- High inflation and subsidy reforms drive up living costs, suppress business expansion
- Manufacturing, agriculture, and ICT sectors struggle under mounting economic challenges
- Experts call for coherent reforms to stabilize the economy and improve citizens’ welfare
Nigeria’s Economic Woes Deepen Amid Inflation and Policy Shifts
Nigeria’s economic performance in 2024 was overshadowed by persistent inflation, foreign exchange volatility, and the removal of fuel subsidies, undermining the projected GDP growth of 3.1%. Experts attributed the country’s struggles to weak coordination between fiscal and monetary policies.
The year began with an inflation rate of 28.92%, but despite the Central Bank of Nigeria (CBN) setting a target of 21.3%, inflation soared to 34.6% by November. Rising prices eroded disposable incomes, forcing citizens to spend more on basic necessities while earnings stagnated.
The removal of fuel subsidies further exacerbated economic woes. Fuel prices surged from ₦668 per liter in January to ₦1,025 by December, despite promises of relief from operational refineries like Dangote and Port Harcourt. The hike in transport and logistics costs triggered widespread inflation across all sectors.
Foreign exchange challenges added to the turmoil. The naira, which started the year at ₦1,455 per dollar, peaked at ₦1,800 before interventions brought it to ₦1,633 by December. However, the volatility continued to disrupt the pricing of imported goods, a critical component of Nigeria’s consumption.
Sectoral Performance Highlights Structural Issues
The manufacturing sector experienced a sharp decline, with nominal GDP growth plummeting from 36.59% in Q3 2023 to 3.62% in Q3 2024—a 90% year-on-year drop. The sector also contributed less to GDP, highlighting issues like high production costs and limited forex access.
Agriculture’s GDP growth slowed to 1.14% in Q3 2024 from 1.30% in the same period of 2023. Although the oil sector expanded by 5.17%, this was a significant drop from 10.15% in Q2 2024. Similarly, the ICT sector’s contribution to GDP fell to 16.35% in Q3 2024 from 19.78% in Q2, signaling broader economic challenges.
Experts from the Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI) attributed these declines to high operational costs, inflation, and forex instability. They emphasized the urgent need for policy consistency and economic diversification to address these structural issues.
Policy Interventions and Recommendations
Economic analysts highlighted the disconnect between fiscal and monetary policies. While the CBN tightened monetary measures, the fiscal side pursued expansionary policies, fueling inflation. Experts like Johnson Chukwu argued that factors like food production and crude oil output, which lie beyond monetary tools, continued to drive inflation.
Recommendations included harmonizing fiscal and monetary strategies, boosting food production, managing the forex market better, and investing in infrastructure for power and energy sectors. Stakeholders stressed the importance of creating an enabling business environment to attract investment and foster sustainable growth.
As Nigeria navigates these challenges, the effectiveness of its economic management and reform implementation will determine whether it can reverse the current downturn and improve citizens’ quality of life.
