In a startling revelation, Nigeria’s economic landscape has taken a turn for the worse, despite bold reforms implemented in 2023. According to a comprehensive report by SB Morgen Intel, the nation now faces an elevated risk of instability, with deteriorating living conditions and widespread business closures marking the current economic climate.
The SB Morgen Intel 2024 Africa Country Instability Index, a respected barometer of continental economic health, has painted a grim picture of Africa’s most populous nation. The report underscores a perfect storm of challenges, including skyrocketing food inflation, persistent security issues across all geopolitical zones, and a alarming surge in poverty levels.
Economic Downturn and Political Polarization
Nigeria’s economic instability has reached a critical juncture, with the country experiencing a significant downgrade from its previously stable status in 2023. The report highlights a deteriorating economic environment, largely attributed to controversial reforms introduced by President Bola Tinubu’s administration.
“The economic challenges facing Nigeria are multifaceted and require a delicate balance between necessary reforms and social welfare. The current instability is a reflection of the complexities involved in navigating such a large and diverse economy.”
The elimination of fuel subsidies, a cornerstone of Tinubu’s economic policy, has had far-reaching consequences. While aimed at long-term fiscal sustainability, this move has triggered a chain reaction of economic hardships. Inflation has soared to a 28-year high, igniting a cost-of-living crisis that has fueled social tensions and widespread protests.
Currency Devaluation and Business Impact
Another significant factor contributing to Nigeria’s economic instability is the unification of exchange rates and the floating of the naira. This policy shift, implemented in June 2023, was designed to create a more market-driven economy. However, the immediate impact has been severe, with the local currency losing over 70% of its value in just 18 months.
Ngozi Okonjo-Iweala, Director-General of the World Trade Organization, had earlier caution that: “Currency devaluation can be a double-edged sword. While it may enhance export competitiveness in the long run, the short-term effects on imports and domestic prices can be challenging, especially for a country like Nigeria that relies heavily on imports.”
The volatility in exchange rates, combined with high energy prices and soaring inflation, has created a hostile environment for businesses. Many companies are struggling to maintain profitability, leading to an exodus of multinationals and the closure of local firms. This trend threatens to further destabilize the economy and exacerbate unemployment rates.
Risk Index and Regional Comparison
Nigeria’s position on the Risk Index has significantly worsened, dropping six points from 39 in 2023 to 45 in 2024. SB Morgen Intelligence emphasizes that a higher score on this index indicates an elevated level of political risk to business operations.
In a broader African context, Nigeria finds itself in the company of other nations facing similar challenges. Ethiopia, Comoros, Côte d’Ivoire, Benin, and Togo share comparable risk profiles, highlighting widespread economic and governance concerns across the continent.
Vera Songwe, a member of the African Union’s Panel of Eminent Economists, commented on the regional trends: “The varying performances across African nations underscore the importance of tailored economic strategies. While some countries have shown improvement, others like Nigeria face significant challenges that require urgent and thoughtful policy responses.”
Sub-Saharan Africa’s Economic Landscape
The report provides a comprehensive overview of Sub-Saharan Africa’s economic performance. The region recorded an average score of 45.4% in 2024, showing a slight improvement from 47.7% in the previous year. Out of 48 countries analyzed, 31 demonstrated improved performance, while the remainder showed signs of deterioration.
Notable success stories include Angola, Burundi, Chad, Togo, and Madagascar, which emerged as the biggest gainers. Angola’s improvement was largely driven by a reduction in governance costs, while Madagascar saw its GDP growth inch up to 4.4% in 2023 from 4.3% in 2022.
On the other end of the spectrum, Botswana, Seychelles, Nigeria, Namibia, and Zimbabwe were identified as the most significant decliners. Botswana, for instance, experienced a GDP contraction of nearly two percent in the first quarter of 2024, while Zimbabwe grappled with severe economic challenges, including debt crises and currency instability.
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Regional Disparities and Future Outlook
The report highlights significant regional disparities within Africa. Eastern and Southern Africa share the distinction of being the worst-performing regions, each scoring 40% on the index. Countries like Seychelles, Kenya, Mauritius, and Comoros represent the challenges in the East, while Botswana, Namibia, Zimbabwe, and Zambia exemplify the struggles in the South.
Carlos Lopes, former Executive Secretary of the UN Economic Commission for Africa, offered his analysis: “The regional disparities we’re seeing are not just economic but also reflect varying levels of institutional strength and policy effectiveness. Countries that have managed to implement consistent and transparent economic policies tend to show more resilience in the face of global economic pressures.”
If You Ask Me
The SB Morgen Intel report serves as a stark reminder of the economic challenges facing Nigeria and many of its African counterparts. As the continent’s most populous nation and largest economy, Nigeria’s Economic Instability struggle has far-reaching implications. The coming months will be crucial in determining whether the bold reforms of 2023 will eventually yield positive results or if further policy adjustments will be necessary to steer the economy towards stability and growth.
In these uncertain times, the need for robust economic strategies, transparent governance, and regional cooperation has never been more critical. As Africa navigates these turbulent economic waters, the resilience and adaptability of its nations will be put to the test.
As Nigeria grapples with its economic instability, the implications for the broader African economy are significant. The country’s size and influence mean that its economic health has ripple effects across the continent. Policymakers, both in Nigeria and in neighboring countries, will need to closely monitor these developments and adjust their strategies accordingly.
