Nigeria’s economy is ranked the largest in the continent of Africa with emerging markets in different sectors including technology, communication, financial, and entertainment. However, this does not reflect in the standard of living of its citizens due to various economic problems it is facing.

Nigeria’s economy grows at an average of 2% while the population grows at an average of 3%, showing the alarming rate of poverty, unemployment, and variation in the socio-economic status of Nigeria’s population. The economic problem facing Nigeria is numerous. This article focuses on some of the problems of Nigeria economic.

Inflation and debt

In Nigeria, high levels of government debt have contributed to persistent inflation, which has eroded the purchasing power of the country’s citizens. Government debt also impacts interest rates, which is the cost of borrowing money when a government issues bonds; it competes with other borrowers for the available and can drive up interest rates. High-interest rates can discourage investment, as it increases the cost of borrowing, which again slows down the economy.

Additionally, high-level of government debt has contributed to high-interest rates. This has made borrowing more expensive for large businesses in general, households and micro, small, and medium enterprises (MSME). In particular, government debt can also affect exchange rates. When debt rises it can make imports more expensive, which can lead to higher inflation.

To be sure, high levels of government debt have contributed to depreciation in the value of the country’s currency, which has led to higher import prices and input price inflation. Thus, the relationship between government debt and economic growth is complex.

On the other hand, high levels of government debt crowd out private investment, which slows down economic growth.

Inadequate power supply

Businesses and manufacturing enterprises in Nigeria experience power outages on a regular basis. As a result, firms lose sales’ revenues. In the informal sector, where backup generators are limited, losses can be higher than profit margins. These losses have severe consequences for the health and growth of the wider economy, not to mention the dramatic impact in achieving other development objectives outlined by these sustainable development goals (SDGs). Owners of small businesses in Nigeria seem to have adapted to the poor and epileptic power supply in the other country as they have resorted to alternative form of getting electricity to power their businesses, slowing down growth in the entire economy.

Inconsistent economic policies

For some years now, Nigerian industrial policy has been dangerously inconsistent, and investors, economics, and consumers have been the helpless victims. Nigeria has never been short of industrial policy. After independence, the then-Nigerian government came up with the Import Substitution Policy, to reduce over-dependence on imports, creating a high number of local jobs, and saving foreign exchange. This was seen as a fantastic policy targeted at transforming the country from an agrarian to an industrial economy. Without bias, economic historians aver that the British colonialists merely paid attention to agriculture, which supplied them with essential raw materials needed in the overseas factories. On the flip side, this launched Nigeria into the global market as a strong agro nation. As of 1960, Nigeria was the world’s biggest producer of palm oil, accounting for 45 percent of global output. The country was also a major exporter of cocoa and rubber to the rest of the world.

However, the import substitution policy crashed because early policymakers, like the current ones, believed that protectionism was a cure-all for the country’s fledging economy. In essence, the major reason for policy inconsistencies in Nigeria is that they are not usually well thought out. Tomatoes policy, for example, failed to factor in challenges around tomato quantity and market change that will result in sudden price changes.

Countries use data and science to drive their industrial policy trajectories. Nigeria sometimes uses the same metrics, but the difference is that Nigerians are often tainted with politics, which involves syndrome, ethnicity, regional, and other primordial considerations. This cannot guarantee industrial success.

Poor human capital development

Over the years, Nigeria has not given much attention to human capital development to post impressive growth rates. Human capital allows an economy to grow when human capital increases in areas such as education, science, and management. It leads to increases in innovation, social well-being, equality, increased productivity, and improved rates of participation, all of which contribute to economic growth. According to the United Nations Development Programme (UNDP), human capital is an active factor that drives economic growth in every nation. Nigeria’s poor investments in human capital development could be linked to her poor growth rates. Human capital refers to the abilities and skills of human resources of a country. Why human capital development refers to the process of acquiring and increasing the nonmember who have the human education, and experiences that are critical for the human economic growth and development of a country. Human development index (HDI) is the generally agreed suitable to measure human capital development because it captured the level of education, the standard of living and the health of humans in a country.

Human capital development is crucial to economic growth because humans can think, analyze and solve problems to achieve a more effective society to yield the desired growth rate and development. The ability of a country to seize the competitive advantage that technology offers depends on human capital development.

Nigeria’s investment in human capital development is unimpressive. The Nigerian education sector has received poor budgetary allocation to run the education system.

The nature of the Nigerian market

Consumer products: Nigeria is an increasingly important market and manufacturing center for the African consuming production sector. Nigeria is currently home to the o middle le class, estimated to be just below 15 million people. However, rising inflation is affecting the growth of this band. Major challenges to companies in the consumer product sector in Nigeria include protectionist policies, substandard intellectual property rights, protection, and foreign exchange limitations making imported products or input uncompetitive in price.

Over-dependence on crude oil

Crude oil is one of the major natural resources Nigeria depends on for the bulk of it’s revenue. Lately, there has been a decline in the expected revenue in Nigeria owing to the fall in the price of crude oil.

About four decades ago, when crude oil was booming in Nigeria, a high number of people from the remote part of Nigeria where major agricultural activities were carried out migrated to the cities. This migration badly affected the countries’ agricultural production.

Export produce kept decreasing and Nigeria was pushed into importing basic food commodities like rice, cassava etc, which can be grown locally. This would have worked if the revenue generated from crude oil was increasing. However, there has been a dip in oil prices, hence affecting Nigeria economic growth.

Crime and terrorism

Crime and terrorism have a negative influence on the economy of any country. Nigeria has struggled with the problem of insecurity especially in the northern part of the country knows for massive agricultural production and natural resources reserves. Also, there have been various violent attacks in the oil producing states.

Furthermore, the disturbing state of security also restrict people’ movement, cause a lot of uproars, and makes investors lose confidence in the country. All of these issues have done a lot of havoc on Nigeria’s economy.

High rate of unemployment

The issues of unemployment and economic growth are like the two sides of a coin. The high rate of unemployment causes poor economic growth since there won’t be a large workforce available with different skills.

A report from the National Bureau of statistics (NBS) in 2019 shows that the rate of unemployment in Nigeria is 23.1% which increased to about 38% in 2021. This causes a decline in economic activities which in turn leads to crime in society.

Conclusion

Nigeria is facing many economic challenges, some of which are highlighted above. However, these problems can be solved with good governance and by taking one right step at a time.

Orode Happy is a student of the Department of English and Literary Studies, Delta State University, Abraka