Nigeria’s economy is deteriorating, with GDP per capita dropping to $835.49 in 2025, a 74.08% decline since 2014. Factors such as inflation at 34.88% and naira devaluation contribute to this situation. While some growth in oil production is noted, significant reforms are needed to ensure sustainable economic recovery and improve citizens’ livelihoods.
Nigeria’s economy faces significant challenges, with the International Monetary Fund (IMF) reporting a decline in GDP per capita to $835.49 in 2025, down from $877.07 in 2024. This represents a 4.74% drop, reflecting a deteriorating economic environment. Over the last decade, GDP per capita has plummeted by 74.08%, dropping from $3,222.7 in 2014, indicating that economic growth is outpaced by population increases, which is problematic for overall prosperity.
Several factors contribute to these economic woes, including naira devaluation and surging inflation, which have severely diminished purchasing power for the average Nigerian. Despite a 3.46% economic growth reported in Q3 2024, many citizens have not experienced noticeable economic improvements in their daily lives. Furthermore, Nigeria’s GDP per capita ranks among the lowest in Africa, significantly behind nations like South Africa, Morocco, and Egypt.
IMF forecasts indicate a potential gradual recovery, projecting Nigeria’s GDP per capita to rise to $940.2 by 2026 and $1,047.08 by 2030. However, this trajectory appears inadequate given that Nigeria is expected to surpass the $1,000 mark only by 2028, lagging behind regional and global counterparts. Additionally, Nigeria’s GDP has dropped to $362.8 billion, down from $509.97 billion in 2014, pointing to a decline in the country’s economic standing.
As of December 2024, inflation has reached a staggering 34.88%, the highest in 30 years. Measures must be implemented to reduce this rate for more inclusive economic prosperity. President Bola Tinubu aims for a 15% inflation rate by 2025, yet analysts suggest drops may only be below 30%. The naira’s exchange rate to the dollar has also depreciated significantly, further straining the economy.
President Tinubu is striving for 6% annual growth and an 18% tax-to-GDP ratio by 2026 amid challenges. Nevertheless, Nigeria’s GDP per capita drop signifies a broader decline in national wealth. High population numbers should ideally bolster the economy, but current policies have failed to translate demographic advantages into economic benefits.
Some of Tinubu’s reforms have unintentionally exacerbated the current cost-of-living crisis. To alleviate financial strain, addressing the substantial waste in federal expenditures is imperative. The proposed 2025 budget includes a recurrent expenditure of N13.64 trillion, which requires diligent efforts to reduce.
The example of the United States setting up the Department of Government Efficiency showcases the need for Nigeria to adopt similar measures to cut spending amid economic crises. There is a pressing need for federal, state, and local governments in Nigeria to act with the understanding that the country’s economy is weak and requires austerity even at governmental levels.
Additionally, enhancing state productivity is crucial for the country’s overall growth. Many states still rely on federal allocations, which is unsustainable. A more effective political and economic restructuring could yield greater prosperity, enabling states to generate their revenue effectively and diminishing dependence on central allocations.
The rejected VAT sharing formula that proposed revenue based on equality, derivation, and population impedes states that produce more from receiving their fair share. Implementing policies that incentivize productivity at the state level could instill healthy competition and minimize the dependency mentality.
Despite Nigeria’s economic dire straits, there are positive developments, such as the growth in crude refining and an increase in oil production. The anticipated capacity of the Dangote Refinery and upcoming operations at the Port Harcourt and Warri refineries promise to bolster foreign exchange inflow as oil production exceeds 1.5 million barrels per day.
With rising oil production, Nigeria expects better foreign exchange inflows, potentially stabilizing the naira. The Nigerian Economic Summit Group forecasts improvements in currency valuation and inflation reduction in 2025 if effective government interventions are executed. The government must also consider the implications of subsidy removal on essential services, ensuring any reforms prioritize citizen welfare.
Nigeria’s economic landscape is characterized by a troubling decline in GDP per capita, compounded by high inflation and a reliance on federal allocations. Reforms aimed at cutting expenditure could help alleviate the cost-of-living crisis facing citizens. Positive shifts in oil production and the crude refining sector offer some hope, but systemic changes are necessary for sustainable growth and improvement in living standards. Without addressing the structural deficiencies inhibiting productivity, the country risks further economic decline.
Original Source: punchng.com
