Economy
The Challenges Facing Nigeria’s Economy
The Challenges Facing Nigeria’s Economy
The ongoing COVID-19 crisis is threatening to push Nigeria’s economy backwards, just a few years after the country successfully emerged from a damaging recession. The warning signs are flashing again as increased borrowing, a weakening currency and rising unemployment loom ominously.
As government and financial institutions struggle to remedy the situation, there is a growing demand for foreign exchange, forcing banks to ration outflow, while the hoped-for rally in oil prices has not materialised. Over-dependence on oil, policy inconsistency, insecurity and a persistent level of corruption have all had a dampening effect on the nation’s finances.
But Nigeria remains a nation with tremendous resources and potential, and there are reasons to be optimistic about the future, with a number of avenues to explore that could offer increasing prosperity and a way to guide the country to a firmer financial footing.
Promise of Agriculture
Agriculture remains a strength for Nigeria and it has the potential to help revive the economy. There are a number of plans in place, such as the Kano Agro Pastoral Project, that can help to galvanise this important part of the Nigerian economy. Nigeria is blessed with huge reserves of arable land and a significant farming population, offering a potential solution not just to economic downturn but also to the equally important issues of food poverty and food security.
There are promising signs that cooperation between agricultural specialists, state and national governments is starting to take effect, and by focusing on developing targeted crop value chains while improving the rural infrastructure, Nigeria’s farmers can be empowered to boost the economy.
Importance of Diversification
Nigeria has enormous human potential and economic ingenuity. The inventiveness of the Nigerian entrepreneur is on display across many sectors.
Take the thriving and growing mobile technology sector. Evidence suggests that mobile penetration increased from 36% to 50% between 2014 and 2017. That trend has continued with one estimate by Business Monitor International putting the likely number of mobile subscribers at 182 million by 2021, up from 153 million in 2017. Demand for mobile services has been driven both by technological advances and the dynamic marketing practices of Nigerian mobile companies.
This proliferation of mobile usage is also helping to drive the success of some of the top online casinos in Nigeria. The online casino sector, boosted by the ever-widening availability of mobile technology, is expanding rapidly, particularly among the increasingly affluent young Nigerian middle class.
Innovative local gaming companies are striking deals with major online casino content providers, as well as with international payment providers and digital support companies, enabling them to offer an ever more cutting-edge casino gaming experience.
The rise of the online casino and mobile sectors demonstrates Nigeria’s entrepreneurial potential. But fully unleashing that potential may first require tackling the country’s over-reliance on oil revenue. This has become a problem, but Nigeria has the opportunity to lead the way in designing the new green economy of the 2020s.
The government has already launched Africa’s first sovereign green bonds and has taken steps to extricate the country from oil dependency, starting with a cut in oil subsidies.
Money diverted from the oil industry can be directed into the renewables sector, while the Nigerian Ecological Fund has the potential to tackle some of the serious ecological problems facing the nation – a clean-up that can also boost the economy. The Ministry of Works, in conjunction with the wider government, can help to lead the way by bringing about green reforms in the Nigerian construction industry, while tackling the serious housing shortage in the country.
Rise of technology
Technology is another way in which Nigeria can help to steer its economic ship to safer waters. Although it can be difficult to focus on the future in times of economic difficulty, there is enormous untapped potential in Nigeria when it comes to technological change, not least among the country’s business sector. A strong push to adopt new methods, such as remote work, e-commerce and artificial intelligence, much of which has been given a boost by the pandemic, could reap dividends.
There is a huge potential demand for improved IT infrastructure, from collaboration tools that enable workers to operate effectively as a team while working at home, to teaching solutions that can enable teachers to deliver lessons remotely. And beyond that, the promises of cloud computing and smart homes offer Nigeria the opportunity to be bold and take the lead in African technology.
Retooled finance
Technology can also have a role to play in helping the Nigerian finance sector to contribute to the national economy. The pandemic has shown that more can be done in terms of automation and technical solutions to financing problems, while at the same time, the sector can do more to reach out to all sectors of society. The Nigerian finance industry is full of talent and the desire for innovation, and if unleashed, can play a major role in the nation’s recovery.
Like many other nations around the world, Nigeria has taken a hit due to COVID-19 and there are specific long-term problems that the country still needs to face. But the nation remains one of the most significant countries in the world and a powerhouse in Africa, and with sufficient guidance and investment, the potential of Nigerian farmers, business people, administrators, bankers and scientists can be harnessed to help build a more prosperous future.
By Dipo Olowookere
About 0.04 per cent was recovered on Friday from the loss recorded by the Nigerian Exchange (NGX) the previous due to profit-taking.
Yesterday, investors were in the market with renewed vigour, mopping up stocks trading at relatively cheaper prices.
According to data, the insurance counter gained 0.41 per cent, the banking sector appreciated by 0.38 per cent, and the consumer goods index grew by 0.14 per cent.
The gains achieved by these three sectors were enough to lift Customs Street at the close of business despite the 0.26 per cent decline printed by the industrial goods segment and the 0.14 per cent loss suffered by the energy industry. The commodity counter was flat during the session.
A total of 43 equities gained weight on the last trading day of this week, while 26 equities shed weight, indicating a positive market breadth index and strong investor sentiment.
Red Star Express increased its share price by 10.00 per cent to N13.20, NCR Nigeria grew by 9.97 per cent to N128.55, SCOA Nigeria inflated by 9.96 per cent to N14.90, Omatek appreciated by 9.94 per cent to N1.77, and Deap Capital expanded by 9.85 per cent to N4.46.
On the flip side, McNichols decreased by 8.81 per cent to N6.00, Legend Internet crumbled by 7.56 per cent to N5.50, Cornerstone Insurance crashed by 6.48 per cent to N6.35, C&I Leasing contracted by 6.29 per cent to N8.20, and Austin Laz slipped by 5.78 per cent to N3.75.
Yesterday, 539.9 million shares valued at N16.7 billion were transacted in 48,023 deals versus the 1.0 billion shares worth N31.6 billion executed in 51,227 deals in the preceding day, implying a shrink in the trading volume, value, and number of deals by 46.01 per cent, 47.15 per cent, and 6.26 per cent apiece.
Zenith Bank was the most active for the day with 54.6 million stocks sold for N3.8 billion, Jaiz Bank traded 41.5 million units worth N359.4 million, Secure Electronic Technology transacted 37.7 million units valued at N39.2 million, Access Holdings exchanged 30.5 million units for N699.2 million, and Lasaco Assurance transacted 27.2 million units worth N68.3 million.
When the market closed for the day, the All-Share Index (ASI) went up by 72.21 points to 166,129.50 points from 166,057.29 points and the market capitalisation gained N31 billion to N106.354 trillion from N106.323 trillion.
By Adedapo Adesanya
It was a positive ending for the Naira this week after it further appreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, January 16 by N1.33 or 0.09 per cent to sell for N1,417.95/$1 compared with the previous day’s N1,419.28/$1.
The domestic currency also gained N2.41 against the Euro in the official market to close at N1,647.51/€1 versus the preceding session’s closing price of N1,649.92/€1, however, it suffered a N7.97 loss against the Pound Sterling in the same market window to trade at N1,901.32/£1, in contrast to Thursday’s closing price of N1,893.35/£1.
In the same vein, the Nigerian Naira depleted against the Dollar at the GTBank FX counter by N2 to quote at N1,427/$1 compared with the previous day’s N1,425/$1, but strengthened against the greenback at the black market yesterday by N5 to settle at N1,485/$1 versus the N1,490/$1 it was exchanged a day earlier.
Improved supply conditions helped keep the market within range as exporters’ and importers’ inflows in addition to non-bank corporate supply enhanced liquidity as the Central Bank of Nigeria (CBN) made no visible intervention.
Stronger external inflows from foreign portfolio investors (FPIs) and improving current account dynamics, continue to align with structural support in the wider economy.
Nigeria has seen projections of a stronger economic or gross domestic product (GDP) growth and lower inflation in 2026, with these forecasts citing improved macroeconomic fundamentals and reform impacts.
As for the cryptocurrency market, it was mixed following selloff in precious metals and lower US stocks appeared to be denting crypto sentiment.
Gold and silver, both of which also enjoyed big rallies earlier this week, tumbled 1.2 per cent and 5 per cent, respectively while key US stock indexes — the Nasdaq, S&P 500 and Dow Jones Industrial Average — all reversed from early gains to modest losses in Friday trade.
Dogecoin (DOGE) shrank by 2.2 per cent to $0.1370, Ripple (XRP) slipped by 0.8 per cent to $2.05, Ethereum (ETH) went down by 0.7 per cent to $3,228.56, and Bitcoin (BTC) slumped by 0.6 per cent to $95,086.80.
Conversely, Litecoin (LTC) appreciated by 3.2 per cent to $74.48, Solana (SOL) rose by 0.4 per cent to $143.70, Cardano (ADA) jumped by 0.2 per cent to $0.3942, and Binance Coin (BNB) increased by 0.1 per cent to $935.88, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher amid lingering worries about a possible US military strike against Iran, a decision that may still occur over the weekend.
Brent crude settled at $64.13 a barrel after going up by 37 cents or 0.58 per cent and the US West Texas Intermediate (WTI) crude finished at $59.44 a barrel after it gained 25 cents or 0.42 per cent.
The US Navy’s aircraft carrier USS Abraham Lincoln was expected to arrive in the Persian Gulf next week after operating in the South China Sea.
Market analysts noted that it doesn’t seem likely anything will happen soon. However, the weekends have become the perfect time for actions so as not offset the markets.
The market had risen after protests flared up in Iran and US President Donald Trump signalled the potential for military strikes, but lost over 4 per cent on Thursday as the American president said Iran’s crackdown on the protesters was easing, allaying concerns of possible military action that could disrupt oil supplies.
Iran produces approximately 3.2 million barrels per day, accounting for roughly 4 per cent of global crude production, so it was not a coincidence that markets rallied sharply through Tuesday and Wednesday as President Trump canceled meetings with Iranian officials and posted that “help is on its way” to Iranian protesters, raising fears of potential US military strikes that sent prices surging toward multi-month highs.
Weighing against those fears are potential supply increases from Venezuela.
The Trump administration is exploring plans to swap heavy Venezuelan crude for US medium sour barrels that can actually go straight into Strategic Petroleum Reserve (SPR) caverns, since not all all oil belongs in the reserve.
According to Reuters, the Department of Energy is considering moving Venezuelan heavy crude into commercial storage at the Louisiana Offshore Oil Port, while US producers deliver medium sour crude into the SPR in exchange.
Analysts expect higher supply this year, potentially creating a ceiling for the geopolitical risk premium on prices.
Some investors covered short positions ahead of the three-day Martin Luther King holiday weekend in the US.
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