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.
0 Comments