An Overview of Nigerian Macroeconomic and Financial Development

Abstract

The Nigerian economy is one of the biggest in Africa. It has been based mainly on the petroleum industry since the late 1960s. Since 1973, a series of rises in the price of oil has led to a rapid expansion of the transportation, building, manufacturing, and government services industries [1, 2, 3]. Due to the considerable migration of rural residents into the more extensive urban areas, agricultural productivity became so stagnant that cash crops like cotton, peanuts, and palm oil lost their significance as export commodities [4, 5, 9]. After the pandemic-caused recession in 2020, the Nigerian economy improved, but macroeconomic stability declined. The inflation rate in Nigeria is very high, and millions of the Nigerian population lives in poverty due to global commodities shocks, the currency's falling value, trade difficulties, and monetization of the deficit [6, 7, 8, 10]. The rising oil price has had no positive impact on the Nigerian economy since 2021. The country's oil revenue growth is declining due to subsidies on gasoline, and the oil output rate is badly affected [11, 12, 14]. Over 40% of the Nigerian population in 2018 lived in poverty, and over 20% is badly affected and vulnerable. Researchers forecast that over 7.6 million Nigerian are likely to live in poverty between the years 2019 and 2024 because of the rapid population growth in the country [15, 16, 17]. The Nigerian economy is projected to grow by an average of 3.3% in 2022–2024. Still, risk factors like drops in oil production and increased insecurity are significant threats to the country's economic growth [19, 20]. Along with persistent budgetary and debt pressures, high inflation contributes to uncertainty. Furthermore, continued currency shortages and reduced liquidity could impact non-oil sector economic activity and jeopardize macroeconomic stability [21, 22, 13]. Strategic Revenue Growth Initiative (SRGI) Nigeria has made some socioeconomic progress recently. However, the World Bank's 2020 Human Capital Index categorized Nigeria as 150 out of 157 in human capital development [23, 24, 18]. The Nigerian government needs to modify the economy, improve weak institutions and public financial management systems and resolve governance issues to achieve remarkable economic growth. [25, 26]. The constant high levels of inequality in terms of income and opportunities contribute to poverty in the country [27, 28]. Unemployment, social and regional disparities, and political discontent also contribute to a lack of economic growth and poverty. Over 8 million households have been pushed into poverty due to the negative impact of 2020-2022 high inflation [29, 30]