Macroeconomic and Developmental Indicators
Nigeria has the largest population in the ECOWAS region, with nearly 200 million inhabitants in 2019 (more than two-thirds of the region’s population), growing at 2.6% per annum. Despite the country’s demographic dividend and huge economic potential, social conditions have barely improved over the past decade.
GDP per capita stood at USD 5,286 (PPP) declining by 6.8% from 2014. The Human Development Index (HDI) which measures the average progress in key dimensions of human development (health, education, and income) puts the country in the low human development category (ranking 158 out of 188 countries). With population growth exceeding economic growth, it is expected that GDP per capita will continue to decline in the medium-term. Poverty levels are also elevated, with almost half of the population (53.5%) estimated to live below $1.90 a day. According to the National Bureau of Statistics, the unemployment rate increased from 16.5% in 2017 to 23.1% in 2018, with the labor force growing at around 4.5% over the same period.
Nigeria is the region’s biggest economy accounting for almost two-thirds of regional GDP. In 2019, its economy strengthened to an estimated growth rate of 2.3%, up from 1.9% in 2018. The growth upturn is on the back of the strong performance of the service and industry sectors. The upsurge in mining activities was largely boosted by a rebound in commodity prices while the service sector was driven by construction and ICT. Inflation The medium-term growth outlook is positive; as economic growth is projected to increase by 2.5% in 2019. The pace of growth is highly dependent on the favorable outlook of oil prices, agriculture and oil production, and the implementation of reforms under the Economic Recovery and Growth Plan
The overall fiscal position worsened, increasing from 4.5% of GDP in 2018 to 5.0% of GDP in 2019. The deterioration was on account of expenditure overruns and delay in the implementation of the budget. Public debt remained relatively low at 29.8% of GDP in 2019, but it has been gradually increasing over time as the fiscal space tightened. Also, interest payments-to-revenue ratio is at unstainable levels, registering almost 60% in 2018 and projected to increase to 63.0% in 2019. The external sector worsened slightly despite strong export performance in 2019. The current account widened from a surplus of 1.3% of GDP in 2018 to a deficit of 0.2% of GDP in 2019. The downtrend was largely explained by the worsening of the trade account.
The financial sector remained stable but the pocket of vulnerabilities is still persistent. Banks’ prudential ratios are improving, but a number of undercapitalized banks continue to pose a serious threat to the sustainability of the banking system. Solvency, liquidity and profitability ratios are stable, but Non-Performing Loans (NPLs) are relatively high at 11.7% at end-2018. In some sectors including oil and gas, transportation and power, NPLs averaged between 3 to 30% of total loans.
The investment climate is relatively stable albeit with significant institutional and structural constraints. According to the World Bank Doing Business Survey 2020, Nigeria is ranked 131 out of 190 countries, up from 10 places compared to 2017. According to the report, access to finance is one of the major obstacles to business in Nigeria, with Small and Medium-Enterprises the worst affected. Credit to the private sector has been largely affected by the historical oil price shock coupled with high-risk aversion due to high NPLs and liquidity tightening. In fact, Foreign direct investment (FDI) inflows remained low throughout 2018 (at 0.5 percent of GDP), despite the government’s efforts to improve the business environment and attract long term investments
Nigeria is yet to meet the West African Monetary Zone (WAMZ) convergence criteria. In 2019, only two primary criteria (out of four) were met, though respecting the two secondary criteria on exchange rate variation of +/- 10% and a public debt ratio of less than 70%.