Business
IMF, experts warn of economic disaster as Nigeria’s $1 trillion dream fades
The International Monetary Fund (IMF) and leading economic experts have issued a grim assessment of Nigeria’s economy, highlighting a disturbing mix of poor policy decisions, external economic shocks, and long-standing structural problems.
The IMF has revised down its growth outlook for the nation, citing declining oil prices, Nigeria’s primary revenue source, alongside increasing domestic issues under President Bola Ahmed Tinubu’s administration. The elimination of fuel subsidies, rolled out without adequate social safety measures – has led to a significant increase in transport costs and prices of essential goods, pushing millions further into poverty.
The sharp devaluation of the naira and persistent foreign exchange instability have exacerbated inflation, undermining investor confidence and diminishing consumer spending. Critics contend that President Tinubu’s economic team is enacting reforms without mitigating their adverse effects, resulting in a severe cost-of-living crisis.
As public discontent rises, labor unions have initiated strikes, and mass protests are ongoing in major urban centers. Many citizens feel neglected by a government that they believe is failing to address the pressing issues of hunger, unemployment, and eroding purchasing power.
Once seen as potential economic diversifiers, agriculture and energy are also struggling. Food insecurity has intensified due to ongoing rural violence, including conflicts between farmers and herders, alongside banditry disrupting farming and food supply chains.
Yet, global oil trends are just one aspect of the issue. Analysts assert that much of Nigeria’s current economic turmoil is self-imposed.
Experts at the Vanguard Economic Discourse in Lagos indicated that Nigeria’s economic problems are predominantly self-inflicted. Dr. Yemi Kale, Chief Economist at Afreximbank, delivered a pointed critique of the nation’s policy framework, suggesting that many struggles stem from intentional government decisions rather than unexpected global events.
Speaking at the event, Kale cautioned that Nigeria is at a “critical strategic juncture.” He observed a pattern of ineffective planning, reactive governance, and short-term populist measures that are eroding the country’s economic resilience. He noted that structural issues are being aggravated by temporary solutions that do not address the root causes.
“The stark reality is this: most Nigerians lack the economic buffers—such as savings, social protections, or institutional support—necessary to weather macroeconomic shocks,” Kale stated, drawing attention to the fragility of livelihoods under present pressures. He also criticized the rise in policy uncertainty and inflation, which have led businesses to cease hiring, investors to withdraw, and credit availability to tighten.
Kale’s remarks served as a compelling call for a pivot away from quick political fixes towards sustainable, inclusive governance. As Nigeria braces for another year of economic challenges, his insights highlight a growing consensus among experts that urgent, meaningful reforms are needed.
At the 2025 Bullion Lecture in Lagos, former Minister of Power and CEO of Geometric Power, Prof. Barth Nnaji, warned that Nigeria’s failure to expand its energy infrastructure could cripple any long-term economic recovery. He criticized the lack of new power plants for over a decade and described the current energy strategy as driven by “climate idealism,” disconnected from Nigeria’s development needs.
Nnaji urged the Tinubu administration to adopt a pragmatic, homegrown energy policy that recognizes natural gas as Nigeria’s most viable transition fuel. He cautioned against prematurely phasing out gas in pursuit of foreign climate agendas, arguing that such moves could sabotage Nigeria’s industrialization efforts.
Calling for decentralized, corruption-free investment in power, driven by private-sector participation, he pointed to the Aba Integrated Power Project as a template. Until the government refocuses its policies on inclusive growth, infrastructure, and energy security, experts warn that Nigeria may slide further into recession and instability.
Also speaking at the 2025 Bullion Lecture in Lagos, Dr. Ogho Okiti, CEO of ThinkBusiness Africa, stated the urgency of accelerating economic diversification and building resilience through inclusive growth strategies.
“If you want to grow a $1 trillion economy, you need to be growing at a rate above 7%,” he said. “At 7%, it takes 10.5 years to double your economy; at 10%, it takes 7.5 years. We’re not anywhere near that.”
Dr. Okiti mentioned three critical conditions that underpin sustained high growth: lower food costs relative to income, affordable access to skilled labor, and a transition from dependence on foreign knowledge to local capacity development.
“The cost of food in Nigeria continues to outpace income growth, leaving most citizens with little discretionary income—and therefore, no savings,” he noted. “Without savings, there’s no investment; without investment, there’s no growth.”
He also explained the high cost and poor quality of human capital, calling for urgent investment in skills development to boost productivity and competitiveness.
The IMF’s sobering outlook and calls from local experts underscore a common message: unless Nigeria moves swiftly to implement reforms, diversify its economy, and build inclusive institutions, its vision of a $1 trillion economy may remain elusive.
Experts, including Professor Bongo Adi of Lagos Business School, have raised alarms similar to those of the IMF, highlighting that critical sectors necessary for job creation and economic transformation, such as agriculture and manufacturing, are either stagnant or in decline. Adi pointed out that only 32% of Nigeria’s economy is currently experiencing growth, with sectors like banking, oil and gas, and telecommunications leading output while providing minimal employment opportunities.
He advocated for structural reforms, emphasizing the importance of pursuing export-oriented industrialization and better integration into global value chains as crucial strategies for achieving sustainable economic growth.
Similarly, Dr. Akinwumi Adesina, President of the African Development Bank and former Nigerian Minister of Agriculture, has raised serious concerns about Nigeria’s economic struggles.
Speaking at the 20th anniversary of Chapel Hill Denham, he said Nigeria’s economy is weak and cannot support long-term growth. He pointed out that the country’s GDP per person has dropped from $1,847 in 1960 to just $824 in 2024, showing a clear sign of decline.
Adesina explained that while Nigeria saw some improvement in 2010, when GDP per person reached $2,120, things have gone downhill due to poor economic management.
He blamed the problems on bad fiscal discipline, unstable policies, weak leadership, and too much reliance on crude oil. Other issues include failing infrastructure, low industrial activity, high inflation, weak currency, and rising unemployment—all of which have made it hard for the country to grow.
Comparing Nigeria to South Korea, Adesina showed how better planning can lead to progress. South Korea’s GDP per person rose from just $158 in 1960 to $36,132 in 2024—43 times higher than Nigeria’s. He said South Korea succeeded by saving more, especially through strong pension systems, while Nigeria’s pension fund is much smaller. To fix this, Adesina said Nigeria must stop focusing on managing poverty and instead focus on creating wealth by boosting productivity, encouraging innovation, and attracting private investment.
Despite challenges, Nigeria’s economy grew by 3.4 per cent in 2024, marking the fastest growth rate in three years. This growth was primarily fueled by a strong performance in the services sector, which increased by 5.37%, playing a significant role in driving the economy forward. However, it fell short of the government’s 6% target.
Throughout the year, the economy demonstrated steady improvement, with GDP growth rising each quarter:
– 2.98% in Q1
– 3.19% in Q2
– 3.46% in Q3
– 3.84% in Q4
This upward trend indicated a gradual recovery, largely thanks to non-oil sectors. In 2024, the non-oil sector accounted for 94.49% of the country’s real GDP, a slight decrease from 94.60% in 2023, suggesting a marginal gain in the oil sector’s contribution.
The main contributors to 2024’s growth included financial services, real estate, and telecommunications. Nevertheless, analysts emphasize the need for Nigeria to prioritize sound economic policies to foster meaningful and inclusive growth. They caution that the current growth rate is not sufficient to reach the country’s ambitious goal of a $1 trillion economy.
