Paul Ogbuokiri 
…multiple tariff increases await Nigerians in 2025
According to a recent IMF report, Nigeria’s GDP Per Capita has declined to $835, falling from $3,223 in 2014, a period of 10 years. PAUL OGBUOKIRI reports that the steady decline of the economy in the last decade has put Nigerians at the same poverty level with war torn countries like Somalia and the Congo.
Recent events highlight the impact of fiscal policies on Nigeria’s economy. Despite its past status as Africa’s largest economy, the Naira devaluation in 2023 saw Nigeria drop to third place, behind Egypt and South Africa. While the IMF forecasts a GDP growth of 3.34 per cent in 2024, it also confirmed that Nigeria will slip to the fourth – largest economy by year-end 2024. This shift highlights the vulnerability of Nigeria’s economy to external factors and the importance of effective fiscal management to sustain Nigeria’s economic competitiveness and growth trajectory.
The year is 2011, the country is Nigeria and it has just received $8.4 billion in Foreign Direct Investment (FDI), an all-time high. In the same year, the ‘Giant of Africa’ recorded a 2.9 per cent drop in inflation and a whopping $414.5 billion in Gross Domestic Product (GDP), a 13 per cent increase from the $367 billion achieved in 2010. This comes as no surprise, after all with increased FDI comes job creation, economic growth and knowledge sharing. FDI is critical in Nigeria, as foreign investment is a major source of forex inflow. Furthermore, FDI is an economic indicator that signifies faith not just in the Nigerian economy but also in the Nigerian people.
Fast forward to 2024 and the situation has drastically changed. Nigeria has recorded a steady decline in FDI over the past two years. This has had a significant effect on the populace. Following the exit of pharmaceutical giant, GlaxoSmithKline in 2023, drug prices rose by 900 per cent. To top it off, the country is being overlooked for investment in favour of other African countries, even those with a lower GDP. For instance, Kenya was recently announced as the site of a $1 billion geothermal-powered data centre to be built by Microsoft and G42. The Nigerian government is scrambling to steady the exchange rates, whilst inflation is rising. What’s worse is that the government’s policies aimed at easing the crisis have not yielded significant results. The country that received the highest FDI inflow on the continent in 1997 now seems to repel it.
Nigeria is not only witnessing a decline in foreign investment, but it is also experiencing an exodus of foreign investors. For example, Procter & Gamble, a multinational consumer goods company and producer of household brands including Pampers and Tampax exited Nigeria in 2023. This mass exodus is indicative of a growing unwillingness to invest in Nigeria. In my opinion, the answer to the cause of the FDI decline and the exit of multiple foreign companies can be summed up into one word: risk.
Poverty rises amid insecurity
As of October 2024, Nigeria is one of the five countries with the largest number of people living in multidimensional poverty globally. The World Bank projects that 40.7 per cent of Nigerians will live in poverty by the end of 2024
Based on the most recent official household survey data from Nigeria’s National Bureau of Statistics, 30.9 per cent of Nigerians lived below the international extreme poverty line of $2.15 per person per day (2017 PPP).
Nigeria’s chronically high inflation reached an all-time high of 24.7 per cent annually in 2023, driven by rising food and energy prices, the removal of the petrol subsidy, loose monetary policy, and naira depreciation. Nominal earnings have not kept up with inflation, pushing another 10 million Nigerians into poverty in 2023. Based on World Bank projections, about 40.7 per cent of Nigerians are estimated to live below the international poverty line by the end of 2024
This is as BudgetIT noted that Nigeria, long regarded as one of Africa’s economic powerhouses due to its abundant resources and diversified populace is currently grappling with several security challenges that directly impact its economy, ranging from insurgency to conflicts between farmers and herders to organized crime looting and abduction for ransom. These security threats not only undermine national stability and the rule of law but also have adverse effects on the economy, affecting price, output, employment, trade balance, poverty, inequality, defense expenditure, government budget patterns, socio-political environment, and several others.
Sunday Telegraph reports that there is a high level of insecurity in the country, particularly in the northern region, where the Islamist jihadist group, Boko Haram, has become a threat to business activities. The lack of security continues to deter prospective investors from engaging in business activities in these areas, leading to a stagnation of commercial operations. Consequently, many companies and businesses in northern Nigeria have stopped operations due to the scourge of lingering insurgency. Banditry has severe and far-reaching consequences for the economy of the affected areas, and the incessant activities of bandits have created a pervasive sense of fear and insecurity, directly impacting economic activities and development in the region.
Given the region’s predominant reliance on agriculture as the cornerstone of its economy, the presence of bandits has disrupted agricultural activities, as farmers are often afraid to cultivate their fields due to the risk of attacks. This disruption has led to a decline in food production, threatening food security for millions of people. The displacement of over 200,000 individuals has also resulted in the abandonment of farmlands, exacerbating the food crisis
Removal of fuel subsidy and floating of Naira
The consequences of fuel subsidy removal in Nigeria had a frequent impact on the citizens, but on May 29, 2023, the removal made the most impact in the history of the Nigerian economy. The impact was so serious due to the inflation that engulfed the system. The prices of almost everything in the economy almost tripled.
Subsidy removal and naira devaluation pushed food inflation to 30.64 per cent in September 2024, worsening inflationary pressures in the country. The prices of food caused the Consumer Price Index to surge to 26.72 per cent in September 2024, the National Bureau of Statistics disclosed.
This showed 0.92 percentage point increase from the 25.80 per cent recorded in August 2024. The NBS revealed this in its CPI report for September 2024. It said, “In September 2023, the headline inflation rate increased to 26.72 per cent relative to the August 2023 headline inflation rate which was 25.80 per cent.
“On a year-on-year basis, the headline inflation rate was 5.94 percentage points higher compared to the rate recorded in September 2022, which was 20.77 per cent. This shows that the headline inflation rate (year-on-year basis) increased in September 2023 when compared to the same month in the preceding year (i.e., September 2022).
“Furthermore, on a month-on-month basis, the headline inflation rate in September 2023 was 2.10 per cent, which was 1.08 per cent lower than the rate recorded in August 2023 (3.18 per cent).”
Despite the increase in inflation rate, the NBS claimed that the rate of increase in the average price level in September was less than the rate of increase in the average price level in August 2023.
Food and non-alcoholic beverages (13.84 per cent) contributed the most to inflation. This was followed by housing, water, electricity, gas and other fuel (4.47 per cent), clothing and footwear (2.04 per cent), transport (1.74 per cent), furnishings and household equipment and maintenance (1.34 per cent), education (1.05 per cent), and others.
The rise in September’s food inflation was driven by increases in prices of oil and fat, bread and cereals, potatoes, yam and other tubers, fish, fruit, meat, vegetables and milk, cheese, and eggs.
Commenting on the spike in inflation rate, the Director/Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said, persistent inflationary pressures in the Nigerian economy was likely to accelerate poverty, further shrink the economy with purchasing power continuing to slump over the past few months.
Economic growth, he explained, may remain subdued with the risk of stagflation heightening as key inflation drivers fail to slow.
He said, “These factors include the depreciating exchange rate, surging transportation costs, logistics challenges, forex market illiquidity, astronomical hike in diesel cost, climate change, insecurity in farming communities and structural bottlenecks to production. These are largely supply-side issues.”
However, the Finance Minister Wale Edun has said Tinubu’s reforms in removing fuel subsidy, floating the naira has saved Nigeria $20 billion
The Minister disclosed that the full implementation of the key reforms of market-based pricing of premium motor spirit (PMS) and market-based pricing of exchange rate by the Federal Government saved the government about $20 billion or five per cent of the country’s Gross Domestic Product (GDP) as at October 2, 2024.
The minister noted that after 18 months of reforms implemented by President Bola Tinubu, the country has changed with gains of the reforms now glaring after gestating period pain, discomfort, difficulty, and increased cost of living. Edun, said the result of that action was of immediate benefit to the federal, state and local governments coffers.
Rising debt profile and cost of servicing/repayments
Nigeria’s rising debt profile hit N134.297 trillion in June 2024 which has placed a burden of approximately N619, 501 on each Nigerian citizen, a figure that far exceeds the national minimum wage of N70, 000, worsens their means of survival, this development ActionAid warns that, “without immediate intervention, Nigeria risks falling into a full-blown debt crisis if not total collapse of the economy”
ActionAid Nigeria further expressed alarm over Nigeria’s escalating public debt, which now stands at an unprecedented N134.297 trillion as of June 2024, according to figures from the Debt Management Office (DMO).
This staggering debt has grown by nearly N13 trillion in just three months—a rate of nearly 11 per cent—placing a burden of approximately N619, 501 on each Nigerian citizen, a figure that far exceeds the recently approved minimum wage of N70, 000.
“This debt burden, driven primarily by large-scale borrowing, underscores a critical need to reassess Nigeria’s fiscal policies. While infrastructure development is crucial, the cost of these projects should not come at the expense of Nigerians’ access to basic services. With a population of over 216 million, this unsustainable trajectory has led to widespread concerns about the impact on poverty, healthcare, education, and overall quality of life.”
This came as it has been disclosed that Nigeria’s external debt servicing costs/payments increased by 38 per cent, totaling $3.53 billion in the first nine months of 2024. This is against the $2.56 billion the Central Bank of Nigeria (CBN) spent on debt servicing during the same period in 2023. This was contained in CBN’s International Payment Data published on its website.
According to the Chief Executive of CFG Advisory, Tilewa Adebajo, the sustainability of Nigeria’s growing debt obligations is a source of concern.
“The debt profile is too high and unsustainable. The federal government must implement policies to grow the economy and create employment to address these challenges effectively,” Adebajo said.
Sunday Telegraph reports that the steep increase underscored the intensifying fiscal pressures facing Nigeria’s economy amid dwindling revenues, inflationary pressures, and currency depreciation.
The cumulative figures highlighted the stark increase in Nigeria’s debt burden. In the first nine months of 2023, the country spent $2.56 billion on external debt servicing. By the same period in 2024, this figure had climbed to $3.53 billion, a $970 million increase.
Tariff hikes would worsen poverty in 2025
As the Federal Government plans 65 per cent electricity tariff increase even as the Nigerian telecommunications operators start implementing the long-awaited 50 per cent tariff hike following regulatory approval from the Nigerian Communications Commission, indication is that Nigerians will be hit with many tariff increases this years as Nigeria Customs Service plans to add extra 4 per cent admin charge on (FOB) value of imports. It didn’t stop there; the Nigerian Ports Authority (NPA) has increased port charges by a whopping 15 per cent as well. The Central Bank of Nigeria (CBN) is set to introduce new charges for ATM transactions, starting March 1, 2025. Off-site ATM: N100 charge, plus a surcharge of not more than N500 per N20, 000 withdrawals.
