SUMMARY OF NIGERIA ECONOMIC REPORT

The above subject is a publication of the World Bank which is divided into two chapters: chapter one
deals extensively with the overview of macroeconomic, and gives special attention to an additional topic
of high policy relevance and the second chapter dwells on a partial reassessment of poverty in Nigeria.

The World Bank Group records that, Nigeria has faced challenges recently due to macroeconomic
management related to weakening oil revenues and volatile short-term capital flows. The article stresses
that gross foreign and fiscal reserves declined steadily from April 2013 into the first quarter of 2014 and
that, the Government met these challenges with prudent fiscal, monetary, and exchange rate policies,
which succeeded in maintaining economic stability, reducing the pace of inflation, and contributing to
investor confidence and a stabilization of the balance of payments position in the second quarter of
2014. The planned Revenue Framework and Federal Budget for 2014 suggest a resolve to maintain
fiscal prudence in light of lower oil revenues, despite growing pressures in the pre-election environment
(World Bank Group, 2014).

Accordingly, the diversification of the Nigerian economy, with important sources of growth coming from
manufacturing (especially food and beverages) and previously undocumented services (including the
entertainment industry). Also, Slower assessed growth in agriculture in the newly re-based GDP figures is
consistent with apparently slow recent progress in poverty reduction in rural areas , the article opines. The
oil sector remains a primary source of macroeconomic uncertainty . Given the high dependence of the
budgetary and balance of payments positions of the country on oil, changes in prices or in the performance
of the oil sector can have a major impact on the macroeconomic picture. A combination of regulatory
uncertainty and increasing security challenges in the Niger Delta have limited investment and output in the
oil sector in recent years. Declining oil revenues relative to the size of the Nigerian economy are already
necessitating fiscal adjustment. Fortunately, the performance of the oil sector and oil revenues has been
stronger in the first half of 2014 than during the particularly difficult year of 2013.

Despite remaining risks, the author saw the prospects for macroeconomic stability are generally good. The
stabilization of the balance of payments position and budgetary revenues in the second quarter of 2014 is
welcome, and could be perpetuated in part by continual signals from the Government and Central Bank of
the maintenance of the current macroeconomic policy stance. On the other hand, the combination of a
vulnerable current account due to slow growth in (oil) exports, combined with potentially volatile short term
capital flows, imply that the macroeconomic risks in Nigeria remain high. This situation is particularly
vulnerable to any large shock to oil prices or output. Accelerated growth and job creation, together with
increased State revenues from the non-oil economy, remain critical challenges for stability and welfare
improvements over the medium and longer term.
Available evidence show that, National accounts statistics in Nigeria had not been re-based since 1990. The
re-basing exercise involved updating the universe of firms assessed to be operating in Nigeria by roughly ten
times. Preliminary figures were made public in April, 2014, and were subsequently revised in July, 2014.
The July revisions reflect further work on (a) supply-use tables that allow for the harmonization of the
production and expenditure sides of GDP, (b) GDP deflators, and (c) the finalization of numbers for 2013.
More refinements of these numbers are possible in the near future as this work continues, and new
information coming from comprehensive agriculture and business censuses conducted over the next few
years should further improve the accuracy of GDP estimates for Nigeria.

However, the re-basing has led to a much higher assessment of the level of GDP in Nigeria. For the new
base year of 2010, the assessed value of GDP increased by 60.7% relative to previous statistics. For 2011,
2012, and 2013, the assessed increases in the level of Nigerian GDP were 68.3%, 76.9%, and 88.9%,
respectively). The new GDP numbers imply that Nigeria had a gross national product of US$ 509 billion in
2013, making it the largest economy in Africa and the 26th largest economy in the world. The higher level of
GDP in Nigeria also changes the assessments of a number of other key economic indicators. Government
budget deficits now appear lower at close to 1% of GDP in recent years. The fiscal space also looks larger,
with sovereign debt at only 10.6% of GDP. The non-oil revenues received by the Federation Account and
VAT Pool now look particularly low at less than 4% of GDP. Consolidated government expenditures
(including the fuel subsidy) are now only in the range of 15% of GDP.

GDP growth for 2011, 2012, and 2013 in Nigeria is now assessed at 5.3%, 4.2%, and 5.5%, respectively.
Non-oil growth accelerated to an estimated 8.4% in 2013, but the strong decline in oil and gas (-13.1%)
brought down the overall growth rate for the year. The re-based GDP numbers reveal much less
concentration of growth in agriculture and telecommunications since 2011 than had been estimated
previously, and prescribe higher growth to many other sectors. Notably, this includes manufacturing and the
large Nigerian food industry. A number of sectors in manufacturing other than food (plastics and rubber,
chemicals, metals) also have high newly estimated growth rates, although the share of these sectors other
than food in GDP is still quite small. Plastics and rubber products posted annual growth rates over 30%
during 2011- 2013. Although this sector still accounts for less than 1% of GDP, it has been an important
source of exports other than oil and gas. Growth in trade and transportation slowed notably in 2012, but
revived in 2013. This likely reflects the particular challenges that these sectors faced in 2012: higher
transportation costs (reduction in the fuel subsidy), a national strike, heightened security challenges in many
parts of the country, and severe flooding in a number of regions

Other than slow (negative) growth in oil exports, the primary balance of payments development in Nigeria in
recent years concerns portfolio investment. The combination of commitment by the Central Bank to a high
degree of exchange rate stability and double digit interest rates has made Nigeria a major destination for
portfolio investors since the second half of 2012. Estimated gross portfolio investment to Nigeria amounted
to US$ 2.5 billion in 2011, but the size of these inflows mushroomed to US$ 17.2 billion in 2012 and US$
20.3 billion in 2013. After investing an estimated US$ 13.3 billion in Nigerian debt and equity in the first
half of 2013, investors became visibly more cautious in the second half of the year, limiting gross portfolio
inflows to US$ 7 billion. Gross reported portfolio outflows also increased somewhat in the second half of
2013, amounting to close to US$ 3 billion. Thus, declines in portfolio inflows were a major reason why the
Nigerian balance of payments slipped into deficit in the second half of 2013 and the Naira came under
increasing pressure. Despite weakening oil exports, the huge portfolio inflows in the second half of 2012 and
first half of 2013 kept the balance of payments in surplus.
Inflation has continued its general downward trend in line with tighter macroeconomic policy since 2011.
The new Central Bank Governor assumed office in June, 2014 and has emphasized a high degree of
continuity in the pursuit of monetary policy. The implementation of government budgets faced challenges in
2013 due to significantly lower revenues than programmed and, in the case of the Federal Government, late
passage into law of the annual budget
Mirroring the unexpectedly low performance of Federation revenues, federal budgetary revenues also fell
short of expectations in 2013, despite coverage by the ECA of a good part of the shortfalls. Due to the late
passage of the original 2013 budget, capital warrants for the release of funds in the first quarter of the year
for execution of the capital budget were reportedly only issued on the 31st of March, thus delaying
implementation of the capital budget. Over the medium and longer term, Nigeria’s future prosperity will
depend critically on improvements in non-oil growth and non-oil government revenues.
In the chapter two of the article which discusses about Poverty in Nigeria as A Partial Reassessment, the
authors. Data from the comprehensive household survey (NHLSS) in 2009/2010 indicated that the official
poverty rate3 remained stubbornly high at 46% of the population (adult equivalent approach), or 62% in
strictly per capita terms. This indicates only a slight decline from 48% and 64%, respectively, that were
recorded from the NHLSS in 2003/2004. These poverty numbers raise two major economic questions.
Firstly, why has the rapid economic growth in Nigeria not generated greater poverty reduction? Second, how
could an economy of the size and wealth of Nigeria have such high poverty rates? The country’s
performance is at odds with the general international trend of poverty reduction, in particular in other
countries experiencing rapid economic growth like Nigeria. At the national level, the GHS-computed per
capita poverty rate registers at 35.2 and 33.1 percent of the population in 2009/2010 and 2012/2013,
respectively. This can be compared with the 2009/2010 per capita estimate of 62% based on the HNLSS.
Reflecting significantly higher GDP per capita in Nigeria, these new poverty rates, in contrast to previous
estimates, are lower than those in neighboring countries such as Benin and Niger.

The GHS data would suggest that all three Southern macro-regions, together with the North Central region,
experienced declines in estimated poverty rates between 2010-2013. By contrast, poverty increased in the
North East and remained largely unchanged in the North West. The contrast in absolute levels of poverty in
different macro regions is also striking, with the South West experiencing the lowest poverty rate of 16% in
2012-2013, while an estimated 50.2% of the population lives below the poverty line in the North East. The
North West and North East together account for the majority (52%) of poor Nigerians. Adding also the
North Central, it appears that about 66% of the poor reside in the Northern part of the country. The contrast
between urban and rural areas in the new estimates with respect to poverty is also striking. A particular
puzzle identified in the previous Nigeria Economic Report concerns the contrast between very rapid
estimated growth in (small scale) agriculture in the last decade of close to 6% and apparent little progress in
poverty reduction in rural areas.

Due to rapid annual population growth averaging about 3 percent, Nigeria needs to experience a strong
reduction in the poverty rate in order to reduce the absolute number of the poor. The new estimates presented
above would imply that the number of poor Nigerians did not decrease between 2010/2011 and 2012/2013,
remaining at 58 million (Figure 8). In addition, the number of poor people living in the Northern part of
Nigeria is increasing, while the number of poor in Southern Nigeria is decreasing. The lack of progress in
poverty reduction in the North West and North East can be related to both a stagnation in average
consumption and increasing inequality. A significant number of Nigerians live close to the poverty line,
particularly in rural areas.

A large share of the Nigerian population appears vulnerable to poverty. Available evidences show that, 58%
of the population lives under 140% of the poverty line. In rural areas, this number reaches almost 70%. By
contrast, this number for urban areas is 30%, and some improvement is visible in 2012/2013 relative to
2010/2011. An examination of cumulative distributions of consumption by macro-region shows the same
general improvements in the South and deteriorations in the North West and North East. While the
distributions of consumption by Nigerian macro-regions are similar in 2010/2011 and 2012/2013, the
difference between the North and South is clearly visible. this examination of recent GHS data offers a
number of hypotheses on poverty and living standards in Nigeria that can be confirmed or refuted following
the next comprehensive HNLS. Poverty rates estimated from GHS data are significantly lower than current
official rates based on the HNLSS. These rates are more consistent with the size, wealth, and growth of the
Nigerian economy.
The Authors noted that, an emerging possibly clearer picture of the evolution of poverty and living standards
in Nigeria has implications for economic policy and development in the country. The North/South divide in
poverty and poverty reduction is a regrettable trend that can hopefully be reversed. The current deterioration
or stagnation in poverty reduction in the North East and North West. is likely related to the security situation
in this part of the country. This particularly concerns the visible deterioration in living standards in the North
East. Research in economics continues to stress the high value of basic education for increasing the
probability of productive employment. Over 90% of children in the Southern part of Nigeria between ages 6-
16 attend school, while this is only true for less than half of children in the North West and North East
(Nigeria Education and Skills Policy Notes, 2013).
Health indicators show a similar divide. For example, immunization rates of 14% and 21% in the North West
and North East, respectively, can be compared with over 70% immunization rates in the South. Infrastructure
that could better connect markets in Nigeria or measures to facilitate higher productivity in agriculture could
also have a measurable impact on poverty reduction in the North.
In conclusion, the authors also argue that, poverty reduction in rural areas can be strengthened through urban
growth (migration to cities) and measures to increase the viability of agricultural markets. Evidence from the
GHS surveys indicates that migration from rural to urban areas may already be increasing agricultural
productivity (yields relative to number of people on household farms) in some areas in Nigeria. Thus, strong
urban growth that provides opportunities for migrants in cities is also a key to rural poverty reduction. The
Agricultural Transformation Agenda also holds promise in Nigeria for increasing agricultural productivity
through increasing the viability of markets for key value chains. The potential for rural poverty reduction is
large.
SUMMARY ON THE ARTICLE: NIGERIA ECONOMIC SITUATION
This article, which highlights the economic situation of Nigeria is divided into three (3) chapters. The first
chapter deals with Macroeconomic Overview, the second - Oil Revenues and the Fuel Subsidy and third -
Unlocking the Potential of Nigeria's Natural Gas Sector.
In first chapter, the World Bank Group records that, overdependence of Nigeria on oil revenues has resulted
to many challenges in the form of external imbalance, steep falls in government revenues and slower
economic growth. In contrast to the period of 2008 – 2009, Nigeria no long has a large fiscal reserve to
buffer government budgets from the revenue shortfalls. As a result, distributions to federal and state
government budgets declined in nominal terms by 39 percent in the first half of 2015 relative to the same
period of 2014. Accordingly, Nigeria no longer has a large fiscal reserve to buffer government budgets from
the revenue shortfalls. As a result, distributions to federal and state government budgets declined in nominal
terms by 39 percent in the first half of 2015 relative to the same period of 2014. Federal and state
governments have slashed capital spending, and a number of states have struggled just to pay salaries to civil
servants and service domestic debt obligations (World Bank Group, 2015).
The authors also noted that, the pace of growth in Nigeria has slowed in light of lower foreign inflows from
oil and the fiscal contraction. The national currency has depreciated by 20 percent between November 2014
and March, 2015, leading to a significant import contraction that has alleviated some of the pressure on the
naira. New currency controls on the forex market should bring further significant import contraction,
although they are also expected to negatively impact trade and GDP growth.
The authors also spelt out other recent policy initiatives to include a financial assistance package for State
budgets, measures to rationalize the management and operation of the Nigerian National Petroleum
Corporation (NNPC), fight corruption, and resolve the conflict in the North East of the country. The fuel
subsidy, which is imposing a large and increasing burden on public finance, has become the focus of
renewed policy debate. For the medium term, Nigeria will need to create the fiscal space needed to provide
the public services essential for maintaining and accelerating progress in job creation and poverty reduction.
However, it will likely be unable to rely on oil revenues as in the past. Oil prices are expected to remain
weaker over the medium term than their recent historical levels. Even if oil prices rebound to those levels,
the absence of growth in the oil sector implies that oil revenues will most likely continue to decline relative
to the size of the Nigerian economy.
On the positive side, the sovereign debt position of Nigeria is still strong, there is potential for boosting non-
oil revenue generation, and investors stand ready to bring significant resources to the country if they receive
signals of commitment by the new Government to policy directions and regulations consistent with strong
private-sector-led growth.
However, chapter two of the article examines the costs and benefits of the fuel subsidy in Nigeria in light of
current prospects for oil prices and revenue. Overall, the fuel subsidy appears to have very modest benefits
for everyday Nigerians, particularly given the fact that the administratively set prices for petrol and kerosene
are no longer enforced in most of Nigeria. The lack of enforcement means that almost all benefits are
captured by importers and traders; moreover, even if these prices were fully enforced, it is estimated that the
richest 20 percent of Nigerians would capture most of the benefits. On the other hand, the costs of the
subsidy are very high and growing with time, as increasing petrol demand in Nigeria outpaces growth in oil
output or revenues. The US$35 billion cost of the fuel subsidy during 2010-2014 was a primary reason why
Nigeria was unable to accumulate a fiscal reserve in the Excess Crude Account that could have protected the
country from the recent oil price shock. Fuel subsidy obligations are expected to reach 18 percent of all
government oil revenues in 2015, and, if the current regulated prices are maintained, this is projected to
increase to more than 30 percent by 2018.
Chapter three examines the costs and benefits of the fuel subsidy in Nigeria in light of current prospects for
oil prices and revenue. Overall, the fuel subsidy appears to have very modest benefits for everyday
Nigerians, particularly given the fact that the administratively set prices for petrol and kerosene are no longer
enforced in most of Nigeria. The lack of enforcement means that almost all benefits are captured by
importers and traders; moreover, even if these prices were fully enforced, it is estimated that the richest 20
percent of Nigerians would capture most of the benefits.

On the other hand, the costs of the subsidy are very high and growing with time, as increasing petrol demand
in Nigeria outpaces growth in oil output or revenues. The US$35 billion cost of the fuel subsidy during
2010-2014 was a primary reason why Nigeria was unable to accumulate a fiscal reserve in the Excess Crude
Account that could have protected the country from the recent oil price shock. Fuel subsidy obligations are
expected to reach 18 percent of all government oil revenues in 2015, and, if the current regulated prices are
maintained, this is projected to increase to more than 30 percent by 2018.
WORLD BANKS STATEMENTS
In the above named title, it is noted by the author that since the pandemic induced recession in 2020,
Nigeria’s economic growth recovered but macroeconomics has been steadily weakened. Amidst global
commodity shocks, a depreciating currency, trade restrictions, and monetization of the deficit, inflation is
surging and pushing millions of Nigerians into poverty. Since 2021, Nigeria is also unable to benefit from
the surging global oil prices, as oil production has fallen to historic lows and petrol subsidy continues to
consume a larger share of the gross oil revenues.
Accordingly, the authors have noted that, in 2018, 40% of Nigerians (83 million people) lived below the
poverty line, while another 25% (53 million) were vulnerable. With Nigeria’s population growth continuing
to outpace poverty reduction, the number of Nigerians living in extreme poverty is set to rise by 7.7 million
between 2019 and 2024.
While the economy is projected to grow at an average of 3.2% in 2022-2024, the growth outlook is subject to
downside risks including further declines in oil production and heightened insecurity. Meanwhile, continued
scarcity of foreign exchange and tighter liquidity could affect the economic activity in the non-oil sector and
undermine the overall macroeconomic stability. The uncertainty is also expected to be accompanied by high
inflation and continued fiscal and debt pressures. 
The authors pointed out some development challenges which they stressed that while Nigeria has made some
progress in socio-economic terms in recent year, it human capital development ranked 150 of 157 countries
in the World Bank’s Human Capital Index. Thus, Nigeria faces massive developmental challenges, including
the need to reduce the dependency on oil and diversify the economy, address insufficient infrastructure, build
strong and effective institutions, as well as address governance issues and public financial management
systems.
Also, Inequality, in terms of income and opportunities, have been noted to remains high and has adversely
affected poverty reduction. The lack of job opportunities is noted to be at the core of the high poverty levels,
regional inequality, and social and political unrest. High inflation has also taken a toll on household’s
welfare and high prices in 2020-2022 are likely to have pushed an additional 8 million Nigerians into
poverty.
To end extreme poverty and increase shared prosperity, a new Country Partnership Framework (CPF) was
approved in December 2020 to guide the World Bank Group’s support to Nigeria from 2021-2024 around
four key engagement areas, the authors posited:
Investing in Human Capital and harnessing Nigeria’s demographic dividend,
Promoting Jobs and Economic Transformation and Diversification,
Reducing Fragility and building Resilience,
Strengthening the Foundations of the Public sector.

Worthy of note is that; the World Bank is supporting Nigeria with an active investment of $12.2 billion in
financing from the International Development Association (IDA) and International Bank for Reconstruction
and Development (IBRD). Nigeria is also one of the International Finance Corporation’s (IFC) fastest
growing portfolios in the region.
The World Bank Group’s support is structured around several priorities as highlighted in the CPF which
aims to promote diversified growth and job creation, with a focus on youth, women, and the poor in
marginalized areas, and social inclusion, through higher quality and efficiency in social service delivery at
the state level. It also aims at fostering macroeconomic resilience and advancing structural reforms for
private sector-led, non-oil growth. This includes empowering women and girls and increasing their human
capital and economic opportunities, increasing domestic revenue mobilization, and improving the quality of
public expenditures and strengthening debt management. The World Bank Group also supports increased
engagement in the climate resilient agenda as well as Nigeria’s response to the COVID-19 pandemic and its
post-recovery efforts.
In conflict affected north-east Nigeria, the Bank Group is stepping up its support to address service delivery
gaps, livelihood deficits, and social cohesion issues, as well as providing support to economic
diversification. 
In the area of Agriculture, The World Bank’s support for the agricultural sector, including through the
Commercial Agriculture Development Project, the Transforming Irrigation and Water Resources
Management Project and West Africa Agriculture Productivity Project  has helped Nigeria strengthen
agricultural production:
Over 7 million farmers received improved agricultural technology
Farmers cultivating tomatoes and rice contributed 26% and 14.27%, to national production respectively, in
2019
Cassava farmers realized more than $55 million as revenue and a gross margin of over $36 million in 2019
Rice, sorghum and tomatoes farmers realized gross margins of over $288 million, $169 million, and $53
million respectively
A Farmers’ Microfinance Bank birthed from FADAMA gives loans at low interest rate of 3.5% for business
startup and expansion, with 80% recovery rate. The amount saved from the FADAMA enterprises was over
$200,000 as at 2019
Export of over 10,000 metric tons of smoked fish and other Agric-products
3,102 hectares received improved irrigation services through the ongoing rehabilitation of 3 dams located in
Sokoto, Zamfara and Kano states under the Transforming Irrigation Management in Nigeria project

CLIMATIC RESILIENCE: The Nigeria Erosion and Watershed Management enhanced Nigeria’s capacity

on the preparedness to respond to natural hazards, climate risks and natural disasters, which has led to the
following;
About 2,201 hectares of the land area have been reclaimed in the immediate gully site micro-catchments as
at June 2020, including reclamation and afforestation programs across northern states
16 States now have improved erosion risk maps, towards ensuring better-quality catchment management
plans prepared for 31 sites across States.
75 hydromet stations providing data for integrated catchment planning have been installed across the country
2 storm water master plans have been completed for Onitsha in Anambra State, Aba and Abakaliki in Ebonyi
State, strengthening and streamlining the country's Environmental Impact Assessment process
Issuance of Nigeria’s second tranche of Sovereign Green Bond (for $42 million) after the first green bond, to
finance climate change activities. Activities financed by the initial tranche of Green Bonds, such as solar
plants in seven selected Federal Government Universities and a Renewable Energy Micro-Utility project in
Torankawa community in Sokoto State, have been completed
 
SOCIAL SAFETY NET: The Community and Social Development Project has
▪ Led to Institutionalization of Community & Social Development Agencies across implementing
states, which serves as a platform for program sustainability by state government or further
interventions by other donor partners
▪ Recorded over 3 million direct project beneficiaries including Internally displaced persons in the
North East of Nigeria
▪ 4,662 new communities and over 1.8 million households have access to social services (of which
IDPs constitute more than 10% of residents) as against 1,000 communities and 500,000 households
baseline values respectively
▪ 800 new poor communities with access to natural resource management services (of which IDP’s
constitute more than 10% of residents)
▪ Over 1,510 rehabilitated and 256 newly built health centers
▪ Over 2,362 rehabilitated and 300 newly built classrooms
▪ Increased school enrollment with records of over 18,000 Boys and 14,000 Girls enrolled in primary
education schools
▪ An estimated 36 million people in 13,299 cluster of communities have benefitted directly and
indirectly from the original and additional Financing resources
▪ The National Social Safety Net Project has:
▪ Created a National Social Registry (NSR) for Nigeria
▪ Captured about 814,376 households included in the National Social Registry and recorded about 3.2
million Direct Project Beneficiaries of the program, 49% of this number are female
▪ By June 2019, almost a million poor and vulnerable households in the NSR had benefitted from
10,000 Naira bi-monthly Conditional Cash Transfer program; expected to reach 1 million poor and
vulnerable households by end of 2019
▪ Benefitted 20 states from targeted cash transfers
▪ Helped 1,200 beneficiaries from 30 communities save more than 22 million naira in 18 months from
their conditional cash transfers. This fund is being used as start-up capital for small businesses to
generate income and improve their livelihood. 

SUMMARY ON THE ARTICLE: NIGERIA ECONOMIC SITUATION

This article, which highlights the economic situation of Nigeria is divided into three (3) chapters. The first
chapter deals with Macroeconomic Overview, the second - Oil Revenues and the Fuel Subsidy and third -
Unlocking the Potential of Nigeria's Natural Gas Sector.
According to the details from the first chapter, the overdependence of Nigeria on oil revenues has resulted to
many challenges in the form of external imbalance, steep falls in government revenues and slower economic
growth.
The authors noted that in contrast to the period of 2008 – 2009, Nigeria no long has a large fiscal reserve to
buffer government budgets from the revenue shortfalls. As a result, distributions to federal and state
government budgets declined in nominal terms by 39 percent in the first half of 2015 relative to the same
period of 2014.
In contrast to the period of 2008-2009, the authors opined that, Nigeria no longer has a large fiscal reserve to
buffer government budgets from the revenue shortfalls. As a result, distributions to federal and state
government budgets declined in nominal terms by 39 percent in the first half of 2015 relative to the same
period of 2014. Federal and state governments have slashed capital spending, and a number of states have
struggled just to pay salaries to civil servants and service domestic debt obligations.
The authors also noted that, the pace of growth in Nigeria has slowed in light of lower foreign inflows from
oil and the fiscal contraction. The national currency has depreciated by 20 percent between November 2014
and March, 2015, leading to a significant import contraction that has alleviated some of the pressure on the
naira. New currency controls on the forex market should bring further significant import contraction,
although they are also expected to negatively impact trade and GDP growth.
The authors also spelt out other recent policy initiatives to include a financial assistance package for State
budgets, measures to rationalize the management and operation of the Nigerian National Petroleum
Corporation (NNPC), fight corruption, and resolve the conflict in the North East of the country. The fuel
subsidy, which is imposing a large and increasing burden on public finance, has become the focus of
renewed policy debate.
Also noted by the authors of this article is that, for the medium term, Nigeria will need to create the fiscal
space needed to provide the public services essential for maintaining and accelerating progress in job
creation and poverty reduction.
However, it will likely be unable to rely on oil revenues as in the past. Oil prices are expected to remain
weaker over the medium term than their recent historical levels. Even if oil prices rebound to those levels,
the absence of growth in the oil sector implies that oil revenues will most likely continue to decline relative
to the size of the Nigerian economy.
On the positive side, the sovereign debt position of Nigeria is still strong, there is potential for boosting non-
oil revenue generation, and investors stand ready to bring significant resources to the country if they receive
signals of commitment by the new Government to policy directions and regulations consistent with strong
private-sector-led growth.

However, chapter two of the article examines the costs and benefits of the fuel subsidy in Nigeria in light of
current prospects for oil prices and revenue. Overall, the fuel subsidy appears to have very modest benefits
for everyday Nigerians, particularly given the fact that the administratively set prices for petrol and kerosene
are no longer enforced in most of Nigeria. The lack of enforcement means that almost all benefits are
captured by importers and traders; moreover, even if these prices were fully enforced, it is estimated that the
richest 20 percent of Nigerians would capture most of the benefits. On the other hand, the costs of the
subsidy are very high and growing with time, as increasing petrol demand in Nigeria outpaces growth in oil
output or revenues. The US$35 billion cost of the fuel subsidy during 2010-2014 was a primary reason why
Nigeria was unable to accumulate a fiscal reserve in the Excess Crude Account that could have protected the
country from the recent oil price shock. Fuel subsidy obligations are expected to reach 18 percent of all
government oil revenues in 2015, and, if the current regulated prices are maintained, this is projected to
increase to more than 30 percent by 2018.
Chapter three examines the costs and benefits of the fuel subsidy in Nigeria in light of current prospects for
oil prices and revenue. Overall, the fuel subsidy appears to have very modest benefits for everyday
Nigerians, particularly given the fact that the administratively set prices for petrol and kerosene are no longer
enforced in most of Nigeria. The lack of enforcement means that almost all benefits are captured by
importers and traders; moreover, even if these prices were fully enforced, it is estimated that the richest 20
percent of Nigerians would capture most of the benefits.

On the other hand, the costs of the subsidy are very high and growing with time, as increasing petrol demand
in Nigeria outpaces growth in oil output or revenues. The US$35 billion cost of the fuel subsidy during
2010-2014 was a primary reason why Nigeria was unable to accumulate a fiscal reserve in the Excess Crude
Account that could have protected the country from the recent oil price shock. Fuel subsidy obligations are
expected to reach 18 percent of all government oil revenues in 2015, and, if the current regulated prices are
maintained, this is projected to increase to more than 30 percent by 2018.
WATER SUPPLY, SANITATION & HYGIENE—A WAKE-UP CALL
Nigeria’s emergence from recession remains slow: real GDP grew by 1.9 percent in 2018. While this was
above the 0.8 percent growth of 2017, it was below the population growth rate, government projections and
pre-recession levels. As the oil sector is not labor-intensive, and the non-oil economy was still relatively
weak, nearly a quarter of the work force was unemployed in 2018; and another 20 percent under employed.
The country’s current account balance remained positive (1.3% of GDP in 2018) but declined, as goods and
services import growth outstripped export growth.
Water, Sanitation and Hygiene (WASH) – A Critical Element of Investing in Human
Capital for Nigeria’s Future
At the World Bank/IMF Annual Meetings in October 2018, the World Bank launched the Human Capital
Project and the associated Human Capital Index (HCI) to much acclaim. The HCI is both an indicator of
current development success, as well as a metric of a country’s foregone development potential. It combines
five measures of human Capital into a single index to quantify the contribution that health and education
have on the productivity of the next generation of workers and there are numerous pathways through which
the WASH sector can impact human capital accumulation.
Current Status of the WASH Sector in Nigeria
Nigeria met the Millennium Development Goal (MDG) targets for water—69 percent of the population now
have access to improved water, while access to improved water at the national level increased, access to
piped water on premises declined by 10 percentage points: from 12 percent in 1990 to 2 percent in 2015.
This is mainly due to a steep decline of 29 percentage points in access to piped water in urban areas – from
32 percent to 3 percent – due to rapid urbanization, lack of investment, and institutional constraints in the
expansion of services and Nigeria did not meet the sanitation targets for the MDG, and the country has seen
an overall decline in access to improved sanitation, About 25 percent of the population still practice open
defecation, representing a 1 percentage point increase over the past 25 years
Access rates for WASH, while comparable to those of many countries in Sub-Saharan Africa, are much
lower than the rates of most other countries in Africa. Most noticeably, access to piped water in Nigeria is
below that of most countries in Sub-Saharan Africa. Similarly, access to improved sanitation in Nigeria falls
below estimates for Senegal and Rwanda. To assess the current state of access to water and sanitation in
Nigeria, “A Wake Up Call” draws primarily from the findings of the NWSS household survey, implemented
in 2015 by the Federal Ministry of Water Resources (FMWR).21 As part of the NWSS, 201,842 households
were surveyed, and the survey captures information on a household’s access to water and sanitation services,
using indicators based upon the Sustainable Development Goals (SDGs), The majority of Nigerians (61
percent) have access to at least limited water services, but only a small percentage of them have access to
improved water on premises. Although data are limited, we estimate that between 15 percent and 20 percent
of households have access to “safely managed water,” the SDG for water.
Water and Sanitation Indicators based upon the Sustainable Development Goals (SDGs)
Through the SDGs, the world has now committed to achieving universal access to water, sanitation, and
hygiene under a broader, more refined and more intricate monitoring framework. The new SDG indicators
for measuring access are composite and stricter than the previous MDG indicators. This chapter presents
detailed information on the current state of the water and sanitation sector, making use of relevant SDG
indicators as permitted by data availability.
As technological standards for water access increase, from the most attainable (limited water) to the most
stringent (piped on premises), we observe a steady decline in access rates nationally

WASH and Health

- Access to safe WASH services underpins many aspects of social and human development – from
better health and nutrition, to lower absenteeism and school dropout rates, to improved household
income.
- Undernutrition is a major public health problem in Nigeria. The 2013 Demographic Health Survey
(DHS) estimates that 36.8 percent of children under five in Nigeria are stunted, 18.5 percent are
wasted, and 29 percent are underweight.
- Inadequate WASH can contribute to adverse health and development consequences, and some
subsets of the population are more vulnerable to WASH-related risks than others. People with poor
health and nutrition are especially vulnerable to experiencing the adverse effects of inadequate
WASH.
- WASH-related risk of disease varies significantly across regions and income groups in Nigeria. All
regions in Nigeria show disparities in risk between the poorest and richest quintiles, with the poorest
having the highest mean risk index values. The reasons for this are threefold:
(a) the variability in WASH-related exposures—with children in poorer households having higher
exposures;
(b) these same children are likely to be much more vulnerable due to underlying poor nutrition and a
lack of access to basic health services; and
(c) both WASH and health vulnerabilities are the product of underlying economic and geographic
inequalities.
Efficiency in the WASH Sector
- While faced with rapid population growth, there has not been an improvement in the institutional capacity
of water utilities in Nigeria. When compared with global and regional averages, Nigeria’s water
infrastructure—as measured by staff productivity, total consumption, service continuity, and cost recovery—
has underperformed
- The drivers behind this poor performance is uncertain: there are inconsistent patterns between certain
measures of efficiency, availability, quality, and financial sustainability, as well as in the overall
performance of water agencies.
- Nigeria faces wide-ranging deficiencies in the technical capacity of its water sector. Hydrogeological base
maps for the country are of poor quality, and thus of little use in developing a water exploration and
extraction plan
- Half of Nigeria’s water schemes and 38 percent of water points are not functioning. Evidence from our
analysis suggests that nearly 27 percent of water points are likely to fail in the first year of construction and
40 percent are likely to fail in the long run (after eight to 10 years).
- If water points and schemes are more carefully attended to during their design, implementation, and
operation, failure rates can be drastically reduced
WASH Public Expenditure Review
The Nigerian government invested close to US$1 billion per year between 2006 and 2010 in the water
sector. Despite assignment of primary responsibility for water services to subnational governments, the
largest share of the total water expenditure was initially executed by the Federal Government (2006) and 8.
Between 2006 and 2010, total expenditure in the sector averaged 0.47 percent of GDP, with capital
expenditure averaging 0.32 percent of GDP and recurrent expenditure averaging 0.15 percent. Nigeria’s
capital investments in WASH are insufficient. Nigeria’s average annual investment in capital expenditure of
0.32 percent of its GDP is lower than regional levels (0.7 percent) and falls short of what is needed for the
country to reach the SDGs.
Recent estimates produced by the World Bank show that the investment needed for Nigeria to achieve the
SDG for WASH is equivalent to US$8 billion,31 or 1.7 percentage points of GDP per year

The Continuing Urgency of Business Unusual

Nigeria’s growth prospects for the next three years have improved thanks to a more robust recovery
in the non-oil economy and higher global oil prices.
The services and agriculture sectors have performed better than expected, while tertiary activities
have rebounded. Higher oil prices stemming from the Ukraine war will boost Nigeria's economic
growth, but not fully due to lower oil output. Fiscal gains are offset by the continuing petrol
subsidy.
Nigeria's macroeconomic framework is deteriorating due to lack of concerted efforts to reduce
inflation, address fiscal pressures, and strengthen exchange rate management. Inflation is expected
to be two percentage points higher in 2022-2023, and the general government fiscal deficit has been
revised upwards from 5.3 to 5.8%. Global risks have risen in the last six months, including the war
in Ukraine and monetary tightening by central banks.
The government has kept a "business-as-usual" policy stance that hinders economic growth and job
creation, with multiple exchange rates, trade restrictions, and financing of the public deficit. This
has led to a potential fiscal time bomb due to elections, high inflation, and higher global interest
rates.
Inflation in 2022 is projected to be higher than anticipated due to policy distortions, trade
restrictions, and conflicting monetary policy goals. In May 2022, the Central Bank of Nigeria
increased the interest rate for the first time in 18 months.
Increased inflationary pressures following the Ukraine war are expected to push even more
Nigerians into poverty, resulting in 15 million more Nigerians living in poverty between 2020 and
2022. Despite higher oil prices, the fiscal situation is deteriorating, limiting the government's ability
to support the recovery and protect the poor. In 2022, Nigeria is not expected to benefit from higher
oil prices fully due to low oil production, a larger unit petrol subsidy, a weaker currency, and higher
apparent petrol consumption. The first four months of 2022 saw the lowest oil production in two
decades due to force majeures, funding shortfalls, a lack of adequate maintenance, and other
factors. The cost of the petrol subsidy will increase significantly as higher global petrol prices will
entail larger subsidy payouts.
The 2022 amended budget allocates N4 trillion for the petrol subsidy, higher than the combined
budget allocated for education, health, and social protection. The NNPC makes other deductions
from oil and gas revenues to finance government gas projects, refining and exploration costs,
pipeline maintenance, and strategic reserve holdings. The worsening revenue collection at the
federation level is increasing budgetary pressures for the States, leading to a precarious fiscal
position.
Increased inflationary pressures following the Ukraine war are expected to push up to 15 million
more Nigerians into poverty between 2020 and 2021. This "inflation shock" is estimated to result in
a 4 percent increase in net oil revenues in Nigeria in 2021, driven by low oil production, a larger
unit petrol subsidy, a weaker currency, and higher apparent petrol consumption. Despite this, the
fiscal situation is deteriorating, limiting the government's ability to support the recovery and protect
the poor. In 2022, Nigeria is not expected to benefit fiscally from higher oil prices fully. FAAC is
an international organization that manages oil and non-value added tax (VAT) transfers.

In 2022, the FOB allocated N4 trillion (almost 2 percent of GDP) for the petrol subsidy, higher than
the combined budget allocated for education, health, and social protection. The NNPC also makes
other deductions from oil and gas revenues such as finance government gas projects, refining and
exploration costs, pipeline maintenance, and strategic reserve holdings. This has caused a rise in
budgetary pressures for the States, and debt servicing expenditures are also mounting due to a
decline in gross statutory account revenue transfers from the federation account allocation
committee (FAAC). The lower FAAC transfers in 2022 will not be compensated by the expected
higher VAT collection or improvements in independently generated revenues.
Agriculture grew by 2.1% in 2021 and is expected to grow by 3.2% in 2022, but has lagged its
average growth of 5.4% over the last two decades. Oil and gas output contracted by 8.3% in 2021
due to technical and security issues. Nigeria's non-oil industry grew by 4.4% in 2021, recovering
from its 2020 contraction, but is expected to grow at a lower rate in 2022 due to supply constraints,
rising costs for inputs and services, and foreign exchange shortages. Services, which account for the
largest share of Nigeria's GDP, contributed the most to GDP growth in 2021, driven by ICT and
financial services.
The war in Ukraine is affecting the Nigerian economy through direct and indirect channels, such as
trade disruption, commodity prices, and tightening of global financial conditions. Trade disruptions
are causing supply shortfalls and increases in the international prices of commodities, such as fuel
and food staples. Higher commodity prices exacerbate pre-existing inflationary pressures, eroding
purchasing power and hurting the poor. Price movements for essential food items may be leaving
some Nigerians especially worse-off and at risk of falling into poverty. Raw wheat prices have
increased dramatically since the start of the war, rising by 35% between January and March 2022.

This demonstrates the interlinked nature of international and domestic markets for raw and refined
commodities. The higher crude oil prices triggered by the war have had a negative impact on
Nigeria's current account and fiscal position, with the fiscal deficit expected to grow to 5.8 percent
of GDP in 2022. However, the income effects of higher oil prices on secondary and tertiary
economic activities are expected to result in higher growth in 2022 than initially anticipated. Global
financial conditions have also led to higher interest rates in advanced economies, diverting capital
away from EMDEs such as Nigeria, and foreign aid flows may tilt in the direction of Ukraine.
Nigeria has not realized its oil production potential due to high production, high security risks, the
inability of the Federation to pay fully and on time for its share of costs in joint-venture operations,
and in the past uncertainties about the future fiscal terms, now set out in the Petroleum Industry
Act. Ending the petrol subsidy will go a long way in reversing the decline in oil production. Further,
the global energy transition has made investors increasingly selective about where to invest. To
remain competitive, Nigeria will need to slash gas flaring, venting, and fugitive methane emissions;
concurrently, the government and the national oil company will need to enhance administrative
efficiency.
Nigeria's oil production has been declining for many years due to security concerns, tense
relationships with workers and communities, high costs, and the Federation's failure to finance the
production of equity oil. Attacks on oil production infrastructure, work stoppages, and disturbances
in oil-producing communities have led to the suspension of oil production on numerous occasions.
The NNPC reports various incidents disrupting oil and gas production to FAAC on a monthly basis,
which have been publicly disclosed since January 2020. Production in Nigeria is more expensive
and has been limited to drilling new wells in existing license areas. Onshore oil production is
vulnerable to vandalism and high costs due to complex, opaque and slow contract approval
processes.

Nigeria's National Petroleum Policy called for a "fundamental overhaul" of the procurement process
to strengthen efficiency, transparency and cost control. Brazil's local content rules have been
criticized for fostering corruption and cost increases. Even without corruption, if only a handful of
local companies are capable of delivering the required services, there would be inadequate
competition and higher prices. The NNPC's failure to pay for the Federation's share of costs in
joint-venture operations has had a significant impact on oil production, with the Federation owed
US$972 million in arrears as of March 2022. The lack of payment discipline has also threatened
Nigeria's ability to produce oil and gas and supply electricity, with chronic power shortages caused
by the failure of power generation companies to pay gas producers. Improving payment discipline
is essential for Nigeria's energy security and economic development.
Understanding how poverty has changed over time can provide vital insights into the effectiveness
of poverty-reducing policies. Data constraints have traditionally complicated the assessment of
poverty dynamics in Nigeria, but the application of specialized statistical techniques reveals that,
even before COVID-19, poverty reduction in the country was stalling. Moreover, when Nigeria was
growing in the early 2010s, it was richer Nigerians that benefited the most. This underscores the
importance of reforms that not only bolster growth, but also ensure that the proceeds of growth are
shared among all Nigerians, and especially the poor. Such reforms may include broad
macroeconomic transformation to aid job creation, supporting productivity in small-scale household
enterprises, and investing in infrastructure. These policies, guided by data, can help Nigeria make
substantial strides toward poverty reduction.

Rising to the Challenge: Nigeria's COVID Response

In 2020, Nigeria’s economy is expected to experience its deepest recession since the 1980s due to the
COVID-19-related disruptions notably lower oil prices and remittances, enhanced risk aversion in global
capital markets, and mobility restrictions; this article opines.

i Oil and government revenues: Nigeria's oil sector has a direct impact on economic activity,
jobs, government revenues, investment, and credit growth, and consolidated government
revenues are projected to drop by US$10 billion or more in 2020.
 ii Remittances: Nigeria's diaspora's decline in remittances has slowed consumption and
weakened aggregate demand.

iii Capital flows: Foreign portfolio investments have decreased, putting pressure on Nigeria's
external reserves and exchange rates.

iv Mobility restrictions: Public-health measures slowed COVID-19 spread, but mobility

restrictions and precautionary behavior reduced employment and income.

v Prices: Rising food prices, conflicts, and pandemic-related disruptions caused inflation
before COVID-19.

vi Job: Unemployed workers have shifted to the agricultural sector, leading to increased
economic precarity and food insecurity.

vii Poverty: Nigeria's extreme poverty rate is expected to rise by 15-20 million by 2022, with
human and economic costs.

Summarily, Nigeria's oil sector has a direct impact on economic activity, jobs, government
revenues, investment, and credit growth, and consolidated government revenues are projected to
drop by US$10 billion or more in 2020. Remittances have declined, capital flows have decreased,
mobility restrictions have reduced employment and income, and prices have caused inflation.
Poverty is expected to rise by 15-20 million by 2022.

Nigeria is at a critical historical juncture due to the COVID-19 pandemic, requiring an

unprecedented policy response to lift 100 million Nigerians out of poverty by 2030. Growth
projections show that by 2023, Nigeria's GDP per capita is expected to be roughly similar to 2010,
meaning that Nigeria would lose 14 years in per capita incomes. This is equivalent to going back to
the 1980s.

Work and COVID-19 in Nigeria

Even though many Nigerians returned to work after the easing of strict lockdown measures in the early phase
of the COVID-19 crisis, most households remain in an economically precarious situation. Indeed, more than
two in three report lower incomes now than one year ago. One reason is that, according to a sample of
household heads interviewed through high-frequency telephone surveys, a large share of Nigerian workers
has entered or switched into less productive agricultural jobs. With incomes down, food insecurity is also far
more prevalent than in previous years, with the poorest households being especially likely to report a
deterioration in their food security throughout the course of the COVID-19 crisis. Additionally, it appears
that women’s working situation has been disrupted more than men’s as the crisis has evolved.

Nigeria’s social protection system during COVID-19 and beyond

Nigeria has notably high levels of poverty and vulnerability. Predictions indicate that the ongoing global
economic crisis induced by the COVID-19 pandemic has contributed to a worsening of these levels. Among
other instruments, the Nigerian government has sought to leverage its social protection system to provide
relief. Integral to this effort are ongoing innovations in data that assist in understanding on-the-ground
realities and in shaping a response. At the same time, the government has sought to continue important
reforms to build, and improve the performance of, the social protection system. Policy options going forward
include greater and more sustainable financing of social protection by government, plus stronger
coordination and alignment in program design and implementation across government agencies and
administrative levels. Other priorities include further advances in the development and use of data systems,
greater resilience and responsiveness of the social protection system to shocks, and better interlinkages
between social safety net programs and other programs and services

Nigeria’s health response to the COVID-19 pandemic

With 65,148 COVID-19 cases registered as of November 16, Nigeria ranks among the top ten countries
heavily affected by COVID-19 in Africa. The government responded to the pandemic by: strengthening its
political and technical structures through a cross-sector COVID-19 response effort, coordinated by a new
Presidential Task Force based in the office of the Secretary to Government of Federation; bolstering the role
of the Ministry of Health as custodian of the response through a new inter-ministerial technical working
group; and boosting the core functions of the Nigeria Centre for Disease Control to ensure it has sufficient
capacity. COVID-19 has negatively impacted service delivery for disease control programs as well as
essential healthcare services. This can be attributed to both the direct health effects of the virus, as well as
the knock on effects for the economy and the consequent ability of the population to pay for services.
Education and COVID-19: Policies to mitigate the impact and accelerate progress
The COVID-19 pandemic will exacerbate the challenges that the education sector faces in Nigeria. Learning
levels could decline by 10 percent or more, which in turn will translate in an economic loss equivalent to at
least 10 percent of the current GDP. The state and federal governments have taken multiple measures to
mitigate these risks. Scaling up successful interventions and protecting education funding will be
fundamental to minimize and mitigate the impacts of this crisis on education while setting the scene to build
back a better education system that can benefit all.
Opening development opportunities in Nigeria by closing gender gap
Gender disparities in economic opportunities and earnings limit inclusive development and constrain growth.
Data from the Nigerian household survey (2018-19) indicate that women in Nigeria earn considerably less
from their economic activities than men. In agriculture, women plot managers produce 30 percent less per
hectare farmed than men. In entrepreneurship, women earn about one third of what men earn. In wage work,
salaried women earn over one-fifth less (22 percent) than their male colleagues. These gaps in earnings not
only hold back the Nigerian economy, but also represent an opportunity: closing the gender gaps in key
economic sectors could yield additional gains of US$9.3 billion to US$22.9 billion. Further analysis of the
household survey data reveals seven key constraints that could be driving lower earnings for women,
including: choice of low-value crops, limited access to farm inputs, and access to less productive labor for
women farmers; low levels of growth capital and subordinate position in the value chain for women
entrepreneurs; sectoral segregation for female wage earners; and multiple non-work pressures on women’s
time. These constraints could reinforce one another, further limiting women from reaching their full
potential. It is therefore pivotal to design innovative policies and programs that can ease these constraints
and close gender gap
Making the most of young Nigerians’ economic potential: The case for more and better
managed international labor migration from Nigeria
The surge in irregular migration from Nigeria during the height of the European migration crisis in 2016-17
is a direct consequence of worsening joblessness, combined with young people not having regular channels
to find work overseas. Travel restrictions and border closures caused by COVID-19 are leading to declines in
international migration from countries of origin such as Nigeria. But this is a short-term hiatus. Over the
medium term, international migration is likely to continue increasing, primarily due to economic and
demographic factors. Given the overwhelming evidence of the economic benefits of economic migration in
the global context, Nigeria stands to benefit from creating new migration corridors as well harnessing
additional returns from existing corridors. Opening new, safe, and orderly channels for international labor
migration could unlock unrealized gains for Nigeria’s economy and help facilitate its recovery.
 Resilience through Reforms
In 2020, Nigeria experienced its deepest recession in four decades, but growth resumed in the fourth
quarter as pandemic restrictions were eased, oil prices recovered, and the authorities implemented
policies to counter the economic shock. High inflation rates are worsening poverty and depressing
economic activity, However, several critical reforms are as yet incomplete, which threatens
Nigeria’s nascent recovery. Limited employment opportunities pose both economic and security
challenges.
Economic Growth
Past the pandemic-induced recession, but not yet on the road to solid growth
In 2020 the Nigerian economy shrank by 1.8 percent. The COVID-19 crisis drove the economic
slowdown; the external context was marked by capital outflows, intensified risk aversion, low oil
prices, and shrinking remittances. In March 2020, the federal government imposed a lockdown on
Lagos and Ogun states and the Federal Capital Territory, and state governments set similar
restrictions, While heavily affected trade and investment are still guarded, private consumption is
showing signs of
resilience. Timely government support helped shore up consumption and prevented an even larger
contraction. The government launched a COVID-19 spending program and, in contrast to previous
practice, this program was budgeted and combined with measures to enhance procurement and
conduct independent audits of the spending.
In 2020 agricultural output went up by 2.2 percent, slightly below 2019’s 2.4 percent growth.
Crop production, which represents 90 percent of total agricultural production, drove the expansion,
especially staple foods like rice, corn, beans, and cassava for domestic consumption. Agriculture
was the sector least affected by COVID-19, and production expanded in the second half of the year.
Its growth was supported by farmers returning to work after July and the movement of workers
from services to agriculture
Oil production in 2020 contracted by 8.9 percent. A tighter OPEC quota and the disruption of oil
production in the first three quarters resulted in a combination of lower oil prices and smaller
production volumes, which diminished revenues for both the public and the private sectors as the
decline in oil output accelerated a contraction in services, investment, and credit growth. For the
last 40 years, growth of Nigeria’s GDP has closely tracked oil prices, and the economy continues to
depend heavily on sales of crude oil.
The nonoil industrial sector, including manufacturing and construction, shrank by 3.9 percent.
Lockdown measures and slowing economic activity caused a contraction in much of the nonoil
industry except for cement production, processed foods, and chemical and pharmaceutical products.
Monetary Policy and Exchange Rate Management: Adjustments remain critical to Nigeria’s
recovery
Since 2020, the CBN has focused more on funding the government and easing financial
conditions to soften the impact of the COVID-19 crisis than on stabilizing prices. Although
inflation accelerated in 2020 and further in 2021, led by rising food prices, the CBN progressively
lowered the monetary policy rate (MPR), citing—as its rationale—the need to support economic
recovery. The CBN limited its use of open-market operations (OMO) bills to manage liquidity and
shore up the value of the naira, slashing its use of them from the first quarter of 2020 through the
first quarter of 2021. After the 2015 oil-price crash, the CBN opened the market for OMO securities
to foreign portfolio investors, who ultimately held up to one-third of the bills to take advantage of
their high yields. Prolonging the CBN’s accommodative monetary policy would risk further
entrenching high inflation and exacerbating financial outflows.
As exchange rate stability continues to be a key policy objective, the CBN has pursued this by
continuing to manage FX demand and employing other means to strengthen the value of the naira.
More recently, it has taken further steps to unify the exchange rates.Although the CBN devalued the
official exchange rate by 15 percent in March 2020 and by another 5 percent in August while also
allowing the Importers’ and Exporters’ Foreign Exchange (IEFX) rate to depreciate, it was hesitant
to allow further slides in the rates.
The Financial Sector: Nigeria avoided a credit crunch but the banking system is showing signs
of stress
Despite the harsh operating environment, the banking system has proven generally resilient, but
signs of stress are beginning to appear. The financial system must continue to deal with the
COVID-19 crisis, rising inflation, the collapse of crude oil prices in 2020 H1, a surge in
unemployment, and a protracted disruption in the supply of foreign exchange. Thus far, the CBN’s
policy initiatives and development-finance interventions have helped prevent a severe credit crunch
in the private sector
Fiscal Policy: Despite rising oil prices, Nigeria’s fiscal position is tenuous, highlighting the need to
sustain reforms
In 2020 reforms of the power sector, reduced gasoline subsidies, and higher VAT rates were
fundamental in expanding the government’s restricted short-term fiscal space. These measures,
combined with greater transparency, are expected to bolster revenues and enhance the allocative
efficiency of public spending. Mobilizing more revenue is vital for public services and social
programming, and over the longer term such funds can be used to counter the harm inflation does to
household welfare, expand the social safety net, increase the supply of health care, and accelerate
recovery of consumption by vulnerable households.
The continuing effects of the COVID-19 crisis on welfare and work
The share of people working in February 2021 is similar to the share in September 2020, which is
much higher than would be expected if working rates followed typical seasonal patterns. The higher
share of people working is concentrated among women and people from poorer households, which
suggests an “added worker effect,” in which additional household members increase their labor
supply in order to cope with economic shocks. Also, the commerce and service sectors have
expanded beyond what would be expected given previous seasonal patterns, especially for women.
Accompanying these labor market shifts, incomes for some households have increased since before
the crisis, although that is far from universal. Yet even if incomes are stabilizing, households are
feeling the impact of rising prices, which erodes their purchasing power and means that food
insecurity remains widespread.
Poverty and inflation in Nigeria
Inflation reached a 4-year high in March 2021, with food prices accounting for 63 percent of the
total rise in inflation in 2020. Even among poor agricultural households, most of the food that
households consume is purchased rather than produced at home, so inflated food prices are a major
threat to purchasing power and welfare. Food insecurity is more widespread than it was before the
COVID-19 crisis: in November 2020, in 56.1 percent of households, adults had skipped meals in
the previous 30 days. In the short run, expanding social protection to provide time-bound support
could alleviate the effects of inflation. In the medium and long run, however, it will be vital to
address the sources of inflation through a mix of monetary, exchange rate, fiscal, and trade policies
as well as effecting reforms to support job creation
 Igniting economic growth by reforming Nigeria’s power sector
Electricity not only fuels productivity, it is a vital catalyst in health, education, and other forms of
social development. According to the latest Tracking SDG7 report, 85 million Nigerians (43
percent of the population) have no access to electricity. Lack of reliable power stifles economic
activity; in Nigeria, annual economic losses from lack of reliable power are estimated at 5 to 7
percent of GDP—at a cost of US$25 billion). The transition to a largely privately owned sector did
not bring about the outcomes expected. Distribution companies (DISCOs) report inefficiencies
measured by aggregate technical, commercial and collection (ATC&C) losses at about 50 percent,
far above the 15 percent that is international good practice. The inefficiencies combined with the
irregularity in applying the tariff policy have led to a breakdown of the electricity payment chain.
The cumulative shortfalls in tariff collections for 2015–19 were estimated at N1,678 billion
(~US$6.0 billion). In 2019 the tariff shortfall rose to N524 billion (~US$1.7 billion), which was
more than the total Federal Government of Nigeria (FGN) health budget.16 It was also fiscally
unaffordable. The FGN has recognized that the severely underperforming power sector threatens
Nigeria’s recovery from the oil price shock and the COVID-19 crisis; in 2020 it began to take
critical action to help turn the sector around.
Options to raise revenues in a time of crisis
Nigeria is Africa’s biggest economy but has the lowest tax-GDP ratio on the continent of just 4
percent. Tax revenues are necessary to ensure essential services, provide security to citizens, help
tackle hunger and poverty, and deliver critical health and education services. The COVID related
economic lowdown coupled with the plunge in oil prices in 2020 brought into sharp focus the need
to increase non-oil revenue in a time of crisis when investment, jobs, and growth also need to
increase. This calls for policy and administrative measures that are carefully calibrated to grow
revenues without negatively impacting investment. This rules out any increases in traditional ad
valorem taxes like the value-added tax (VAT) but opens a window to fully implement the already
existing tax policies and reform tax administration to seal compliance gaps. There is potential for
harvesting revenue-yielding fruits such as increasing “sin taxes,” charging fees for electronic money
transfers, rationalizing tax expenditures, removing loopholes in tax laws, and improving tax
compliance by reinforcing revenue administration. Over the next three years, measures like these
could raise the tax-to-GDP ratio to about 7 percent, bringing in an additional N10 trillion. In the
longer term, fundamental reform of the tax system is needed to stimulate post-pandemic investment
and economic growth. As Nigeria tries to “build back better” after the COVID crisis, the approach
to revenue mobilization needs to be more strategic: not just taxing more, but taxing better; not just
how much to collect, but how to collect, what to collect, and from whom.

FRAGILE RECOVERY

In 2016, Nigeria experienced its first full-year of recession in 25 years. Global oil prices reached
a 13-year low and oil production was crushed by vandalism and militant attacks in the Niger Delta,
resulting in severe contraction of oil GDP. While the oil sector represents only 8.4 percent of GDP,
the lower foreign exchange earnings from oil exports had significant spillover effects on non-oil
sectors, especially industry and services, which are dependent on imports of inputs and raw
materials. Low oil revenues and the lack of major tax policy reforms to significantly increase non-
oil revenues led to large revenue shortfalls at all levels of government in 2016. After a sharp
depreciation of the exchange rate following the June 2016 liberalization of the Naira, the Central
Bank of Nigeria (CBN) maintained the interbank exchange rate at around N 305 per USD.

Economic growth is expected to recover slightly, to above 1 percent in 2017, driven mainly by the
restoration of oil production to normal levels (2.1 million barrels per day) due to the Government's
efforts to resolve the fragile Niger Delta situation, as well as higher oil prices and continued strong
growth in agriculture, Although the CBN intends to restrain the growth of narrow money in 2017,
in line with its monetary growth benchmarks, inflation expectations remain high in the short term.
In recognition of the deep weaknesses of the economy and the potential for further weakening,
the Federal Government has developed an Economic Recovery and Growth Plan (ERGP) for the
period 2017–2020.

The strategic objectives of the ERGP are to:

(a) restore growth;
(b) invest in human capital; and
(c) build a globally competitive economy.

The 12 strategic priorities for executing the Plan fall into five main categories:

a. Stabilizing the macroeconomic environment

i. Align monetary, trade and fiscal policies

ii. Accelerate non-oil revenue generation
iii. Drastically cut costs
iv. Privatize selected public enterprises/assets

b. Achieving agriculture and food security

v. Deliver on agricultural transformation

c. Ensuring energy sufficiency (power and petroleum products)

vi. Urgently increase oil production
vii. Expand power sector infrastructure
viii. Boost local refining for self-sufficiency
d. Improving transportation infrastructure
ix. Deliver targeted high priority transportation projects
x. Enable private sector financing of infrastructure
e. Driving industrialization, with a focus on small and medium-size enterprises
xi. Improve the ease of doing business
xii. Accelerate implementation of the National Industrial Revolution Plan.

The Nigeria Power Sector Recovery Program

The Ministry of Power, Works and Housing and the Ministry of Finance are committed to taking
urgent and decisive actions that are needed to put the power sector on a track of sustainable
development. The Federal Executive Council (FEC) of the Federal Government of Nigeria (FGN)
approved the Power Sector Recovery Program on March 22, 2017.
The objectives of the PSRP are to restore the sector's financial viability; to improve power supply
reliability to meet growing demand; to strengthen the sector's institutional framework and
increase transparency; to implement clear policies that promote and encourage investor
confidence in the sector; and to establish a contract-based electricity market.

Components of the Recovery Program

The plan outlines specific strategies for achieving the above objectives. These are presented under
the following components:
 Eliminate of cash deficits that have accumulated in the past through to December 2016,
including through the full disbursement of the Central Bank's Nigerian Electricity Market
Stabilization Facility (“NEMSF”)
 Implement an end user tariff trajectory that ensures cost reflective tariffs in the next 5
years
 Funded payment of future sector deficits
 Ensure DISCO performance and accountability, including through the enforcement of
commitments made in Performance Agreement signed with the Bureau of Public
Enterprises (BPE) and reflected in the tariffs at privatization
 Ensure grid stability by attaining effective and dependable generation and distribution of
at least 4,000MWin order to build confidence with consumers
 Ensure that accumulated MDAelectricity debts are paid and implement payment
mechanism for future bills, including through the introduction of a system where bills are
paid centrally on behalf of MDAs and deducted from their budgetary allocations
 Improve sector governance, including through the appointment of vacant boards in all the
sector institutions
 Increase electricity access by implementing off grid renewable solutions
 Develop and implement an FX policy for the power sector
 Make contracts effective where penalties are imposed on sector participants that fail to
fulfill their contractual obligations Implement a comprehensive communication strategy
that results in buy-in of all sector stakeholders and Nigerians into the PRSP
Risks to Economic Outlook
 In the absence of a foreign exchange regime that promotes a predictable inflow of foreign
exchange, Government's foreign reserves constitute the main source of foreign exchange
to the economy.
 The budget remains dependent on oil revenues; significant revenue shortfalls would
lower government capital spending as well as consumption.
 Incomplete implementation of the structural reforms outlined in the ERGP would affect
the ability of the Government to set the economy on the path of sustained and inclusive
growth over the medium to long term.
HUMAN CAPITAL- WORLD BANK

The Nigerian economy remains dependent on oil, despite its diminishing contribution to growth.
This makes Nigeria’s balance of payments and government budgets vulnerable to volatilities in oil
prices. Indeed, growth and investment in Nigeria have been negatively impacted by repeated oil-
price driven boom-bust cycles. The oil price shock of late 2014 and its aftermath pushed the
economy into recession and precipitated a major budgetary crisis at the national and state levels
which brought to light the longer-term trend of weak domestic revenue mobilization. Nigeria
therefore needs to take concrete steps to break its oil dependency in order to improve its economic
and social outcomes (World Bank Group, 2018)
Accordingly, the Nigerian economy emerged from recession, but the recovery remains slow and
fragile. Higher oil prices and stable output in the first half of 2018 contributed to a stronger fiscal
and external position. Foreign capital inflows which began to strengthen in 2017 have slowed in
2018. The federal government continues to rebalance its debt portfolio towards external borrowing.
Commercial banks remain risk-averse and credit to the private sector remains weak.
Nigeria’s growth began to lag behind the growth in comparator1 countries in 2015 when oil price
and production shocks hit the country. The agricultural sector’s real growth rate of 1.2 percent in
Q2 2018 was the lowest in recent history and the oil sector contracted by 4.0 percent in Q2 2018
after growing robustly from Q2 2017 up till Q1 2018
A relatively tight monetary stance kept the exchange rates stable and helped control inflation, which
reached a two-year low of 12.5 percent (yoy) in April.The headline inflation declined further to
11.1 percent in July 2018. However, with declining inflation, the CBN began to cut back on its
liquidity draining operations from March 2018. In August, inflation increased slightly to 11.2
percent, on account of increasing food inflation.
Given the clearly challenging economic backdrop, certain key policy reforms would be important to
support macroeconomic resilience for Nigeria. Amongst these are the following:
1. Acceleration of the economic diversification agenda
2.Upholding of a stronger counter-cyclical fiscal policy stance to guard against oil price shocks
3.Reform of the petrol subsidy regime to improve the fiscal space
4.Improvements in the domestic revenue (particularly non-oil) mobilization drive to reduce
volatilities in government revenues and expand fiscal space
5.Unification of all exchange rates in the economy.
Talking about human capital development in Nigeria. Studies show that between 10 and 30
percent of the differences in per capita income between countries can be attributed to human
capital. The economic burden of malaria alone in Nigeria, accounting for direct and indirect costs
excluding mortality, is estimated at 13.5 percent of GDP. However, in the quest for sustainable
growth, Nigeria, like many other countries, has underinvested in human capital. While physical
capital remains critical, it does not fully account for improvements in growth. The Government of
Nigeria acknowledges that bold actions are required to address years of underinvestment in human
capital. To bring attention to the alarming human capital outcomes in Nigeria and prioritize
financing for high-impact interventions, the Nigerian government has established a human capital
working group. The working group is made up of key agencies of the government at the national
and state level, the private sector, non-governmental actors, and development partners. On
October 3, 2018 the steering committee of the human capital working group held its inaugural
meeting.
The Government requested all stakeholders including community service organizations, the private
sector, traditional leaders and development partners to partner with them; calling for action in the
following areas required to unlock the potential of Nigeria’s people:
National dialogue: Foster a national dialogue to find country-led solutions to critical Human
Capital challenges including demography, stunting, and education.
State-led solutions: Empower States to identify and implement programs that will allow its citizens
to access the health, education, and other services required to live productive lives; while also
holding States accountable to deliver results at scale and provide program funding based on
performance.
Commit to equity: Enhance support to the poorest by disaggregating the human capital outcomes
thematically and by state; improving the national and state level statistics to fill in data gaps; and
identifying key drivers of the poor human capital outcomes.
Jumpstarting Inclusive Growth
According to the World Bank Group report, Nigeria continues its recovery from the 2016 recession,
sustaining an estimated 2 percent growth rate in 2019. The collapse of global oil prices during 2014–16,
combined with lower domestic oil production, led to a sudden slowdown in economic activity. Nigeria’s
annual real GDP growth rate, which averaged 7 percent from 2000 to 2014, fell to 2.7 percent in 2015 and to
-1.6 percent in 2016. Growth rebounded to 0.8 percent in 2017, 1.9 percent in 2018, and then plateaued at 2
percent in the first half of 2019, where it is expected to remain for the rest of the year. Nigeria’s recent
economic performance reflects a combination of slow growth in private consumption and private investment
combined with contracting net exports. Though positive, the growth of private consumption (accounting for
about 60 percent of GDP) remains constrained by high inflation (averaging 11 percent during H1 2019) and
stagnating real incomes. Services drove growth in the first half of 2019, supported by agriculture and
industry, the growth of services accelerated from 0.8 percent in H1 2018 to 2.2 percent in H1 2019, Rising
oil production accelerated the growth of the oil sector despite lower oil price (World Bank Group, 2019).
Economic Outlook
- Global growth projections have been revised down as policy uncertainty and an escalation of trade
tensions between major economies undermine global confidence, and therefore investment
- The growth outlook is stable, but population growth is expected to continue exceeding economic
growth, undermining Nigeria’s prospects for poverty reduction.
- The external balances will be sensitive to both external shocks and domestic policy decisions.
- Measures that increase the effectiveness of monetary policy would strengthen macroeconomic
management.
- Nigeria’s stock of public debt and the related interest payments are projected to rise.
Externally, geopolitical risks are contributing to an increasingly volatile environment, highlighting the need
to build fiscal and external buffers to mitigate shocks.
Risk Scenario
A moderate decline in oil prices could lead to a recession in Nigeria, Because; due to its dependence on oil,
the Nigerian economy is highly vulnerable to a drop in oil prices.
1. Impact of a temporary decline in oil price shock on growth: A direct hit on oil sector value-added could
subtract up to 0.5 pp from growth. Yet, the indirect (spillover) effects on external and fiscal balances
and the financial sector would be significant, similar to, if not worse, than what happened during the
2016 recession.
2. Impact on exports and reserves: The value of oil exports would fall, widening the current account
deficit and nibbling away at external reserves. Export earnings would decline by more than 25 percent
as less demand for Nigerian crude reduces the volume as well as the unit value of oil exports.
3. Impact on financial flows: The slippage in external reserves would put pressure on the nominal
exchange rate. External portfolio investors could become nervous enough to flee; cashing out their
holdings of short-term paper before a likely devaluation would slash external reserves below 2016
levels and intensify devaluation pressure.
4. Impact on public finances and inflation: Since the FGN deficit is already twice the size of Nigeria’s
revenues, the fall in fiscal revenues proportionate to the 25 percent fall in oil prices would virtually
eliminate space for infrastructure spending, with obvious long-term repercussions for growth.
5. Overall impact of the shock: Given the small size of the sector (10% GDP), the direct impact of oil
sector contraction would be relatively small, about 0.5 percentage points.
6. Recovery would be slow in the absence of structural reforms, even if the oil price rebounded by about
15 percent as the global economy recovers.
The articulation and bold implementation of structural reforms would boost the growth of the economy

Boosting Productivity to Accelerate Growth and Job Creation

- The Nigerian government aspires to enable 100 million people to escape poverty over the next
decade; achieving this ambitious goal will require bold reforms designed to boost economic
productivity. Nigeria’s growth and jobs challenges stem from its low levels of productivity.
Productivity reflects the relative efficiency and intensity with which inputs are used in the
production process.
- The returns to recent growth have been concentrated among wealthier households in urban areas and
have done little to reduce poverty
- Creating opportunities for Nigeria’s rapidly expanding labor force will require a new economic
model based on productivity growth.
- Without robust productivity growth, poverty in Nigeria will continue to rise, and living standards
will continue to deteriorate.
- The analysis highlights four priority areas for policy action, which is as follows;
- Promoting policy transparency and predictability will create the certainty necessary to make
effective long-term economic decisions, reduce investment risk, and promote sustainable growth
outside the extractive industries.
- Enhancing factor quality by investing in infrastructure, making land tenure more secure, improving
educational outcomes and building skills, and liberalizing the trade regime will facilitate the efficient
reallocation of factors and make Nigeria more cost-competitive.
- Reducing regulatory discretion will alleviate constraints on market entry and formalization, promote
competition, and sharpen incentives to improve productivity.
- Improving access to finance will help establish a competitive playing field that enables new firms to
compete with incumbents and allows more productive firms to scale up their operations
References

World Bank Report (2014). Nigeria Economic Report. Accessed: March, 2023

World Bank Group (2018) Investing in HUMAN CAPITAL for Nigeria’s future
Retrieved from: http://www.worldbank.org/en/country/nigeria Accessed: March, 2023.

World bank group (2019). Jumpstarting Inclusive Growth: Unlocking the Productive Potential of
Nigeria’s People and Resource Endowments. Retrieved from:
www.worldbank.org/en/country/Nigeria Accessed: March, 2023

World Bank Group (2019). Water supply, sanitation & hygiene—a wake-up call

World Bank Group (2020) Nigeria in Times of COVID-19: Laying Foundations for a Strong
Recovery. Nigeria Development Update

World Bank Group (2018). Investing in HUMAN CAPITAL for Nigeria’s future

World Bank Group (2013). Federal Republic of Nigeria Education and Skills Policy Notes: Policy Note 1:
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Nigeria Demographic Health Survey (NDHS), 2013