Agenda for Sustainable Economic Transformation in Nigeria
The COVID-19 pandemic has had a debilitating effect on the Nigerian economy. Specifically, the combination of lockdown measures and the global slowdown of economic activities led to the contraction of Nigeria’s GDP by 6.1% in the second quarter of 2020, thus inducing the country’s second recession within five years (NBS, 2020). Nevertheless, it is noteworthy that the pandemic occurred amid prevailing economic vulnerabilities.
Nigeria’s economy has been widely recognized as a mono-product and ecologically unsustainable economy, largely due to its high dependence on oil (see Okonkwo & Uwazie, 2015). Oil revenue continues to account for a considerable share of government revenue and exports, as it constituted 70% of government revenue and 77% of exports in 2019 (NBS, 2019). The situation is made worse considering the changing dynamics in the global energy market, with renewable energy outpacing conventional energy sources in efficiency and cost-effectiveness. Beyond the economic implications, from a climate change perspective, the reliance on fossil fuels as the dominant source of energy for electrification–accounting for 75% of on-grid capacity–is in stark contrast to the objectives of the Paris Agreement and Agenda 2030, to which Nigeria is a signatory (SEforALL, 2020). Consequently, Nigeria’s oil dependence is at odds with its long-term economic and environmental ambitions.
Furthermore, the informal sector remains a large contributor to Nigeria’s economic output and employment as it accounted for 65% of the country’s GDP in 2017 (BOI, 2018). A survey by the National Bureau of Statistics (NBS) finds that agriculture, trade, accommodation and food services account for the majority of informal sector output (NBS, 2016). Given that the informal sector is characterised by low- wages and the absence of social security coverage, a considerable share of workers and micro-entrepreneurs in Nigeria operate at a survivalist level. Essentially, the COVID-19 crisis - through the reduction in global demand and the restrictions to movement - has exacerbated the existing structural and systemic problems, especially the heavy reliance on oil and the presence of a large informal sector.
However, the crisis marked by an unprecedented need for government intervention - also presents an opportunity to test Einstein’s famous assertion that, “In the midst of every crisis, lies great opportunity”. The increase in spending plans and the adoption of policy measures present an opportunity for the country to take a more appropriate strategic direction and address its long-acknowledged structural weaknesses. If, rather than focusing on a short-term relief strategy aimed at restoring the pre-pandemic status quo characterized by oil dependence, lack of export diversification, and high poverty rates, the policy responses are designed to achieve economic and environmental sustainability, the COVID-19 pandemic could be a pivotal moment.
Against this background, the policy brief examines the pre-existing economic vulnerabilities, evaluates the Nigerian government’s responses to the pandemic with regards to achieving a green and more-diversified economy, and develops a new agenda and strategies for sustainable growth and economic transformation.
The policy brief is structured as follows. Section 2 presents an analysis of the Nigerian economy’s pre-pandemic structural shortfalls, and how COVID-19 has exacerbated their damaging impacts. This is followed by an evaluation of how the government has intervened, fiscally or otherwise, to mitigate some of the worst impacts of the pandemic in Section 3. Section 4 presents coherent and forward-looking economic strategies focusing on diversification through agroecology, renewable energy, and the use of debt relief to stimulate a green transition. The final section summarizes and concludes.