April 21, (THEWILL)- For the better part of the 21st century, Nigeria has squandered the enormous potential bestowed upon it by natural resource wealth and a large, youthful population. The recent projection by the International Monetary Fund that Nigeria will slip to being only the 4th largest economy in Africa is a fresh low bar, but also an inflection point for undertaking the comprehensive restructuring that can unleash Africa’s sleeping giant.
The decline from being the continent’s premier economy is rooted in both long-gestating structural deficiencies and more recent policy missteps. On the structural front, Nigeria’s economy has been hamstrung by its overwhelming dependence on oil exports, leaving it vulnerable to price shocks in global energy markets.
Despite earning an abundance of petro-dollars from oil revenues since the 1970s, the country has little to show for it in terms of productive diversification into other sectors or investments in human capital development through education and healthcare.
Compounding this is the stark lack of economic complexity and manufacturing capacity. Nigeria remains heavily reliant on imports for even basic consumption goods like food, textile products, and pharmaceuticals. Its exports are overwhelmingly concentrated in a single primary commodity – crude oil.
This lack of diversity leaves the nation perilously exposed during oil busts, while depriving it of sustainable growth drivers during booms. The cherished goal of economic sovereignty remains elusive when so much wealth is drained on importing goods that could be produced domestically.
Pervasive corruption and poor governance have further undermined any progress and hollowed out public institutions. Decades of plunder and misallocation of resources by a self-serving ruling elite have left Nigeria with decrepit infrastructure in dire need of upgrading. Basic services like electricity, transportation, and internet connectivity are unreliable at best. The costs and inefficiencies imposed on businesses operating in this environment have smothered private enterprise and deterred long-term investments.
It is against this moribund backdrop of systemic decay that some controversial economic policies of the current administration have landed. The President Bola Ahmed Tinubu administration took office in May 2023 with promises of sweeping pro-market reforms after years of statist policies by previous governments. Key measures included unifying multiple exchange rates into a single market-driven regime for the naira currency, removing unsustainable petrol subsidies, and raising interest rates to tame inflation.
While well-intentioned as part of a broader economic liberalisation drive, many of these policies have exacerbated near-term pain for the Nigerian public. The naira has plunged significantly against the U.S. dollar, severely denting the country’s dollar-denominated GDP output. Subsidy removals have caused domestic prices for food and fuel to spike amidst a backdrop of global inflationary pressures. The bite has been particularly brutal for Nigeria’s poor and working classes who have seen real incomes collapse.
The consequences of this economic quagmire, both immediate and longer-term, have been dire. In the near-term, Nigeria’s GDP measured in U.S dollar terms has fallen from around $477 billion in 2022 to an estimated $253 billion for 2024 based on current projections. This devaluation-induced statistical contraction has enabled economies like South Africa, Egypt and even Algeria to surpass Nigeria in the GDP rankings.
For a country with such lofty aspirations of regional leadership and pre-eminence, the psychological blow of relinquishing its status as Africa’s biggest economy cannot be overstated. Nigeria’s global standing has diminished, as have its capabilities to project power and shape continental affairs. More tangibly, the reversal of economic fortunes has dampened foreign investment sentiment, with investors adopting a wait-and-see approach to see whether Nigeria can emerge from this turbulence.
The longer-term consequences are even more pernicious if this economic malaise persists. Nigeria has suffered cycles of booms and busts in the past due to its oil dependence. But this time around, the stagnation comes superimposed on an already dire situation of widespread poverty, double-digit unemployment, decaying public services and heightened insecurity from political violence and criminality. The risks of social unrest and internal displacement could spike, setting off a vicious cycle where more economic disruptions and capital flight occur.
It is this perfect storm of structural fragilities and recent shocks that underscores why comprehensive, root-and-branch restructuring of Nigeria’s economic and governance model is imperative – not as a mere policy choice but as an existential imperative for keeping the nation intact. Addressing only surface-level issues through fiscal and monetary policies, while leaving the deeper structural flaws unresolved, is akin to applying band-aids to gaping wounds.
So what could such a restructuring entail? At its core, any overhaul must decisively pivot Nigeria away from its dependence on crude oil exports towards diversified production across multiple sectors, while transitioning to a more decentralised governance model.
On the economic front, a formidable push into agriculture and light manufacturing could provide sustainable growth levers. Nigeria is blessed with over 80 million hectares of arable land and conducive climatic conditions for a wide array of cash crops including cocoa, groundnuts, palm oil and cotton. Yet decades of neglect and wanton insecurity in farming regions have hollowed out once-thriving agricultural value chains and seen the sector’s contribution to GDP fall below 30 per cent.
With a security boost and strategic policies aimed at boosting productivity and market access, Nigeria could rapidly resuscitate its agricultural economy to ensure food security, generate rural incomes and employment, while also capturing a bigger slice of the global food trade. Light manufacturing capabilities linked with agricultural value chains and leveraging Nigeria’s low-cost labour could follow in areas like textile, furniture-making and food processing. These focus areas would utilise domestically available raw materials and skills, rather than being dependent on imported components.
For real restructuring to occur however, political decentralisation and rebalancing of federal-state relations may be the bigger priority – and challenge. For too long, Nigeria’s governance model has concentrated nearly all political and economic power at the federal level and specifically in the Abuja capital territory. Most states rely excessively on fiscal transfers from the central government, fostering an entitlement mindset and disincentivising local economic development. Control over mineral wealth also remains a prickly subject with producing states feeling shortchanged financially by the Federal Government, despite bearing the environmental brunt of resource extraction.
This lopsided arrangement has rendered states relatively impotent and stymied their ability to shape economic policies and developmental priorities. The dominance of the centre has also bred a culture of cronyism where political patronage rather than competence determines key appointments across government bodies. The losers have been the masses who suffer with deteriorating public goods.
A more decentralised, quasi-federal structure would empower states to craft economic strategies tailored to their factor endowments and comparative advantages. It would give states greater spending autonomy to focus on physical and social infrastructure suited for their development needs, rather than just being passive recipients of federal handouts. State governments would be compelled to put better incentives in place to attract investments, productive citizens and businesses, accelerating economic activities that create self-sustaining public revenue streams.
In such a decentralised arrangement, state governments must be entrusted with control over affairs under their territory including natural resources. Presently, states feel cheated that they only receive 13% of revenues from resources like crude oil despite bearing the environmental damages caused by extraction. Rectifying this imbalance could unleash motivation to more prudently manage and beneficially deploy resource endowments for state prosperity.
However, the keys to unlocking Nigeria’s true potential go beyond just economic and fiscal restructuring. A transformation in the quality of governance and public accountability is equally vital if the fruits of growth are to be equitably shared and wealth utilised productively.
For far too long, Nigeria has suffered from a severe crisis of leadership at all levels of society. The corridors of power have been infested by cronyism, a civil service bloat, and a culture where public office is seen as an opportunity for self-enrichment rather than service. Accusations of graft and influence-peddling have plagued successive administrations. Nation-building has taken a back seat to smaller loyalties of ethnicity, religion or regionalism. A dearth of meritocratic values and accountability mechanisms have deprived Nigeria of capable stewarding of its vast resources and policy incoherence.
This malignant environment has incentivised many of Nigeria’s best and brightest minds to seek opportunities abroad, setting off a debilitating brain drain. It has constricted productivity growth, distorted market incentives, imperiled public safety, and engendered a cynicism amongst youth about the ‘Nigerian dream’. By cementing a climate of unequal opportunities, it has prolonged systemic inequalities across gender, class and regional divides.
Good governance and institutional restructuring are vital for upending such a rotten status quo. Establishing checks and balances, robust rule of law, and binding constraints on the behaviour of those occupying public office can re-orient incentives. So can entrenching meritocratic principles into the recruiting and appointments process across the civil public sector enterprises, regulatory agencies, and other key national institutions.
To arrest this current decline and get Nigeria back to its economic pre-eminence, the country needs nothing short of radical restructuring – a pivot towards developing its immense agricultural potential leveraging the nation’s fertile lands and favourable climate to ensure food security and become an agricultural export powerhouse; a transition to genuine fiscal federalism that empowers states to craft their own economic development strategies and control resource revenues; an overhaul of institutions to entrench meritocracy, transparency and democratic accountability in public life; and cohesive efforts to heal longstanding ethnic and regional fissures that could imperil national unity.
Only such comprehensive reforms can unleash Nigeria’s creative energies, human capital, and entrepreneurial zeal to finally make it an African superpower and a respected global player that punches at its true heavyweight potential.
About the Author
