Nigeria Economic Outlook
- Robust growth of around 7% for the past decade is threatened by macroeconomic challenges, particularly exchange-rate volatility and falling global oil prices that impact public-sector spending.
- The main opposition party, the All Progressive’s Congress, has won the most competitive presidential elections in Nigeria’s history which were relatively peaceful in spite of the insurgency in the north east.
- Major rural-urban and regional tensions are due to varying natural-resource endowments, unequal access to political power, insufficient federal services and uneven shares of national wealth.
The economy has enjoyed sustained economic growth for a decade, with annual real GDP increasing by around 7%; it was 6.3% in 2014. The non-oil sector has been the main driver of growth, with services contributing about 57%, while manufacturing and agriculture, respectively contributed about 9% and 21%. The economy is thus diversifying and is becoming more services-oriented, in particular through retail and wholesale trade, real estate, information and communication.
The 2015 outlook is for moderate growth of 5%, due to vulnerability to slow global economic recovery, oil-price volatility and global financial developments. The low oil price will lead to a sharp decline in fiscal revenues. However, the overall impact on non-oil sector GDP will be relatively muted. The sector is, thus, expected to remain the main driver of growth over the medium term and, in the light of the recent macroeconomic challenges, the government has adopted an adjustment strategy that hinges on tightening government spending and shoring up non-oil revenues to compensate for dwindling oil revenues.
Addressing security issues remains a key challenge. Insurgency in the north-east and other parts of the country has negative implications for investment; it also may hamper the fight against poverty as well as increase crime. An increased number of both internally displaced persons and refugees in neighbouring Cameroon and Niger have created a grave humanitarian situation. However, the current regional coalition force against Boko Haram appears to be making headway in subduing the insurgency.
Overcoming geographical and socio-economic barriers is central to achieving inclusive growth and sustainable development. Addressing rural-urban differences to ensure more balanced development through job creation and societal transformation will be critical for Nigeria’s future. This will need to be done within all the six geopolitical zones, in addition to addressing inequalities across these zones. Though there have been several policy initiatives aimed at territorial development in Nigeria, limited success has been achieved in addressing the fundamental causes of unevenness. The problem often lies with a structure of governance that gives room for developmental policy implementation at the federal, state and local levels of governance but not at the regional level.