If there was a time when Nigeria could have taken off, it was in 1999. Democracy had been restored, the country’s economy had reopened after decades of mismanagement and looting under military dictatorships.
Tomi Davies, a systems analyst, was among thousands of Nigerians who returned home to help rebuild the country. After a few years working on public sector projects, he was offered a bag full of dollars to add ghost employees to the payroll system he was installing. Faced with his refusal, a group of men attacked him at his home in the capital, Abuja.
“I arrived like many others hopeful, but had to escape in disgust,” said Davies, 65, who returned to the UK where he is now the company’s chief investment officer. venture capital firm GreenTec Capital Partners based in Frankfurt.
Others like him left too, defeated amid the disappointed aspirations of a nation that was not meant to evolve like this. With some of the world’s largest oil reserves, plenty of arable land, and a young, tech-savvy population of 206 million that sets the trends in music and fashion in Africa, Nigeria had the potential to break into the world stage.
Instead, political missteps, entrenched corruption, and over-reliance on crude oil mean that a country that makes up a quarter of the continent’s economy risks becoming its biggest problem. A dangerous cauldron of ethnic tensions, youth discontent and criminality threatens to spread further poverty and violence in a region that is rapidly lagging behind the rest of the world.
Since its discovery in the 1950s, beneath the mangrove forests of the southeastern coast of Nigeria, oil has dictated the boom and bust cycles of the former British colony, with this product now accounting for 90% of exports and half of government revenue.
Capital of poverty
The economy has yet to recover from the 2014 oil crash – and it is unlikely to do so anytime soon – meaning its population will continue to outpace economic expansion, adding even more poor people to the economy. which is already the poverty capital of the world.
Over 90 million people live in extreme poverty in Nigeria. That’s more than India, which has a population seven times larger.
A presidential spokesperson referred questions to the government’s economic team. The finance ministry and central bank did not respond to multiple requests for comment.
COVID-19 has only made matters worse. Personal incomes are expected to fall to their lowest level in four decades, pushing an additional 11 million people into poverty by 2022, according to the World Bank. One in three Nigerians in the workforce is unemployed and the country’s unemployment rate is among the highest in the world, fueling social discontent and insecurity.
The political mistakes of President Muhammadu Buhari have complicated the path to recovery. He came to power in 2015 with a pledge to create 12 million jobs during his first four-year term; midway through his second term, unemployment more than quadrupled.
Buhari, 78, has revived an import substitution campaign that was popular when he was a military leader in the early 1980s, crippling businesses that cannot obtain goods to survive. It banned the use of foreign currency to import dozens of products, from toothpicks to cement, closed borders to end the smuggling of rice, and refused to completely relax exchange controls.
Policies like this have held back foreign investment, pushed food inflation to 15-year highs, and scared off companies like South African supermarket chain Shoprite Holdings Ltd. The World Bank said in a report Tuesday that rising prices are pushing seven million people into poverty and encouraging crime.
âThe government has made so many mistakes before the pandemic even made it worse,â said Amina Ado, one of Buhari’s oil advisers from 2017 to 2020. âWe urgently need to change course because we are big enough to count in the world. “
The roots of the malaise, however, predate Buhari. Under British rule, Nigeria’s three main regions – divided along ethnic and religious lines – were awkwardly sandwiched in a 1914 merger. Since independence in 1960, elites in the southwest and southeast predominantly Christian fought for power with the Muslim north.
âPolitical instability is a huge obstacle to the kind of deep, long-term institutional economic reforms needed for Nigeria to get off the ground,â said Zainab Usman, Africa Program Director at Carnegie Endowment for International Peace.
Oil led to the dismantling of the small industry that existed by opening the floodgates to cheap imports financed by a strong local currency. Countries like Malaysia and Indonesia, which were as poor as Nigeria in the 1960s, have surpassed it in per capita income after diversifying.
An upsurge in corruption has also torn away the resources needed for infrastructure and a reliable power supply, both of which are lacking.
“In many countries, people are used to officials skimming something initially, but eventually delivering something,” said Matthew T Page, associate researcher at Chatham House in London. “In Nigeria everything is skimmed and nothing is delivered.”
The collapse of security
Poverty and mistrust of the state sowed the seeds of violence. A decade-long jihadist insurgency in the northeast rages on despite Buhari’s claims that he defeated Boko Haram militants in 2015.
Piracy has also made the Gulf of Guinea one of the most dangerous waters in the world, as inland a deadly conflict between nomadic herders and farmers in the center of the country moves south.
A new separatist rebellion is emerging in the southeast, where a secessionist attempt to create the Republic of Biafra sparked a civil war in the 1960s.
Kidnappings are at their highest level in at least a decade, according to data from the Armed Conflict Location & Event Data Project. Nearly 900 students have been removed from schools in mass kidnappings since December, according to the United Nations.
It wasn’t always like that. As a child in the 1980s, Alvari Banu remembers driving short trips to visit the family farm between Abuja and the northern city of Kaduna. Now kidnappings on the same route have kept him away for nearly three years.
“The situation is getting worse,” said Banu, 41, a financial consultant. âThe government has completely failed to provide even basic security. “
The mess is a huge obstacle to growth, costing the economy $ 10.3 billion in 2020. That’s more than the federal government’s total revenues that same year, according to official estimates.
Without key reforms, Nigeria’s economy will remain anemic, growing just over 2% this year and next, still below the rate of population growth, according to the International Monetary Fund.
In the meantime, the government lives off borrowed money, with debt servicing charges absorbing over 80% of its revenue.
“This could end in a default on external debt if things don’t change,” said Charlie Robertson, chief global economist at Renaissance Capital, an emerging and frontier markets investment bank.
To avoid calamities, the government must allow the currency to depreciate, invest in electricity and campaign for a lower fertility rate, which, with 5.3 births per woman, is one of the highest in the world. and undermines economies, Robertson said.
Rising oil prices, a planned sale of sovereign bonds and the forthcoming disbursement of IMF resources will help the country cope for now, said Omotola Abimbola, analyst at the Lagos Chapel-based investment bank. Hill Denham.
The brunt of the economic decline weighs on young people, two-thirds of whom are either unemployed or underemployed. With a median age of 18, the country’s population is increasingly restless and out of touch with the aging politicians who live in luxury.
Protests against police brutality last year turned into a nationwide uprising that crippled major cities, stemmed only by a violent crackdown that left dozens dead.
âThere is a lot of frustration because there are a lot of overqualified unemployed,â said Chioma Okafor, a 32-year-old public health expert who returned to Nigeria in 2014. After two years, he made $ 200 per month while consulting. in Abuja, and with no prospect of a better job, Okafor borrowed money to buy a one-way ticket to the United States
âWhen Buhari came to power, people expected things to change,â she said. âBut it wasn’t just Buhari who failed. The system is broken.
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