What are the economic problems in Nigeria? An economic problem means the government tries to satisfy the country’s unlimited wants and needs, but resources are limited.
People have endless desires, but the resources to meet those needs are scarce. Below are Nigeria’s economic problems.
- Inflation and debts
Inflation and debts have affected Nigeria’s economy and commercial activities. The country’s dependence on oil has decreased in the last few years. According to the Department of Petroleum Resources, the nation’s crude oil reserves produce 37 billion barrels annually, but about 2% of this will be depleted in 49 years
The Nigerian government has increased borrowings from the international capital market to offset the budget crunch caused by the ongoing revenue shortfalls. The rising interest rates worldwide and Nigeria’s revenue decline revenues have worsened the country’s ability to pay its debts, affected its foreign currency reserves, and made it hard for the government to access foreign exchange for business. The Central Bank of Nigeria (CBN) has not adjusted multiple exchange rates. This has caused uncertain and dynamic market conditions for the country’s international businesses.
In 2020, the CBN took measures toward adjusting multiple foreign exchange rates to stabilize the Naira. However, a significant devaluation occurred in 2022 and diverged official and unofficial forex rates.
- Inadequate power supply
Electricity becomes unreliable and expensive to citizens when there is insufficient power. Relying primarily on petroleum increases noise pollution caused by generators and machines, and oil mining can cause pollution at sea and in the air. Environmental pollution is costly to control.
Peoducing enough electricity reduces pollution and increases production. Nigeria also has abundant untapped renewable energy resources like hydro, biomass, wind, biogas, solar, and geothermal.
- The state-society gap
This is one of the biggest problems of economic development in Nigeria. The government has drifted away from its citizens by concentrating on the wants and demands of foreign interests to secure financial support and investments.
Foreign interests encourage the government to make minimal input into building institutions, policies, and strategies that can increase domestic taxation and other forms of revenue. As a result, the country relies heavily on funds from foreign entities to function.
The West (and China) helps perpetuate this state-society gap by providing international aid or Official Development Assistance. Development consultants that accompany aid money also have an external orientation.
They focus on the desires and wants of the foreign entities from which they came. These consultants influence or advise the government to focus on foreign priorities instead of its people’s desires and wants. Consequently, this widens the gap between the government and its people.
- Corruption
Corruption is among the greatest threats to Nigeria’s development. The country’s 2030 Agenda for Sustainable Development aspires to get over 100 million Nigerians out of poverty. Nigeria’s natural resources include petroleum, natural gas, tin, iron ore, coal, limestone, niobium, lead, zinc, and arable land.
The country earns a considerable sum of money from these resources. For instance, Nigeria made about $47 billion from mineral fuels, oils, and distillation products in 2019.
The amount was over 80% of the country’s export value. The natural resources in Nigeria promote corruption and poverty instead of economic development—only a few pocket income from these resources, leaving millions impoverished.
There are other forms of corruption in Nigeria.
Nepotism and vote-buying have put corrupt leaders and workers in public offices. Hence, the standards of professionalism have deteriorated. Public officials solicit bribes, and citizens willingly initiate bribes in public and private offices. Citizens and officers who refuse and report bribes experience negative consequences.
- Inconsistent Economic Policies
Economic policies are measures a government uses to manage its country’s economy. They include monetary policy (money supply and demand), budget, taxation, job creation, etc. There are many reasons behind inefficient and poorly executed policies in Nigeria.
Unhealthy inter-ministerial rivalry causes power struggles and policy inconsistencies in the country. Several bodies control a single sector, and each wants more say in decision-making.
Policymakers who don’t desire to help the citizens sway policies to fit their interests. Every new administration forms new policies and initiatives instead of working on the previous ones. As a result, policies regarded as optimal yesterday may not be executed or ideal in the present time, even if they are implemented.
- Poor Human Capital Development
Human Capital development can‘t be achieved through an efficient education system. It is a great risk for a country to rely on foreign aid to fund these sectors.
The Nigerian education sector receives poor budgetary allocation. For instance, in 2022, the education sector got N1.29 trillion (7.9%) out of N16.39 trillion, N771.5 billion (5.68%) out of N13.58 trillion in 2021, and N671.07 billion (6.7%) out of N10.33 trillion in 2020.
There needs to be more training for young Nigerians in vocational trades. Nigeria should participate in global human capital development through skills development and investment in new technologies to promote workforce competitiveness. In developed nations, the rate of human capital development is relatively high since there are guaranteed rewards for self-improvement in terms of skills, knowledge, and experience. UNESCO recommended developing countries to invest 15% to 20% of their yearly budget on education.
- Unemployment
Unemployment is arguably the most detrimental problem Nigeria faces. Millions of people, mostly youths, are jobless. KPMG stated that the unemployment rate in Nigeria increased to 37.7% in 2022. The ongoing economic recession, slow economic growth, corruption, and increased population are some of the reasons there are insufficient jobs in Nigeria and worldwide. Unemployment creates many problems, including increased crime rates, suicides, and reduced economic growth.