10 Major Economic Challenges in Nigeria and their Possible Solutions

10 Major Economic Challenges in Nigeria and their Possible Solutions

Nigeria's economic problems are similar to those of other developing countries in Africa. Problems like unemployment and inflation are hampering Nigeria's development. 

This article discusses 10 Major Nigeria's current economic problems and how the government is working to solve them. It also includes some suggested solutions.

In 2019, the National Bureau of Statistics (NBS) found that four out of 10 Nigerians live in extreme poverty (meaning they live on less than $2 a day). Some of Nigeria's economic problems will gradually ease while others will worsen.

A country that aspires to one day become the world's leading economy is constantly solving economic problems.


What are the Economic Problems in Nigeria?

Economic problems mean that the government is trying to meet the unlimited wants and needs of the country, but its resources are limited. Humans have infinite desires but lack the resources to satisfy those desires.


Here are the Major Economic Challenges in Nigeria and their Possible Solutions 

1. The Problems of Inflation and the Debt Economy in Nigeria

Inflation and debt have affected the Nigerian economy and business activities. The country's dependence on oil has declined in recent years.

According to the Ministry of Petroleum Resources, domestic oil reserves amount to 37 billion barrels per year, but about 2% of this is expected to be depleted in 49 years. 

The Nigerian government has increased borrowing from international capital markets to address the budget crisis caused by persistent fiscal revenue shortfalls. Rising global interest rates and declining Nigerian revenues have strained the country's debt servicing capacity, depleted foreign exchange reserves and made it difficult for the government to access foreign exchange for business.

The Central Bank of Nigeria (CBN) has not adjusted several exchange rates. This has made the market situation for domestic multinationals uncertain and dynamic.

In 2020, the CBN took several exchange rate adjustment measures to stabilize the naira. However, a significant devaluation took place in 2022, resulting in a divergence between official and unofficial exchange rates.


Possible solutions to inflation and Debt in Nigeria

Inflation is a general increase in the prices of goods and services that reduces purchasing power over time.

How Nigerians Can Beat Inflation and Debt:

• Encourage individuals and organizations in Nigeria to invest their savings in platforms that offer high interest rates. • Nigerian individuals and entities must invest in securities domiciled outside Nigeria.

• You should keep your money in alternative currencies such as US dollars.

• Nigeria can address its current debt burden by approaching the IMF and other international capital market lenders through policy support instruments, debt swaps and debt restructuring proposals.

• Negotiating debt relief with both countries' creditors could help Nigeria use its recent oil revenues to pay off its external debt at a deep discount.


2. Lack of Power Source

Without sufficient electricity, it is unsafe and costly for residents. Relying mainly on oil increases noise pollution from generators and cars, and oil production can cause ocean and air pollution. 

Pollution control is expensive. Generating enough electricity reduces pollution and increases production. Nigeria also has abundant renewable energy resources, including hydropower, biomass, wind power, biogas, solar power and geothermal power.


How can Nigerians overcome Lack of Power Source Challenges?

Here is what the Nigerian government has achieved and what it needs to do to improve the country's electricity supply.

• The Nigerian Electricity Regulatory Commission (NERC) has developed renewable energy supply tariffs for wind, solar, hydro and biomass/biodiesel to increase the country's electricity supply.

• Government needs to improve electricity distribution and distribution equipment.

• Governments should allow private companies to invest in electricity generation and distribution.


3. Communication Problems

Nigeria is considered the largest ICT market in Africa. The government is doing its best to improve communication infrastructure for economic growth. For example, Nigeria launched a communications satellite (NigComSat-1R) in 2011 and confirmed its 5G network in 2021.

Companies are building national microwave and fiber networks, mobile phone operators are installing submarine fiber optic cables, and communications infrastructure companies (Infracos) are building broadband across the country, especially in rural areas.

Despite these laudable developments, Nigeria faces serious challenges in the field of communications. For example, cybercrime is on the rise, there are not enough technical experts in the country to provide quality services, and ICT software and technical equipment are expensive to purchase and maintain.

When power outages occur and criminals break into installed IT equipment, it becomes difficult for most people to stay online. The internet and technology have automated many jobs. This can lead to poverty and unemployment for many people.


Possible Solutions to Nigeria's Communication problems

Here are some ways Nigeria can address some of the challenges in the telecommunications sector.

• Governments and organizations should retain as many employees as possible after automating ICT services.

• The government must stabilize the power supply, especially electricity, so that citizens can use the ICT infrastructure.

• Governments should strengthen the security of ICT infrastructure to reduce vandalism.

• To reduce cybercrime, governments must clamp down on IT fraudsters.


4. The Gap between the Country and Society

The gap between state and society is one of the major problems of economic development in Nigeria. The government distanced itself from its own people, focusing on the hopes and demands of foreign interests to secure financial support and investment.

Foreign interests encourage governments to contribute as little as possible to establishing institutions, policies and strategies that can raise domestic taxes and other forms of revenue. As a result, the country relies heavily on funding from foreign entities for its operations.

The West (and China) helps maintain this gap between states and societies by providing international aid or official development assistance. Development consultants overseeing aid funding are also outsourced. They pay attention to the wishes and desires to visit foreign subjects. These advisors influence or advise governments to focus on overseas priorities rather than the wants and desires of their citizens. This increases the gap between the government and the people.


Possible Solutions to State-Society Conflict in Nigeria

Here are some steps governments can take to bridge the gap between state and society.

• The Nigerian government should reduce foreign financial assistance and investment. Instead, the government should focus on building local institutions for national development.

• The Nigerian government should stop relying on the advice of consultants who focus on the wants and needs of foreign organizations. It enables Nigeria to create independent organizations that can make effective decisions for its people.

• To reduce the gap between state and society, governments must decentralize governance. Leaders in devolved governments should also be encouraged to frequently engage in social feedback.


5. Corruption

Corruption is one of the biggest threats to Nigeria's development. The goal of Nigeria's 2030 Agenda for Sustainable Development is to lift over 100 million Nigerians out of poverty. 

Nigeria's natural resources include oil, natural gas, tin, iron ore, coal, limestone, niobium, lead, zinc and arable land. The country earns a lot of money from these resources.

For example, Nigeria earned about $47 billion from mineral fuels, petroleum and distillate products in 2019. This amount represented more than 80% of domestic exports. Nigeria's natural resources contribute to corruption and poverty rather than economic development. The low income from these resources impoverishes millions of people. 

There are other forms of corruption in Nigeria. Nepotism and vote buying have led to corrupt leaders and workers entering public office. As a result, standards of professionalism have deteriorated. Government officials demand bribes and citizens willingly accept bribes in public and private offices. Citizens and officials who refuse to pay a bribe and report it face negative consequences.


How can Nigerians Fight Corruption?

Nigeria continues to fight corruption despite the appointment of over five commissions, agencies and tribunals to investigate and prosecute corrupt practices.

Some possible solutions to corruption include:

• The government should allow anti-corruption commissions, agencies and courts to investigate corruption cases fairly and without political influence.

• Corrupt leaders and citizens should be punished according to law and their ill-gotten wealth should be confiscated.

• Citizens and civil servants who refuse to accept bribes and report them should be compensated.

• Ensuring transparency in public procurement processes and access to information to increase the accountability of civil servants.


6. Inconsistent Economic Policy

Economic policy is the measures taken by the government to manage the country's economy. This includes monetary policy (money supply and demand), the budget, taxes, job creation, etc. There are many reasons why Nigeria's policies are ineffective and poorly implemented. Unhealthy interdepartmental competition causes power struggles and political disagreements within the country. Different institutions govern the same sector and each wants a greater say in decision-making.

Politicians unwilling to help citizens steer policy in a way that serves their own interests. Instead of building on previous governments, each new government creates new policies and initiatives. As a result, policies that were considered optimal yesterday may not be feasible or ideal today.


Possible solutions to Nigeria's Inconsistent Economic Policies

Some possible solutions to Nigeria's inconsistent economic policies include:

• Leaders and officials must follow the country's development plans and priorities and understand the budgeting, implementation and control processes.

• Governments should establish temporary bodies to ensure policy continuity between regimes. These institutions must also fulfill the political duties of leaders, administrators and citizens.

• Organizations and individuals responsible for developing government policy must carry out appropriate consultation and research.

• Governments must check political and bureaucratic corruption to ensure that leaders and organizations do not create and implement policies for personal gain.


7. Poor Development of Human Capital

Human capital development can be achieved through an effective education system. It is a big risk for countries to rely on foreign aid to finance these sectors. 

The education sector in Nigeria is poorly budgeted. For example, education received N1.29 trillion (7.9%) out of N16.39 trillion in 2022, N771.5 billion (5.68%) out of N13.58 trillion in 2021 and N671.07 billion N (6 billion). 7%) N10.33 trillion in 2020. Nigerian youths need more vocational training.

Nigeria must participate in global human resource development through skills development and investment in new technologies to increase the competitiveness of the workforce.

Human capital development rates are relatively high in developed countries because self-improvement in terms of skills, knowledge and experience is rewarded. UNESCO recommends that developing countries spend 15 to 20 percent of their annual budget on education.


Possible Solutions to Poor Human Capital Development in Nigeria

Some measures that can help alleviate the human capital development deficit in Nigeria are:

• Nigeria needs to increase its budgetary allocation to the education sector to hone its human capital to drive the knowledge economy.

• The government should establish institutions to improve the skills and abilities of students at all levels of education in the country. For example, students need experience and mentors to put into practice the theories they learn in the classroom.

• The Korea Development Bank, Ministry of Labor and other government agencies should encourage continuous training and retraining of workers to improve their skills.

• Government should subsidize education to make education affordable for everyone in Nigeria.


8. Crime and Terrorism

The Global Terrorism Index (GTI) has ranked Nigeria as the third most dangerous country in the world in 2020. Crime and terrorism have slowed the country's economic growth. Terrorist attacks, including bombings, destruction of property, kidnappings and deaths, have increased in Nigeria. Most of them are linked to Boko Haram and ISIS-WA. They use firearms, captured military equipment and improvised explosive devices.


Possible Solutions to Crime and Terrorism in Nigeria

Below are some additional suggestions on what the government is doing and should be doing to eradicate crime and terrorism from the country.

• Governments should encourage the public to report criminal activities and suspicious persons.

• Governments must block the routes that terrorists use to obtain weapons and funds.

• Governments should enforce strict policies on alcohol and illegal substances to reduce violence among citizens.

• Governments must prevent young people from committing crimes and provide employment opportunities to meet their basic needs.

• Since 2011, UNODC has assisted the Nigerian government and relevant ministries to reduce crime and terrorism in Nigeria.


9. Unemployment

Unemployment is perhaps the most dangerous problem facing Nigeria. Millions of people, especially young people, are unemployed. KPMG says Nigeria's unemployment rate will rise to 37.7% by 2022. Economic recession, slow economic growth, corruption and population growth are some of the reasons for the lack of jobs in Nigeria and around the world.

Unemployment causes many problems, including high crime rates, suicide, and low economic growth.


How Can Nigeria Fight Unemployment?

There are different ways to solve the government employment problem. Possible solutions include:

• Expansion and revitalization of technical training institutions. In many countries, the demand for practical skills exceeds the supply. Governments can encourage young people to take technical courses.

• Fighting corruption to protect public resources that could be used to invest in job creation.

• Encouraging self-employment through financing and creating markets for products and services.

• Promotion of human capital exports by providing overseas employment opportunities for skilled and educated Nigerians.


10. The Nature of the Nigerian Market

Government regulations and policies affect businesses and markets. For example, the Nigerian government has a monopoly on prices for products and services in almost every industry. Often, significant increases in fuel prices lead to higher prices for many goods and services in the country.

Nigerian exporters face high financial exchange rates, high tariffs and taxes, sea and airport congestion and the endless network of Apapa. Like many problems.


Possible Solutions to the Problems in the Nigerian Business Market

Here are some of the solutions the government is working on for the challenges of the Nigerian business market.

• Government facilitates access to finance/credit for private enterprises and connects them with international markets and partners. We need to support this by increasing exports.

• The Nigerian government should encourage private companies to reduce monopoly prices of products and services. Healthy business competition between public and private organizations improves the economy.

• Government has increased traffic flow along the Lagos-Kano Jibia transport corridor and reduced congestion at Lagos ports to facilitate trade.

• The Nigerian government has reformed and modernized the Customs Service and built a commercial capacity at the Ministry of Trade and Industry to facilitate business and trade.


Frequent asked questions on Major Economic Challenges in Nigeria and their Possible Solutions 

What are the challenges of economic development in Nigeria?

There are many challenges preventing Nigeria from achieving its full potential in economic growth and development.

The biggest economic problems of the country are:

• Inflation and debts

• Inadequate power supply

• Problems in the communication sector

• State-society gap

• Corruption

• Inconsistent economic policies

• Poor human capital development

• The nature of the Nigerian market

• Crime and terrorism

• Unemployment

• Ethnicity and religious differences

• Poor health system

• Poor transport infrastructure


What is Nigeria's Biggest economic problem?

The most pressing economic problems in Nigeria are corruption, poor education, inadequate health care and unemployment.


How can We Reduce Corruption in Nigeria?

Possible solutions to Nigeria's economic problems include encouraging the general public to report corruption, strengthening anti-corruption institutions and encouraging transparency.


What is the Current GDP of Nigeria?

Nigeria's current GDP is over $440 billion, according to data from the World Bank's national accounts. Nigeria's economic problems are widespread. Governments and individuals can solve most of these problems, but corruption stands in the way.

Post a Comment