuals work between 1 and 19 hours (underemployed) while 12.16 million were without work in the period under review.

Unemployment is possibly the biggest problem confronting President Muhammadu Buhari’s administration. Bloomberg indicated that unemployment has more than quadrupled over five years. The central bank governor, Godwin Emefiele, has warned of the dangers of the rising unemployment rates in the country, calling for drastic measures to address it.

“The level of unemployment must be addressed swiftly to moderate the restiveness among the populace”- Emefiele.
That discontent was demonstrated last year in the #EndSARS protests. The protests against police brutality morphed into demonstrations about insecurity to youth unemployment that brought the country’s biggest cities to a halt.

Emefiele new

Godwin Emefiele
Central Bank Governor


Meanwhile, Former Vice President, Atiku Abubakar has warned that the rising insecurity in Nigeria is a result of rising youth unemployment. As such, he urged Nigeria to tackle out-of-school children cases, pay a monthly stipend to poorer families, incorporate youths who are above school age into massive public works programs, and others.

Atiku disclosed this in a social media statement titled “World’s Highest Unemployment Rate: Time to Help This Government Help Nigeria”. According to him, stakeholders had earlier warned that abandoning the people-centered leadership and free trade and deregulatory policies of the Obasanjo years would trigger unemployment.

“What this government must realize is that the unprecedented insecurity Nigeria is facing is the result of youth unemployment”.

The Former Vice President outlined several ways Nigeria could explore to bring back its economy on the right track.

“Idleness is the worst feature of unemployment because it channels the energy of our youth away from production, and towards destruction, and that is why Nigeria is now the third most terrorized nation on Earth.

“Drastically bring down youth unemployment, every family in Nigeria with at least one school-age child, and earning less than $800 per annum should receive a monthly stipend of 5000 Naira via their BVN and NIN on the condition that they verifiably keep their children in school. If we can get the 13.5 million out of school Nigerian children into school, we will turn the corner in one generation. If we do not do this, then the floodgates of unemployment will be further opened next year”.

He urged that the fastest way to bring down a world record unemployment rate is via incentivized education. According to him, increased education has been scientifically linked with lower rates of crime and insecurity, along with lower infant and maternal mortality, and a higher lifetime income.

“In a situation where we are simultaneously the world headquarters for extreme poverty, the world capital for out-of-school children, and the nation with the highest unemployment rate on Earth, there is a very real and present danger that we might slip into the failed states index”.

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Atiku Abubakar
Former Vice President Nigeria

#EndSARS Compounds Recovery of Ailing Covid-19 Stricken Nigerian Economy

#EndSARS Compounds Recovery of Ailing Covid-19 Stricken Nigerian Economy

Nigeria, Africa’s largest economy and most populated country in the African continent has been battling serious economic crises even before the outbreak of the COVID-19 pandemic.

The African Development Bank (AfDB) Group stated that Nigeria is facing rapidly weakening macroeconomic conditions, triggered by the sharp decline in the price of oil to below $30 a barrel in March 2020, from more than $60 at the start of the year. The pandemic has also had a cascading impact through reversed investment flows, volatile financial markets, and disruptions in travel and tourism.

Real GDP growth was estimated at 2.3% in 2019, marginally higher than 1.9% in 2018. Growth in 2019 was mainly in transport, an improved oil sector, and information and communications technology. Agriculture was hurt by sporadic flooding and by conflicts between herdsmen and local farmers.

Manufacturing continues to suffer from a lack of financing. Final household consumption was the key driver of growth in 2019, reinforcing its 1.1% contribution to real GDP growth in 2018.

The effort to lower inflation to the 6%–9% range faced structural and macroeconomic constraints, including rising food prices and arrears payments, resulting in a rate estimated at 11.3% for 2019.

Poverty remains widespread. The poverty rate in over half of Nigeria’s 36 states is above the national average of 69%. High poverty reflects rising unemployment, estimated at 23.1% in 2018, up from 14.2% in 2016. Low skills limit opportunities for employment in the formal economy.

GDP projections

Nigeria’s economy is forecast by the International Monetary Fund (IMF) to contract by 4.3 percent in 2020. The IMF attributed the downgrade to low oil prices, reduced production under the Organization of Petroleum Exporting Countries and other major oil producers (OPEC+) agreement, and declining domestic demand from the lockdown.

Growth is projected to recover to only 1.7 percent in 2021, responding to firmer oil prices and increasing oil production.

The AfDB Group also forecast real GDP to contract by between 4.4% and 7.2% depending on the gravity and duration of the pandemic, wiping out gains from the three consecutive years of growth since the 2016 recession.


Despite the likely improvement in farm produce as the wet season starts, subdued consumer demand, and lower than expected growth in bank credit, the AfDB Group forecast inflation to increase to 14% in 2020 from the 11.1% projected before the crisis. The IMF also indicated Nigeria’s inflation will rise from 11.4 % in 2019 to 12.9% at End-December 2020 and declined slightly to 12.7% in 2012. 

Debt & Deficit

Crude oil and gas account for an estimated 90% of total export earnings and more than 50% of fiscal revenues. The government projects oil revenues to decline by 90% in 2020 due to the decline in oil prices triggered by low demand.

Coupled with growing expenditure pressures to mitigate the COVID–19 health and socioeconomic impacts, the budget deficit is projected to widen to 6.7% in the baseline scenario, with the potential to deteriorate to 7.8% if the pandemic persists beyond the second half of 2020.

The AfDB Group stated that the lower oil exports are expected to deepen the current account deficit to between 4% of GDP in the baseline scenario and 5% in a worst-case scenario, wiping out the pre-COVID–19 projected marginal surplus.

The Government Debt as a percent of GDP is forecast to rise to 35.0% in 2020 from 29.1% in 2019. Public debt is expected to continue its upwards trajectory and rise to 35.5% at the end of 2021. Additionally, data from the IMF indicates that Nigeria’s debt stock averaged 17.7% between 2010 and 2016 and then rose to 25.3% in 2017 before rising to 27.7% in 2018.

The COVID–19 pandemic has morphed into a socioeconomic crisis with far-reaching implications on jobs and poverty. The Brookings Institution estimates that 10 million people could slip into poverty in Nigeria, which is among the countries likely to record an increase in poverty of more than three percentage points in 2020 due to the pandemic.


According to the National Bureau of Statistics, as of the second quarter of 2020, the unemployment rate in Nigeria stood at a staggering 27.1 percent and the underemployment rate at 28.6 percent. Of the 21.7 million unemployed, young people between the ages of 15 and 34 accounted for a whopping 34.9 percent. They also accounted for 28.2 percent of the 22.9 million underemployed Nigerians.

The above indicators spurred anger among Nigerians especially the youth which culminated in the EndSARS protests that resulted in damages to properties and loss of lives in Nigeria.

The discontent among the youth was already simmering given the economic crises sparked by the fall in global oil demand and compounded by the outbreak of the COVID-19 pandemic, institutionalized corruption, and state profligacy that have drawn more Nigerians into poverty.

The foregoing coincided with eight months of the closure of educational institutions due to strikes held by university lecturers, leaving many young people alienated and angry. Worsening economic conditions and bleak projections for the future have only fanned the flames.  

 “The protesters are also demanding a revival of the educational and health systems and stronger efforts toward job creation. In short, the message of the #EndSARS protest is that the young Nigerians want to take back their county from the entrenched political order that they believe has not served their interest”, said Brookings.


End SARS was a decentralized social movement and series of mass protests against police brutality in Nigeria. The slogan called for the disbanding of the Special Anti-Robbery Squad (SARS), a notorious unit of the Nigerian police with a long record of abuses.  The protest which took its name from the slogan started in 2017 as a Twitter campaign using the hashtag #EndSARS to demand the disbanding of the unit of the Nigerian government.

The second wave of the outcry resurfaced in October 2020 when two young Nigerians were alleged to have been killed by SARS police.

On Saturday 3rd October 2020 when a video showing a SARS police officer shooting a young Nigerian in front of Wetland Hotel, UghelliDelta State trended on the Internet, it was alleged that the police officers took away the young man's vehicle – a Lexus SUV. The trending video caused a public outcry on social media, especially on Twitter, with the #EndSARS hashtag trending.

And on Monday 5th October 2020, another report surfaced of SARS officers killing a 20-year-old upcoming musician named Daniel Chibuike, popularly called Sleek in his neighborhood.

On Thursday 8th October 2020, nationwide protests on #EndSARS started after weeks of outrage and anger with videos and pictures showing police brutality, harassment, and extortion in Nigeria.

Solidarity protests and demonstrations by Nigerians in diaspora and sympathizers occurred in many major cities of the world. The protest is notable for its patronage by a demographic that was made of entirely young Nigerians.

On Wednesday, 14th October 2020, what started as a peaceful protest turned bloody when protesters in Lagos were attacked with cutlasses, sticks, and charms. In Abuja, protesters were attacked by people with cutlasses and cudgels at Berger roundabout. Cars were destroyed and some of the protestors were injured.

There were protests in Lagos and in at least ten states including Delta State, Anambra State, Abia State, Osun State, Rivers State, Ogun State, Enugu State, Ebonyi State, Edo State, and Plateau State. The protests resulted in the imposition of curfews in most of the states that curtailed movements of people.

Nigerian Stock Index performs amid prevailing challenges

Investors in the Nigerian Stock market are surely having good returns amid prevailing macroeconomic disruptions in the global financial market.

Data retrieved from Bloomberg terminal, according to Nairametrics, reveals that the Nigerian Stock Index ranked third globally concerning stock index performances. Consequently, the year to date (YTD) performance improved to stand at 13.43%.

Just in October alone, investors made a gain of about N1.934 trillion as the Nigerian bourse recorded its best monthly gain since 2018.

“It’s no surprise seeing the Nigerian equities market among the top three best performing index year to date after the outlier performance we had in October. The NSEASI was up 13.79% MTD in October, its biggest monthly gain since January 2018, which was largely driven by the robust system liquidity coupled with low yields at the fixed income space”, an Emerging market/Fixed income trader Emmanuel Orji, told Nairametrics.

 “Nigeria now ranks as the third best-performing stock market in the world out of a basket of 93 indices tracked by Bloomberg. This performance is majorly driven by local investors given the low yield environment and the continued, albeit slow-paced, and uneven rebound in economic activities which has bolstered the third-quarter earnings of major Corporates on the NSE”, said Managing Director of Afrinvest Research, Abiodun Keripe.

Oil Price Slump Threatens Nigeria’s 2021 Budget

The Minister of Finance, Budget and National Planning, Zainab Ahmed, has said the resurgence of COVID-19 in Europe, which has caused oil prices to decline in the international market, may affect the 2021 budget estimate.

The 2021 budget is predicated on $40 per barrel but the current price in the market stands at $37.

The chairman of the panel, Senator Adeola Olamilekan (APC, Lagos) asked the minister when she appeared before the Senate Committee on Finance to defend her ministry’s budget about the contingency plans the federal government has put in place to insulate the budget from the shocks of falling oil price.

In her response, she said “the actual projection was $40 per barrel and that is the average price that we projected for the year. Some of the institutions that are responsible for tracking the price of crude oil, actually have crude oil prices going as far as $50, $52 per barrel.

We took a safer path. It seems the second wave of COVID-19 in Europe is affecting us. We are hoping to have clarity as to which direction to take in the next week or two”.

The minister, however, dismissed insinuations that the federal government may increase Value Added Tax (VAT) again by 2.5% in 2021.

“As for the finance bill, we have the draft. There will be no increase in VAT or any form of taxes because we see 2021 as a year of recovery”, she said.

Nigeria’s Economy plunge by 6.1 percent in the second quarter of 2020; the worst in 10 Years.

Nigeria, Africa’s largest economy and leading oil producer has been hit hard by the COVID-19 pandemic. According to the World Trade Organization, Nigeria ranks 50th largest export economy in the world in its recent ranking. However, over the last five years, the value of Nigeria’s export has fallen sharply from 88.9 billion to 47 billion dollars.

Even before the outbreak of COVID-19, Nigeria has suffered huge revenue losses due to the persistent decline in the global oil prices. Nigeria is one of the fastest-declining crude petroleum exporters in the last five years, posting a 72.8% decline in export values overall.

The country has a 5% share of an annual crude petroleum global export market worth $740 billion and every one of the top fifteen exporting countries has suffered declines in their export values over the last five years.

The top five commodity exports for Nigeria are crude petroleum, petroleum gas, refined petroleum, cocoa beans and rough wood. According to commodity.com, crude petroleum and petroleum gas contributes 36.9 billion and 7.39 billion dollars respectively to the Nigerian economy annually. Other notable exports are scrap copper, tanned goat hides, cocoa butter, rolled tobacco and rubber.

In 2019, available data indicates that Nigeria shipped US$53.6 billion worth of goods across the globe. That dollar amount reflects a 10.7% increase since 2015 and a 1.3% uptick from 2018 to 2019.

Based on the average exchange rate for 2019, the Nigerian naira depreciated by 59.5% against the US dollar since 2015 and declined by 0.3% from 2018 to 2019. Nigeria’s weaker local currency makes its exports relatively less expensive for international buyers.

Majority of exports in 2019, went to India, Spain, Netherlands and Ghana. In the continental level, the distribution is as follows; Europe (39.7%), Asia (28.2%), Africa (20.4%), North America (8%), Latin America excluding Mexico but including the Caribbean (2.7%) then Oceania led by Australia (0.7%).

Inflation has also been on the rise for 11 months running rising from 11.02% in August 2019 to 12.82% in July 2020, running according to NBS. Inflation rose from 12.56% in June to 12.82% in July 2020.

Nigeria’s inflation rate rose by 12.82% (year-on-year) in July, compared to 12.56% recorded in June 2020. This is the highest rate recorded in 27 months since March 2018 when headline inflation was 13.34%.


In April, The International Monetary Fund (IMF) said that the Nigerian economy was highly reliant on foreign exchange proceeds and the recycling of petrodollars and it’s expected to contract by about 3.4 percent in 2020, a 6-percentage point drop compared to pre-COVID-19 projections. This is mainly due to large fiscal and external financing gaps that have emerged as a result of the decline in economic activity.

However, the IMF in June announced that the Nigerian economy would witness a deeper contraction of 5.4% and not the 3.4% it projected in April 2020. Before April, the IMF projected a contraction of 2 percent. But the global lender expects Nigeria’s economy to rebound by 2.6% in 2021. 

Between 2012 and 2019, the Nigerian economy grew on average 2.8% and recorded its highest growth rate of 6.22% and a lowest growth rate of -1.58% in 2014 and 2016 respectively.

Based on the latest economic data, Capital Economics also projected that Nigeria, the continent’s largest economy, will suffer its worst economic hit in 35 years in 2020 as the critical oil sector continues to be ravaged by low prices and output cuts. Similar predictions about a looming worst recession were made by the World Bank.


The pandemic has bitten hard into the fiber of the Nigerian economy such that the impact is every evident in almost all the sectors of the economy.

A recent Gross Domestic Product report released by the National Bureau of Statistics (NBS), showed that for the first time since 2016, the Nigerian economy has recorded a negative growth rate.

The negative growth rate of –6.10% (year-on-year) in real terms recorded in the second quarter of 2020, was just an indication of how abysmal the various components of the national accounts have fed over the period.

It is the worst in the last 10 years since 2010, comparative analysis has shown. The report indicated that the latest GDP contraction ended the 3-year trend of low but positive real growth rates recorded since the 2016/2017 recession.

Prolonged disruption in economic activities due to the pandemic combined with the collapse of oil prices and the reduction in demand for Nigeria’s oil products is severely impacting Nigeria’s fiscal position. 

Specifically, the NBS largely attributed the economic contraction to "significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic."

The NBS indicated that the domestic efforts ranged from initial restrictions of human and vehicular movement implemented in only a few states to a nationwide curfew, bans on domestic and international travel, closure of schools and markets among others, affecting both local and international trade.

The measures put in place to contain the spread of the virus; lockdowns, stay-at-home orders and other social distancing protocols have all affected lives and livelihoods as well as the operations of businesses. At the macro level, these have affected household consumption, firm investment as well as government expenditures which have sky rocketed.

Real GDP growth rates

  CHART page 001                                Source: National Bureau of statistics, 2020.


Power sector

The latest documents on the industry’s performance have shown that the Gas transmission, distribution and other constraints made Nigeria’s power sector to lose about N468.4bn between January and August 21 this year. For the months of April, May, June and July, the power sector’s constrained revenues were N64.635bn, N61.601bn, N61.771bn and N63.207bn respectively.

Findings showed that between August 1 and August 21, 2020, the sector lost N40.227bn due to the earlier highlighted constraints. The figures showed that the highest monthly loss this year was recorded in March 2020, as the industry’s constrained revenue in that month was N65.56bn.

Agriculture sector

The real growth of the agriculture sector in the second quarter of 2020 is 1.58%, a decrease of 0.21% point from the corresponding quarter in 2019. The sector’s contribution to aggregate real GDP in second quarter was 24.65%, much higher than the contributions of the corresponding sector in 2019 as well as the first quarter of 2020. Both with growth rates of 22.78% and 21.96% respectively.

ICT Sector

Despite the decline in the overall GDP, the Information and Communications Technology (ICT) sector contributed 17.83 per cent to the total real GDP in the second quarter of 2020. This is 20.54 per cent higher than its contribution in 2019. It is also higher than its contribution in the preceding quarter in which it accounted for 14.07 per cent.

Mining and Quarrying sector

This sector declined nominally by 16.02% (year on year) in the second quarter of 2020. This stemmed from the decline in the various sub-sectors. According to the report by the BNS, Coal Mining grew by 10.53% in the second quarter of 2020 from -43.41% in the first quarter of 2020 and 7.63% in the second quarter of 2019. Metal Ores contracted by 7.01% in the second quarter of 2020 from - 4.10% in the first quarter 2020 and -3.77% in the second quarter of 2019. Quarrying and Other Minerals also contracted by 6.39% in the second quarter of 2020 from -83.03% in the first quarter 2020 and -3.48% in the second quarter of 2019.

Manufacturing sector

Nominal GDP growth of the Manufacturing sector in the second quarter of 2020 was recorded at –0.14% (year-on-year), or -37.92% points lower than figures recorded in the corresponding period of 2019 (37.79%) and –28.61% points lower than the preceding quarter’s figure of 28.47%. Real contribution to GDP in second quarter of 2020 was 8.82%, lower than the 9.08% recorded in second quarter of 2019 and the 9.65% recorded in the first quarter of 2020.

Other pressing macroeconomic issues.

Rising Unemployment rates

Recent data for the second quarter of 2020 from Nigeria’s bureau of statistics indicates that one in every two Nigerians in the country’s labor force is either unemployed or underemployed.

The last time unemployment data was published dated back to the third quarter of 2018, unemployment rate was 23.1%. The recent data indicated that unemployment rate has climbed to 27.1%. Underemployment which is measured by people working less than 40 hours a week, or in jobs that underutilize a person’s skills, time, or education has also increased to 28.6%.

The number of unemployed persons according to the report stood at 21.7 million out of a labor force of 80.2 million. Young Nigerians between the ages of 25 and 34, form the largest bloc of the labor force. It is worrying that the unemployment rate among this cohort is much higher at a rate of 30.7%.

Unsustainable deficits and debt servicing costs

In 2019, the Federal government-generated Revenue of N4.60tn which pales in comparison with the budgeted N9.33tn indicating a 49.3% performance. However, it represented an increase of 6.1% (year-on-year) when compared with 2018. The overall budget deficit was N4.17tn as against a Budgeted Deficit of N1.92tn. The debt service cost to revenue ratio higher was 59.4% for 2019.

In the first quarter of 2020, the government scored 48.3% as far as meeting her revenue targets is concerned. This is because, out of a budgeted revenue of N1.97tn, retained revenue was N950.56bn. 

Nairametrics has expressed concerns about the elevated debt service cost of N943.12bn which implies a debt service cost to revenue ratio of 99.2%. We note the 2020 budget provided a prorated amount of N681.37bn for debt service costs which implies an overshooting of 38.4% on debt service costs.

The federal government requires stringent measures that will reboot the economy. The high unemployment rates can be tackled by promoting youth in agriculture policies that will then create jobs for the youth. It will also help address the declining trends in agriculture’s contribution to overall GDP. The much needed growth can also be attained by focusing on the digitization of the economy to take advantage of the growth in the ICT sector.



The Nigerian economy is one that has been described by both the IMF and the World Bank as stable but with slow growth prior to the outbreak of COVID-19. The IMF in 2019, said that Nigeria recorded a growth rate of 2.2%. In an updated forecast on 14th April 2020, as a result of the outbreak of COVID-19, the IMF projected the growth rate to fall to -3.4% in 2020 and recover in 2021 with a growth rate of 2.4%, depending on the aftermath of the pandemic.

Nigeria earlier this year have had some challenges in the financial market. Stock volumes in Nigeria have been declining since 2006. However, the issue has become worse as data from the Nigeria’s securities and exchange commission indicated that no single individual or firm registered on the Nigerian stock exchange market in 2019. In 2006, 19 brokers were accredited but the numbers continue to decline due to the banking industry’s upheaval and global financial crises. Blomberg reported on Tuesday 28th January 2020 that

“shares changing hands on Nigeria’s benchmark index last year fell to the lowest level since at least 2009. Investors also have less equities to choose from, with the number of listings down to a 15-year low, as the economy struggles to recover from a drop in oil prices”.

These challenges in the Nigerian economy were however accelerated, exacerbated and made worst by the outbreak of the coronavirus. Coronavirus cases continue to rise despite stringent measures put in place by the Nigerian government to contain the spread of the virus.

Nigeria, just like any other African country, requested for emergency funding from the International Monetary Fund to deal with the pandemic. In April, the IMF approved USD3.4bn as emergency fund for Nigeria, the largest loan to an African country from the IMF during the outbreak of the coronavirus.

Discussions are however under way to cut basic healthcare budget by almost half, so as to enable the government tackle other sectors worst hit by the pandemic.

Finance Minister certain about Nigeria's Recession

The Minister of Finance, Zainab Ahmed, stated while speaking with journalists after a virtual National Economic Council (NEC) meeting, that Nigeria’s economy will go into a recession at an average of -4.4 per cent.

The National Bureau of Statistics (NBS) has made an assessment. So, it is the NBS assessment that Nigeria will go into a recession measuring at an average of -4.4%. But with the work that the Economic Accessibility Committee is doing bringing stimulus packages, we believe that we can reduce the impact of that recession. And if we applied all that have been proposed and we are able to implement it, we may end up with a recession that is -0.4 per cent. In any case, we will go into recession but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it come 2021,”

the Minister of Finance indicated.

On the gradual easing of lockdown in the country, she said,

this is a very difficult time because the challenges we have now are double. There is health challenge, there is an economic challenge. Even as we are addressing the current health challenge, we still have to look at how we can support the economy so that the economy does not fall into a depression”.

Impact of COVID-19 on Oil-Dependent Nigeria.

The disruptions in the global supply chain due to the lockdown in China and also due to the falling oil prices have hurt oil-dependent African countries such as Nigeria. For instance, during the coronavirus crisis, Nigeria was exposed to a significant drop in oil prices which hit the economy hard as it could not sell its oil to foreign buyers, and this led to loss of oil revenue to the country. Also, Nigeria’s 2020 budget which was planned at an anticipated oil price of USD$57 was no longer sustainable and the budget had to be revised downward to USD$30 per barrel.

Impact of COVID-19 on tourism

One of the hardest hit sectors of the global economy due to the outbreak of the coronavirus is the tourism sector. The sector has been affected due to closure of borders as well as restrictions on international travel in many countries.

According to the World Trade Organization (WTO), the cur­rent disruptions caused by the coronavirus might lead to a de­cline of 78% in international tourists and lead to over 100million jobs loses. The global travel and tourism industry have lost an equivalent of $300-$400 billion in international tourism receipts. The Nigerian travel industry lost more than N180 billion, according to the Independent.

Adetutu Adedeji, CEO Zeriah Travel and Tours Lim­ited, in an interview said,

Nige­ria is a beautiful nation blessed in human and natural resources. We are a country-rich in an abundance of mountains, culture, beaches, and history well enough to attract any tourist. Unfortunately, Nigeria’s tourism is underdeveloped and facing secu­rity and infrastructure challenges. There is an urgent need for the gov­ernment to create an enabling envi­ronment to revive the tourism indus­try. Time for the state government to start generating income from their asset as this will only not contribute to the revenue but will create job op­portunities”.

Effect of COVID-19 on Micro, Small and Medium Enterprises (MSMEs)

The outbreak of the coronavirus has stifled and crippled businesses in Africa’s largest economy. PWC data indicates that businesses in the segment are expected to employ about 84 percent of its working population, and rake in as much as 48 percent of national GDP. However, disruptions in business activity will result in loss of revenue to the federal government, loss of employment and income and as well worsen the poverty situation in the country.

A new survey conducted by FATE Foundation in partnership with BudgIt Nigeria, dubbed “the impact of Covid-19 on Nigeria MSMEs”, designed to give insight into the prolonged impact the COVID-19 pandemic is having on MSMEs in the country said 30% of MSMEs in Nigeria won’t survive from coronavirus pandemic. Specifically, the survey showed that three out of every 10 MSMEs operating in Nigeria will not survive the coronavirus pandemic. The survey covered a sample size of 1,943 businesses, 80 percent of which were micro businesses sampled across various sectors in the country. The findings of the survey showed that the impact of COVID-19 on businesses in the segments have been fierce with 94.3 percent of them reporting they are worse-off on all financial fundamentals from sales, to revenue down to their cash flows.

The survey further showed that, about 80 percent of businesses reported that they were likely to lay off employees. Those employees that will survive lay-offs will experience salary cuts. Reasons that necessitated retrenchments according to the survey are prolonged periods of the pandemic, inability to pay staff, poor sales and restrictions on movement.

The Africa International Trade and Commerce Research in partnership with the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), O-analytics Research and Development Initiative (ORADI) and International Trade & Research Centre (ITRC) also undertook a national survey from March to April, 2020, to ascertain the effect of the COVID-19 on the Nigerian private sector.

The result of the survey evidently revealed that 97 percent of businesses that participated in the study suffered revenue loss due to COVID-19 outbreak and the subsequent lockdowns. More than 66 percent of the businesses that participated in the study are micro businesses employing less than 10 staff.

On the impact on job creation, The Africa International Trade & Commerce Research said “Our findings on the impact on job creation reveals that 72 percent of the private sector businesses surveyed experienced a contraction in job creation, due to COVID-19 outbreak as majority are rattling for new ways to be in business. The only strategy most of the businesses are adopting is to cut down their staff strength”.

It is clear from the findings of both surveys that the already bad unemployment situation in Nigeria will worsened.

According to a report by the Business Day, unemployment was already at record high of 23 percent as of third quarter of 2018 when official data on unemployment was last published. One thing that is clear from both surveys is that, poverty and unemployment situation in Nigeria will worsen drastically. The current outbreak of COVED-19 is calling for the need to embrace technology in doing business, be it small or large. Firms should therefore seize this opportunity to look for more innovative ways of promoting their businesses since social distancing and lockdowns may not permit face-to-face interactions among market players.

The Economic Sustainability Plan

As a result of the impact of the coronavirus on the Nigerian economy, the government set up a Committee on Economic Sustainability Plan, led by Vice-President Yemi Osinbajo. This committee is charged with developing Nigeria's economic recovery plan from the coronavirus. On Thursday, June 11, the committee presented its economic plan to President Muhammadu Buhari.

According to the committee the pandemic could leave about 39.4 million people jobless by the end of 2020 if the government fails to put proper measures in place to revive the economy.
The Committee on Economic Sustainability Plan also said restrictions imposed to prevent the spread of Coronavirus had mainly affected agriculture, manufacturing and tourism sectors. According to the committee, the dip in the nation's oil earnings would result in a $473m (£375m) shortfall every month. The Committee recommended among others the need to roll out mass programmes that create jobs and utilise local materials in agriculture, housing and road construction.

Nigeria’s president Muhammadu Buhari says the pandemic has had a moderate effect on the Nigeria economy compared to other economies around the world.  Even though many citizens are complaining of massive job losses and extreme poverty, Mr Buhari, in a televised address to mark Democracy Day, said the government is employing 700,000 people under a Special Public Works Programme to build roads and clean up the environment.

COVID-19 Opportunities

The outbreak of COVID-19 has also presented avenues for Nigeria to repair the public health system, use legislation to create a national welfare system, create a well-functioning digital economy and also establish digital learning platforms that will enhance the development of human capital.

Policy Recommendations

It is now clear that Nigeria needs to diversify her economy and should not only depend on oil which is characterized by frequent price changes. It’s time for government to prioritize other sectors such as the tourism sector. Tourism if well-developed will contribute significantly to revenue and also create more jobs to reduce the unemployment rates in the country.

Nigeria closed its land borders to curb the spread of coronavirus when the country recorded its first death from the pandemic. Nigeria had closed parts of its borders in August 2019 to fight smuggling of rice and other goods, but people had still been permitted to cross both ways.

Even though the aim of the earlier border closure was to curb smuggling of goods and services especially oil to neighbouring countries and to boost domestic production, it has resulted in supply shortages especially rice which led to price increases.

It is therefore recommended that Agriculture should be made a priority so as to ensure continuous supply of food from domestic production. This will reduce the imports, stabilize the exchange rate and also reduce poverty and shortage of food.


Nigeria's Border Closure and The AfCFTA: Towards Alignment of Objectives

On 29th April 2019, Nigeria signed the African Continental Free Trade Agreement (AfCFTA), in the process, satisfying the ratification threshold of twenty-two (22) African Union member states for the agreement. The goal was clear; to increase intra-African trade by eliminating cross-border tariffs and non-tariff barriers to trade.


The Genesis

In August 2019, barely three months after signing the agreement, Nigeria shut its land borders to neighboring countries (Benin, Niger, Cameroon), restricting the movement of goods and people within and outside its territory. Initially, the directive was a partial ban on imports and exports via the land borders, with the air and sea channels remaining open. Shortly after, the Federal Government (FG) ordered a complete closure of the border to expedite achievement of the objectives set. 

Border closure is not new to Nigeria; given that several countries (who are also members of the AfCFTA -Kenya, Rwanda and Sudan) have treaded similar paths in the past. The objectives for this vary amongst countries: from health precautions, to security issues, diplomatic clashes and economic concerns.

For Nigeria, the mandate sought to check smuggling, reduce importation, foster a more robust security apparatus and encourage local innovation, but inadvertently defeated a critical aim of the AfCFTA– to facilitate regional integration via the free transfer of goods, technology and knowledge.


Petroleum Products Vending Restriction; Worthy of Cheer?

Sequel to the initial directive on border closure, the FG upped the ante by outlawing the discharge of petroleum products to retail stations within twenty kilometers (20km) of its land borders to buttress its stance, nip the illicit trade in petroleum products in the bud, discourage round-tripping and save subsidy-related expenditure.


Nigeria 1


Nigeria's PMS consumption per capita (population basis: 198mn people) is currently 0.28 litres per day. Data from developed economies (US and UK), Emerging markets (China) and SSA peers (South Africa & Egypt) were examined to place Nigeria's PMS consumption in context.


Nigeria 2


Of the 6 countries examined, Nigeria recorded the worst scores/ranking on the CIP Index, highlighting lagged industrialization and subdued business activity. The fact that per capita PMS consumption is also the lowest in the observation group supports this assertion. Moreover, we can argue that Nigeria's consumption numbers should be even lower, when other relevant factors including quality of road infrastructure (and impact on vehicle longevity), size of industrial base and fuel efficiency of engines in use are considered.


 Nigeria 3


Consumption (proxied by average truck-out volumes) grew steadily from c. 50.88mn in 2014 to c. 54.84mn in 2019 (Year-to-date), with a slight drop-off in 2016 when the price cap was raised to NGN145/litre. Meanwhile, Department of Petroleum Resources (DPR) data highlights that there are c. 2,200 retail stations along Nigeria's land borders and Nigeria's capped PMS price is the lowest amongst major economies in the West African sub-region. 

The price disparity clearly creates ample room for (risky) arbitrage, especially with the existence of porous borders. Marketers can obtain PMS at subsidized prices from the NNPC and proceed to distribute same at margins of c. NGN225 (ex-other costs) to Nigeria's West African neighbors; escalating the country's already-excessive under-recovery costs. Indications from the data on PMS consumption and imports point to some early success of the restriction directive; an opportunity to significantly cut the subsidy bill. However, we opine that there are healthier solutions, more stringent licensing requirements and effective, technology-enabled border policing will certainly do better than limiting supply to the affected areas. Eventually, individuals and businesses in and around border communities also need fuel for commercial and domestic ends. 


Sky-High Inflation Rate

On the cost end, the embargo has begun to materialize in the form of pressured prices of food items such as rice, oil and frozen foods, amongst others. The Federal Government's mandate to halt the supply of petroleum products to border communities also triggered the rise in the price of fuel in these vicinities. The convergence of these translated to sky-high inflation factors rate as seen in the month of September: 11.24% and October - 11.61%.

To a very large extent, the surge in inflation rate is expected to persist as we ride through the festive seasons. Intense demand on staples, such as rice, vegetable oil, frozen foods and pepper amongst others will trigger a continued rise in inflation rate. Coupled with that is the upward review of Nigeria’s employment minimum wage from NGN18,000 to NGN30,000. The implementation of the new wage is scheduled for December 2019 and it is expected to stimulate consumer spending and boost the overall economy in the long run. 

Having established the inflationary impact of these measures on the domestic economy, however, the negative impact of this border closure flows beyond Nigeria's borderline. Shutting the doors at neighboring countries with which it signed a free trade agreement pushes it farther from achieving the regional integration agenda. For Benin’s economy, whose major agricultural produce export is to Nigeria (about 20% of its national GDP), great loss has been incurred from rotten agricultural produce. Also, the social wellbeing of Nigerians who live in border communities in Nigeria has been hampered by the loss of their means of livelihood as they have been unable to move their goods into neighboring countries they transact with. 

Despite the aforementioned, a number of market players have been able to milk in gains in the period since the closure. Pasta producers for instance, have benefited from the mandate, reporting increased patronage as individuals have begun to substitute pasta for Asian produced rice. Individuals are also beginning to patronize local rice millers and poultry and maize farmers. From this perspective, the border closure walks towards achieving the intended objectives of rejuvenating the Nigerian economy (GDP Q2 -2.12% and Q3 - 2.28%) and creating employment opportunities. 

Nonetheless, insulating domestic private sector players do not stimulate innovation; competition does. Trade protectionism can only go so far, and market players require much more, as access to cheap credit and availability of affordable infrastructure (electricity etc.) also help businesses thrive. Technically, Nigeria's closure of its borders will only offer temporary solutions and by the time the borders are reopened in January 2020, there will be a return to old habits as the quality and pricing of domestically produced commodities remain uncompetitive. 


The Way Forward

It is quite evident that the border closure stands in stark contrast to the principal objectives of AfCFTA. Consequently, regional trade and cross-border investments are in dire straits, limiting the overall competitiveness of the continental market. Expectedly, there is some pushback from entrepreneurs in neighboring countries that are caught in the economic cross-fire. News reports from Ghana suggest that traders are shutting down foreign-owned businesses in defiance.

Taking cues from China, the closure of the Chinese borders came at a time when the resources and technology needed to make the nation self-sufficient were readily available. Moreover, it is clear that border closure was insufficient as a tool to drive Chinese economic success. Rather, intentional efforts at diversification, a critical emphasis on technology-based education, deliberate infrastructural development and the general enhancement of domestic capacity facilitated self-sufficiency and worked pari-passu with the border closure initiative to catalyze economic growth. We also opine that it is imperative for the Federal Government to offer a transitional phase before embarking on implementation of critical decisions such as a complete closure of the borders, to afford all stakeholders opportunities to plan their affairs and check elevated inflationary pressures that might arise from the closure.

  • by Meristem Research

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