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What are the Causes of Nigerian Economic Problems?

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…

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.

Read: 5 Ways Buhari killed Nigeria’s economy

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.

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Buhari Wins – Nigerian General Elections 2019 Results – What’s Next?

Nigerian General Elections 2019 Results were announced by the Election commission of Nigeria on Wednesday, February 27, 2019, stating All Progressives Congress (APC) candidate – Muhammadu Buhari – has been…

Nigerian General Elections 2019 Results were announced by the Election commission of Nigeria on Wednesday, February 27, 2019, stating All Progressives Congress (APC) candidate – Muhammadu Buhari – has been reelected as the president of Republic of Nigeria. Defeating Atiku Abubakar of People’s Democratic Party (PDP), Buhari took the crown in 19 states out of 37 with a vote difference of 3,928,869 votes. Other smaller parties like Africa Action Congress (AAC) put up a good fight in selected regions like Lagos where it secured 8,910 votes. Meanwhile, the Young Progressive Party (YPP) and Alliance for New Nigeria (ANN) collectively gathered 38,665 votes.

Check Nigerian General Elections 2019 Results here

Nigerian citizens count on Buhari for taking strict actions against corruption as well before the election campaigning, he has been portraying himself as an anti-corruption crusader. However, the opposition had several questions for him. The presidential tenure that follows would be more challenging as many of Buhari’s own cabinet ministers and high-level officials have been charged for the same. At the same time, the public has been viewing these convictions as a positive sign of war against corruption.

Nigerian Serving Senator Charged for Corruption

Economic Challenges for the Government

Nigerian economy was negatively impacted in 2016 and since then, there has been a nominal growth in the overall economy. Meanwhile, the World Bank Organization is estimating GDP growth of merely 2.2% in the year 2019. At this rate, it would be extremely challenging for the Nigerian economy to roll repeat 2014 when it had crossed $550 billion.

nigeria-general-elections-2019-results-nigeria-gdp
Figure: Nigerian GDP (2012 – 2022)

According to Statista report, Nigeria will not be able to achieve that feat before 2021 but if things go as expected, before the next general elections in 2023, the biggest African economy – Nigeria – would cross the $650 billion mark.

Although GDP consists of multiple parameters, an immediate action strategy is expected, moreover, mandatory for the elected government in the following sectors.

Poverty and Illiteracy

The huge divide between urban and countryside Nigeria, when it comes to electricity and power, is enormous. National Bureau of Statistics (NBS) report states that even though 4 out of every 5 homes in cities and urban areas have electricity but out of the total rural families (which constitutes 64% of the total population of Nigeria), 2 out of every 3 do not.

Nigeria – Second Worst Country in Electricity Supply

Overtaking India, Nigeria has become the country with the largest population living under extreme poverty. According to a report in July 2018 by the World Poverty Clock, 86.9 million people have been affected by the curse of poverty and some major reasons include corruption and overpopulation in the country. It can hereby be concluded that the first Sustainable Development Goal (SDG) prepared by the United Nations, aiming to end poverty by 2030 seems too far-fetched, especially for African Nations including Nigeria and the Democratic Republic of Congo which is expected to be the next to follow the suite and replace India to take 2nd position in the ranking.

Figure: Poverty estimation for Nigeria, Republic of Congo and India

More than 70 million Nigerian citizens including 11 million out-of-school children, and 60 million youth and adults, are illiterate. Furthermore, orthodox systems and communal obligations apart from lack of government’s ability to implement the policies, is simply worsening the problem even further.

For a booming Nigerian population (increasing at 2.6% annual rate), fulfillment of fundamental requirements including food, shelter, and education is imperative. However, the worsening numbers is an indication for the upcoming Buhari’s governance to pay special heed.

Oil, Agriculture, and Remittances

The largest oil-producing country in Africa and the 6th largest oil producer in the world, the oil-driven economy of Nigeria needs to diversify.

Agriculture-sector needs special attention because the fertile land of Nigeria and the agriculture produce, due to lack of Agro-technology, are not able to feed the mouths. Once a leading food exporter, Nigeria today imports food from other countries. This points towards the negligence of duty by the Nigerian officials and policymakers who instead of extensively investing in oil should have been improving the agriculture sector as well.

At the same time, remittance inflow is playing a decisive role in keeping the economy afloat which is why it becomes essential for the Buhari government to promote international transactions and mobile payments. Those who want to send money to Nigeria online need easier and economically feasible platforms and the government must take encouraging steps for the money transfer services, businesses and investors to develop these services. Needless to say, there are plenty of other sectors that need more importance but ignoring the remittance industry would be a huge blunder for Muhammadu Buhari’s government.

Tensions and Violence

Nigerian general elections 2019 results came along with the announcement of the winner but there were more than 39 casualties and hundreds of arrests which is although less than the 2015 general elections (when almost 60 people died in 61 reported election-related violence), the country has a long way to go before conducting, what in a democratic nation is termed as, fair and safe elections. It would be expected from Buhari to keep aside the results, as he portrays himself as a law-abiding and honest person, and ensure that the hard-earned democracy is kept alive and prosperous.

As promised, Buhari has had a huge impact on the Islamic extremists, Boko Haram, in the North which is one of the biggest reasons for Nigerian voters vouching for him and giving an overwhelming mandate to APC in the 2019 general election.

Figure: Nigerians protesting against Boko Haram

However, the problem of southern insurgency still remains. This makes Nigerian economic diversification even more important as the insurgents since the 1990s simply do not want to be exploited. Buhari has promised to resolve the Niger Delta conflict soon, however, there is no definite timeframe decided. The unrest among minority ethnic groups led to a significant vote-share shift towards PDP in the recent elections. After the elections, we will keep an eye on how Buhari balances the oil crisis and the southern conflict.

While taking strict action to curb insurgency and corruption, Buhari may be continuously alleged for usurping both judicial and legislative power. His past record of using military rather than diplomatic or democratic steps have been put under question but also suppressed by power. This is not a very good sign for the future of the Republic of Nigeria, however, with the entire world tending to shift towards a more strong and decisive right-aligned governments, Buhari seems to be the best choice available and his steps in the next 4 years will decide what will be seen and experienced by the Nigerian generations that follow.

At FAZRemit, we hope that “Unity and Faith, Peace and Progress” prosper in the Giant of Africa.

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