In this report, The ICIR’s EHIME ALEX examines the performance of the Nigerian economy in 2023 and highlights the impacts of government policies on households and businesses.

UNTIL early this year, Omotayo Jimoh, a food seller, was doing well in her business before the cash crunch hit her operation and crashed the business she had nurtured for about 17 years. 

Omotayo had relocated her business from the Jibowo-Fadeyi area in Lagos State some 14 years ago to acquire a shop at Opic Road, Mowe, in Ogun State, where she operated a “mama put” restaurant.

Her ordeal started when the Central Bank of Nigeria (CBN) introduced the naira redesign policy that birthed the new N200, N500 and N1,000 notes to phase out the old banknotes.

Among other issues, the policy created a scarcity of banknotes in circulation to the extent that Nigerians could not withdraw cash at will as banks rationed limited notes released daily from their headquarters under strict CBN directives.

The situation was so pathetic that Nigerians were sleeping at ATMs in banks in their bid to get cash to meet basic daily needs. Others who could not endure the pains of queueing for days in the bank agreed to part with almost 30 per cent of what they got from PoS operators.

At the time, Omotayo, whose business required cash daily to transact her food business, was cash-strapped. Regrettably, she had to stop the business, where she was making over N2.4 million in monthly sales.

“We had up to 10 companies we supply food to for their lunch, and we were making sales of not less than N35,000 a day when we supplied food to them,” Omotayo, a Banking and Finance graduate, narrated her ordeal to The ICIR.

She said she supplied the food to the companies three times weekly and made sales of over N105,000.

“Before January, I used to make sales of between N70,000 to N80,000 daily. But if I supplied companies purchasing from me, it would be above N100,000,” said Omotayo, a mother of three, who used what she realised from her business to support the salary of her husband, who works as a civil servant. 

As pathetic as Omotayo’s story is, the removal of fuel subsidy and unification of exchange rates have further strained businesses, even as the naira scarcity has resurfaced lately.

So, to assess the impact of government policies on households and businesses, The ICIR looks at critical macroeconomic indicators that speak to how the Nigerian economy fared in 2023.

Economic growth 

Commonly used to measure the increase in the aggregate market value of additional goods and services produced, using estimates such as the gross domestic product (GDP), Nigeria’s economic growth declined in the review year.

Data from the National Bureau of Statistics (NBS) shows that GDP, which was at 3.52 per cent in Q4 2022, fell to 2.31 per cent in Q1, 2.51 per cent in Q2 and 2.54 per cent in Q3 of 2023.

In nominal terms, the GDP, which was at N56.76 trillion in Q4 2022, dropped to N51.24 trillion in Q1 and rose to N52.103 trillion in Q2 before jumping to N60.66 trillion in Q3 of 2023, while in real terms, the GDP at N21.04 trillion in Q4 2022, declined to N17.75 trillion in Q1, N17.72 trillion in Q2 and rose to N19.44 trillion in Q3 of 2023.

Real terms, which consider changes in the price level over time, contrary to nominal terms, which do not, are a far more accurate measurement of value.

Price stability 

This relates to inflation, the rate at which the overall prices for goods and services change over time. More precisely, it means a low, stable and predictable inflation rate.

Nigeria’s inflation rate surged for 11 consecutive months to 28.2 per cent as of November this year from 21.34 per cent in December 2022.

During the year in review, the basket of goods and services consumed by the average Nigerian, known as food inflation, consistently outpaced the headline and core inflation. It throttled to 32.84 per cent in November 2023 from 23.75 per cent in December 2022.

The November inflationary situation is the worst in recent history, making it the highest rate recorded in almost two decades since August 2005.

Unemployment 

Considered a vital measure of the economy’s health, the NBS puts Nigeria’s latest unemployment rate at 4.1 per cent as of Q1 2023 after modifying its methodology. Some experts had argued that the pace did not reflect the actual position of unemployment in the country.

The latest NBS report means that about 8.2 million Nigerians are unemployed, based on an estimated population of 200 million.

But NBS’ Nigeria Labour Force Survey Q4 2022 indicates that 5.3 per cent of the population, equivalent to 10.6 million Nigerians, were unemployed.

In Q4 2020, the statistics office disclosed that 33.3 per cent of Nigeria’s population was unemployed, revealing that one in three Nigerians was unemployed.

As of 2022, about 133 million Nigerians were multi-dimensionally poor. Experts have urged the Federal Government to work with this figure instead of the latest unemployment rate, which they believe would not be helpful for fiscal and monetary planning.

Foreign Exchange Market 

Some foreign exchange challenges Nigeria faces include sharp currency depreciation, illiquidity, volatility, and transparency, as the recent policy settings are stifling business activities, investment and growth and amplifying macroeconomic risks.

The country’s foreign exchange rate, which was at N461.50/$1 at the official rate and N737/$1 at the black market rate at the beginning of the year, has worsened to N888.35/$1 and N1,230/$1 respectively, as of December 18, 2023.

Balance of payment position 

The balance of payment statistics, in which the apex bank is the sole producer, shows Nigeria’s statement of account as regards its inflow and outflow of goods, services, and assets.

In its Q1 2023 Economic Report, the most recent disclosure, CBN revealed that the uncertainties of the 2023 general elections exerted pressure on the external sector as the overall balance of payments deficit widened.

The report shows that Nigeria’s current account posted a surplus of $2.49 billion; a capital reversal of $0.78 billion was recorded in Q1 2023, in contrast to an inflow of $1.94 billion in Q4 2022. Also, aggregate financial assets recorded a disposal of $1.30 billion compared to an acquisition of $1.09 billion in Q4 2022.

The international reserves at $35.14 billion were equivalent to 6.68 months of import for goods and services or 9.01 months for goods only.

The international investment position recorded a net financial liability of $76.62 billion, and public sector external debt stock and external debt service payment at the end of December 2022 stood at $41.69 billion and US$0.80 billion, respectively.

Nigeria’s economy weighed below projections

Nigeria’s economic growth weighs below the 2.9 per cent World Bank Group’s forecast for 2023.

The Britton Wood Institution had in its Global Economic Prospects predicted 3.3 per cent growth, but citing currency pressure, insecurity, and other challenges in its Africa Pulse report, a regional macroeconomic outlook revised Nigeria’s economic growth to 2.9 per cent.

Nigeria’s economic growth also falls below the earlier projection of 3.03 per cent by the CBN, 3.75 per cent by the Federal Government and 3.29 per cent by the International Monetary Fund (IMF).

Wrong policy mix

No doubt, households and businesses have gone through rounds of shocks inflicted by the naira redesign policy, fuel subsidy removal and exchange rate unification reforms.

“There was no compelling argument to undertake the naira redesign in the first place,” an economist, Muda Yusuf, said.

On exchange rate unification, Yusuf noted it would boost inflows from foreign direct investment (FDI), foreign portfolio investment (FPI), export proceeds and diaspora remittances.

However, the government should have avoided a complete floatation of the naira to guide against currency volatility amid intense speculative pressures.

“I must also acknowledge that the reform has its downsides, especially the further depreciation of the currency, which is expected to be temporary,” Yusuf said at a retreat organised by the Labour Writers Association.

A professor of economics, Segun Ajibola, pointed out that the avalanche of problems confronting the Nigerian economy arose from global and domestic challenges.

“There have been many policy issues, policy inconsistencies, environmental issues over the years. I am not sure any of them (economic indicators) were at a state of comfort as of May this year,” he said.

Nigeria’s macroeconomic faces instability, shrinking fiscal space, soaring public debt, heightening inflationary pressures, currency depreciation, foreign exchange illiquidity, surging energy cost, weakening purchasing power, legacy structural constraints, lingering insecurity, and crippling trade facilitation issues which the new administration of President Tinubu should tackle in the coming year.