After a much-needed rebasing of the GPD matrices, Nigeria is officially sub-Saharan Africa’s largest economy. Despite this and the fact that the country enjoys one of the continent’s highest economic growth rates, the mean standard of living for its 167 million-strong population is still well below par for a nation like Nigeria.
To tackle this and related issues, the government has embarked on a vigorous transformation strategy with three pillars – fiscal consolidation, inclusive growth and job creation – that should, all going well, deliver a thriving emerging market that is globally competitive come 2020.
In April 2014, Nigeria recalculated the size and composition of its economy, leaping from $263bn to $510bn, according to figures released by the National Bureau of Statistics, overtaking South Africa to become the largest in sub-Saharan Africa.
The rebasing showed the changing shape of Nigeria, and how, over the past decade, the country has moved beyond its historic dependence on oil to grow across a broad range of sectors. The GDP per capita of the country moved from $1,555 to $2,689, a demonstration of how individual Nigerians have benefited from their country’s growth.
Underpinning the strong growth of the economy has been the country’s demographic growth – a population of 167 million people which is rapidly urbanising – assisted by sound macroeconomic policy making and a government-wide focus on attracting and nurturing the private sector.
Through direct interventions and the creation of an enabling environment for businesses, the government hopes to continue the diversification of the economy, create jobs and build the prosperity of the nation.
As President Goodluck Jonathan acknowledged in his New Year message in 2014, the challenges of a growing economy are many: “We are keenly aware that in spite of the estimated 1.6 million new jobs created across the country in the past 12 months as a result of our actions and policies, more jobs are still needed to support our growing population,” he said. “Our economic priorities will be stability and equitable growth, building on the diverse sectors of our economy.”
At a macroeconomic level, Nigeria is on sound footing. The appointment of the well-respected former World Bank managing director Ngozi Okonjo-Iweala as Coordinating Minister for the Economy and Minister of Finance gave many international investors comfort.
In her previous tenure as finance minister between 2004 and 2006, Okonjo-Iweala played a key role in securing debt relief from the Paris Club of creditors, which gave the country considerable fiscal space.
Following the 2014 rebasing, the budget deficit has reduced from 1.9% of GDP to 1.0%, and the external debt-to-GDP ratio has fallen from 5.2% to 2.8%. This, once again, gives the country more room to manoeuvre. The solid economic performance has given confidence to the capital markets. Nigeria’s $1 billion issue in July 2013 was four times oversubscribed, despite a global sell-off of emerging markets.
That $1 billion was earmarked for investments in the power sector. Infrastructure and, in particular, solving the longstanding power shortages that have slowed the growth in the economy. As well as directly investing in the sector, the government focused on privatisation, opening up a sector that was moribund and under capacity to a range of domestic and international bidders. The first 14 generating and distribution companies were handed over to their new owners this year, with a further 10 power plants are in the process of being sold.
The government has also worked to modernise another key area of the economy that had been neglected under previous administrations. The agriculture sector provides more jobs than any other in Nigeria, but had suffered from underinvestment and corruption. The agricultural transformation has created millions of jobs and massively reduced the amount of food that Nigeria needs to import every year.
Oil and gas, which have long been the lifeblood of the Nigerian economy, are also being mobilised to provide jobs and development for the country. The Gas Master Plan, spearheaded by the Ministry of Petroleum Resources, aims to revolutionise the power sector and catalyse industrialisation.
By encouraging and enabling the use of the country’s huge gas reserves for domestic use, investing in pipelines and industrial zones, the government wants to drive a new wave of job creation in the manufacturing industries.
The government also plans to use oil and gas resources to directly invest in social development. The creation of a sovereign wealth fund was signed into law in 2011, and the institution, the Nigeria Sovereign Investment Authority, was given seed funding of $1 billion. The fund is split into three. The Stabilisation Fund will be used to safeguard against unexpected shortfalls in the national budget resulting from oil price shocks; the Future Generations Fund will make long-term investments in order to maintain a pool of capital for future generations of Nigerians; and the Nigerian Infrastructure Fund will support development by investing in transport and power infrastructure.
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