General News
Nigeria’s Gradual Road to Economic Recovery
By Lukman Otunuga, Senior Research Analyst at FXTM
Africa’s largest economy has displayed resilience over the past few months.
From defending against the Covid-19 menace to battling untamed inflation and shouldering domestic risks. Initially, the economic outlook was bleak during 2020 after the economy sunk back into its second recession in less than five years. Lockdown restrictions caused significant disruptions in the value chain, halted most aspects of the economy while crippling the manufacturing sector. A growing sense of alarm and unease over surging coronavirus cases added to the uncertainty, ultimately fanning fears around Nigeria experiencing a prolonged economic recession.
However, the economic expansion of 0.11% in Q4 2020 came as a breath of fresh air and offered some light at the end of the tunnel. Although the economy contracted 1.92% for the full year, the rebound during the final quarter raised hopes that Africa’s largest economy was exiting from the Covid-19 induced recession.
World Bank projects Nigeria to expand 1.1% in 2021
According to World Bank, economic growth is expected to expand by 1.1% this year while Bloomberg forecasts GDP to contract by 1.5% in Q1 2021. Nigeria certainly has the potential to exceed these growth estimates due to rising oil prices and improving global economic conditions. It must be kept in mind that earnings from oil exports account for over half of government revenues and about 90% of foreign-exchange earnings. As oil prices appreciate, this provides the government with ammunition to attack domestic risks threatening the country’s fragile economic outlook. In regards to other key metrics, inflation is seen averaging around 14% while the Central Bank of Nigeria (CBN) is forecast to hike interest rates at least once this year as economic conditions improve.
No love for the Naira
The past few months have certainly not been kind to the local currency. It has weakened considerably on the black-market exchange, trading around 482N per Dollar compared to the 380N official rate. An unappetizing combination of depressed oil prices, dollar shortages, and rising inflationary pressures exposed the emerging market currency to downside risks.
Devaluation third time lucky?
Unfavourable domestic conditions forced the Central Bank of Nigeria (CBN) to devalue the Naira twice in 2020 with CBN governor Godwin Emefiele recently confirming another devaluation to N410 against the dollar. Indeed, a weaker rate would boost government revenue from oil exports – a welcome development for the energy producer. If the Naira weakens, this could bolster revenues from crude, which is sold in Dollar but converted to Naira.
It does not end here. Nigeria’s economic prospects could brighten if the devaluation opens doors to fresh discussions with the World Bank regarding a $1.5 billion loan. Confusion around Nigeria’s multiple exchange rates has hindered investor attraction with major institutions requesting currency reforms to rekindled investment.
Inflation remains a cause for concern
But a weaker Naira may lead to untamed inflation…
Inflationary pressures have punished consumers and threatened the country’s fragile recovery. In January, consumer prices jumped to 16.47% more than double the target of 7.5% thanks to supply disruptions, dollar restrictions, and removal of oil subsidies.
Nigeria is dealing with a cost-push inflation scenario where overall prices have increased due to the rising cost of production and raw materials. The government could pursue deflationary fiscal policy or monetary authorities could increase rates, but this may do more damage than good.
Diversification & oil reliance
It is widely known that diversification has the potential to cure Nigeria’s dependence on oil. However, the country’s economic outlook remains heavily influenced by the commodity’s performance. The good news is that oil prices have appreciated over 25% since the start of 2021 thanks to OPEC+ cuts, optimism over US stimulus, and robust demand from China. But the bad news is that West Africa’s biggest oil producer has seen its shipments fall in recent months thanks to infrastructure issues with production falling to 1.50 mbpd according to data from Bloomberg.
OPEC+ meeting in focus
The OPEC+ meeting in March may indirectly impact Nigeria’s economic outlook.
While Saudi is publicly urging fellow members to be extremely cautious despite prices rebounding to pre-pandemic levels, Moscow on the other hand is indicating that it still wants to proceed with a supply increase. Another question is whether Saudi Arabia will continue its voluntary production cuts of 1 million barrels per day. Market expectations are rising over OPEC+ easing supply curbs after April thanks to rising oil prices. But given the nature of OPEC+ and the outcome of previous meetings – anything could be on the table.
Even if oil prices appreciate following the OPEC meeting, gasoline prices will remain unchanged in March indicating that the costly fuel subsidies are back. With inflation at a 12-year high, rising fuel costs could pour fuel into the fire – leading to further uncertainty.
CBN rate hike in 2021?
The million-dollar question is not “if” but “when” the CBN will hike interest rates.
Globally, fiscal policy has been labelled as a more effective weapon against covid-19. However, a large share of Nigeria’s revenues is spent on repaying debts. This has left little room for critical social and infrastructure spending to shield the economy from the negative impacts of Covid-19.
Monetary policymakers remain in a tricky spot after the Covid-19 menace spread its poisonous tentacles across the economy. The pandemic resulted in lockdowns, reduced activity, a weakened Naira, and stagflation. While a rate hike will increase the cost of borrowing, effectively reducing inflation – this may result in a bigger fall in GDP. However, the options are limited within the monetary policy toolbox with unconventional tools such as loan to deposit ratio, liquidity ratio, and cash reserve ratio in focus.
Nigeria has plans to launch a $40 million fund to support early-stage tech startups, aiming to strengthen the country’s entrepreneurial ecosystem and reduce young companies’ reliance on private investors.
The fund will be equally financed by the Japan International Cooperation Agency (JICA) and the Nigeria Sovereign Investment Authority (NSIA), which manages the national sovereign wealth fund.
Kashifu Inuwa Abdullahi, director general, National Information Technology Development Agency (NITDA), confirmed the final agreement would be signed within the next month.
The initiative is part of Nigeria’s Startup Act, adopted in October 2022, which aims to create a favorable environment for startups through tax incentives and financial support.
The act established a 10 billion naira (approximately $8.6 million) annual fund to finance certified startups through seed funding, grants, or loans.
According to Disrupt Africa, Nigeria’s startup ecosystem attracted over $2 billion in investments between January 2015 and August 2022, positioning the country as Africa’s leader.
Companies like Flutterwave, Andela, and Opay achieved multi-billion-dollar valuations.
, fundraising dropped to $224 million in 2023, down from $531 million in 2022 and over $1 billion in 2021.
This decline highlights the need for government intervention to revitalize the tech ecosystem amid investor caution.
The new fund marks a significant step for Nigeria, which aims to foster local innovation.
Currently, 12,948 companies are registered as startups, benefiting from a three-year tax exemption. Low awareness of the law’s benefits has prompted the government to plan a nationwide information campaign.
By facilitating access to funding, the initiative could strengthen support for existing startups and stimulate new tech ventures, reinforcing Nigeria’s position as a leading hub for digital innovation in Africa.
Eight countries – six of them in Africa, including Nigeria, Kenya and Lesotho – could soon run out of HIV drugs following the US government’s recent decision to pause foreign aid, the World Health Organization (WHO) has said.
US President Donald Trump announced the freeze on his first day in office in January as part of a review into government spending.
“Disruptions to HIV programmes could undo 20 years of progress,” Tedros Adhanom Ghebreyesus, WHO chief warned.
It could also lead to more than 10 million additional cases of HIV and three million HIV-related deaths, he added, noting this was “more than triple the number of deaths last year”.
Nigeria, Kenya, Lesotho, South Sudan, Burkina Faso and Mali – as well as Haiti and Ukraine – would run out of live-saving anti-retroviral (ARV) medicines in the coming months, Dr Tedros said at a press conference on Monday.
Trump’s executive order paused foreign aid support for an initial duration of 90 days in line with his “America First” foreign policy.
It has affected health programmes around the world, leaving shipments of critical medical supplies, including HIV drugs, greatly hampered.
The majority of the US Agency for International Development’s (USAID) programmes have since been terminated.
Despite a waiver issued in February for the US’s ground-breaking HIV programme, its work has severely impacted.
Known as the US President’s Emergency Plan for Aids Relief (Pepfar), it relies on logistical support from USAID and other organisations hit by the turmoil.
It has led to the “immediate stop to services for HIV treatment, testing and prevention in more than 50 countries”, Dr Tedros said.
Launched in 2003, Pepfar has enabled some of the world’s poorest people to access anti and has been credited with saving more than 26 million lives worldwide.
During his first days in office, Trump also announced that the US would pull out of the WHO, affecting funding for the global health agency.
“The US administration has been extremely generous over many years. And of course, it’s within its rights to decide what it supports and to what extent,” Dr Tedros said.
“But the US also has a responsibility to ensure that if it withdraws direct funding for countries, it’s done in an orderly and humane way that allows them to find alternative sources of funding.
An estimated 25 million people are living with HIV in sub-Saharan Africa, which is more than two-thirds of the global total 38 million people living with the disease.
In Nigeria, nearly two million people are living with HIV, with many relying on receiving aid-funded medicines.
Kenya has the seventh-largest number of people living with HIV in the world, at around 1.4 million, according to WHO data.
“We ask the US to reconsider its support for global health, which not only saves lives around the world, it also makes the US safer by preventing outbreaks from spreading internationally,” Dr Tedros said.
National Identity Management Commission (NIMC) has announced that as of February 28, 2025, the number of Nigerians enrolled in the National Identification Number (NIN) database has reached 117.3 million.
This marks a significant increase of over seven million registrations since September 2024, when the figure stood at 110 million.
Gender and State Distribution
The latest statistics reveal that 56.5% of registered individuals are male, totaling 66.2 million, while 43.5% are female, at 51.07 million.
Among states, Lagos leads with 12.6 million registrations, followed by Kano with 10.2 million and Kaduna with 6.9 million.
This is consistent with the high populations in Lagos and Kano.
Other states with notable enrolment numbers include:
Ogun (4.9 million),
Oyo (4.5 million),
Katsina (4 million).
In contrast,
Bayelsa (758,111),
Ebonyi (990,775),
have the lowest enrolment figures.
The government has been emphasising the need for citizens to link their NIN to access essential services, including social services, financial transactions, and telecommunications.
A well-developed and accessible digital ID system is seen as vital for effective digital governance.
Beyond strengthening security and promoting transparency, this initiative aims to enhance the efficiency of service delivery across the country.
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