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”.
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.
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.