In 2018, Nigeria received the highest amount of remittances ($25 Billion) among all Sub-Saharan countries. The total amount sent home crossed $625 billion. Nigeria has always dominated this market by a considerable margin yet other Sub-Saharan countries like Ghana and Kenya are catching up. It can be estimated that money transfer from USA to Nigeria was worth $6.2 billion in total.
With a $400 billion GDP and receiving a considerably large amount of money inflow, the nation is still struggling with issues on multiple fronts. Booming poverty level, overpopulation, political instability, and socio-economic problems have been haunting the nation. Even if the money transfer operators and banks try to mend things in the remittance department, the country is far from completely overcoming its economic problems. In this blog, we will go through some major obstacles pulling down the Nigerian economy.
1. Informal Economy Overshadows Formal Economy
Nigerian individuals and citizen groups cannot trust the government, their financial institutions, and above all, their commitment to serve the country. Even at the time when online banking and online bill payment are considered the easiest, the number of unbanked and under-banked Nigerians is still very high.
This may not be the only reason for Nigerians not signing up for bank accounts and maintaining them. But the incompetent government infrastructure cannot cater to the needs of the general population. This is why a significant portion of the population opts for cash transactions.
This analysis also puts light on another side of the story. This means that the total remittances actually received by Nigerian citizens are far more than just the formal estimation.
De-risking was introduced to curb money-laundering but in turn, it caused havoc in the partially formal, and mostly under-banked Nigerian communities. CBN did license a limited number of operators to continue their operation in Nigeria after the social backlash. However, the damage was already done, and it was more like a damage-control move.
Instead of strengthening and guiding the bank account holders, this drastic step severely affected Nigerians, especially those with the lowest income and severe economic problems.
2. Bad Economic Policies of the Government
If corruption was not enough, disastrous economic policies and public disagreements between the Finance minister and CBN governer fuel the problem. Delay in important regulations, especially in the case of oil prices, and putting political interests in front of the national economy has contributed to pushing the Nigerian economic down south.
Federal government setting absurd prices of basic necessities like fuel has distributive effects on the overall economy. Direct intervention in the Nigerian market is also a major cause of distress. Instead of deciding what an individual can or cannot buy or sell by altering the value of goods and services, the government needs to ensure that it facilitates a healthy competition in the commercial market.
3. Induced Economic Problems
Because of the government’s lack of emphasis on allocating significant budget for education and health, 24% Nigerians are unemployed. This number worsens if we consider only Nigerian youth.
Unchecked corruption in education and health sector is pulling back the development agenda.
A majority of students coming out of Nigerian universities have, more or less, educational degrees in their hands but have very less to no professional skills.
Lack of medicines, inexperienced doctors and inadequate health facilities further leads to more economic problems faced by the poor.
The poor condition of oil fields in the Niger delta directly affects the inhabitants. Oil spillage affects the water, soil, and finally the health and economy of Nigerian agriculture. This has even led to a strong rebellion in the South. Insurgency is a major concern for the nation, and its root cause is the inability to satisfy the needs of the natives.
And when we consider its overall impact on the nation, the situation worsens.
4. Lack of Basic Amenities
Without sufficient electricity supply, and the electric department unequipped with the required skills, impacts foreign investment as well. Constant power failures, inability to nourish talent and to satisfy the natives as well as present and potential investors could be a deciding factor in worsening Nigerian economic problems. But a decisive government with sound decisions can change the tides.
Businesses and investors from across the globe vision Nigeria as a future economic giant because of the huge natural and human resources available at its disposal. It is the responsibility of the Federal Government of Nigeria to take well-calculated steps hereon. So, it would be interesting to see how Buhari’s government performs. Promises have been made by the head-of-the-state but would he be able to solve the economic problems of Nigeria? We will see in the upcoming days.