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Nigeria's economic prospects in a changing world order 10 Mar 2025

As President Bola Tinubu nears the halfway mark of his term, debates continue about whether his policies will yield long-term benefits or deepen existing socio-economic challenges. The president's Renewed Hope Agenda is aimed at reforming the economy to deliver sustained inclusive growth, improving healthcare and education access, boosting agriculture to achieve food security, establishing a strong national security architecture, among other goals. However, the implementation of this agenda has faced significant challenges and criticisms.

The abrupt removal of fuel subsidies without adequate compensatory or social safety measures has contributed to Nigeria's worst cost-of-living crisis in nearly 30 years, pushing millions deeper into poverty. The devaluation of the naira by the administration exacerbated inflation as the cost of imported goods increased. By December 2024, inflation reached 34.80%, a level last seen in 1996. Despite a reported decrease in inflation to 24.48% in January 2025, as a result of the rebasing of the Consumer Price Index (CPI), the economic hardship persists, with prices of essential goods like food and housing remaining high.

Indeed, there are doubts about the government's ability to effectively translate its agenda from a policy framework into concrete actions that can address Nigeria's long-running structural issues. These include heavy reliance on oil revenues, limited economic diversification, and sluggish economic growth. From 2015 to 2024, average annual GDP growth was a mere 1.93%, resulting in a steady erosion of living standards.

Compounding domestic macroeconomic weaknesses, Nigeria must contend with subdued global growth or what the UN Trade and Development (UNCTAD) terms "a new, low normal" for the global economy. The UN body's 2024 report on global economic trends introduced this concept to refer to a period of tepid economic growth rates, reduced investment flows, and increased income inequality. Global growth is projected to remain around 2.7% for both 2024 and 2025, well below pre-pandemic levels. This trend is driven by several factors, including deceleration in major economies like China, the United States, and the European Union; rising global debt levels; and supply chain disruptions.

Against this backdrop of subdued global growth, Nigeria must contend with geopolitical shifts that could further reshape international trade and investment flows. The return of Donald Trump as US president has brought about policy shifts that could significantly impact Nigeria's economic outlook. Trump's "America First" agenda – characterised by protectionist trade policies, withdrawal from international agreements, and reduced multilateral engagement – poses particular challenges for developing economies. His administration's withdrawal or threat of withdrawal from key international organisations and agreements, including the World Trade Organisation, could undermine the rules-based trading system upon which countries like Nigeria depend.

For Africa’s most populous nation, the implications of global economic trends and geopolitical developments are far-reaching. For instance, the new, low normal in global growth is not merely an abstract concept; it translates into tangible constraints on economic progress. The UNCTAD report reveals a troubling trend: developing economies that once expanded at 6.6% annually between 2003-2013 now struggle to maintain 4.1% growth. When China's outsized contribution is excluded, the picture becomes even bleaker, with the global South achieving just 2.8% annual growth over the past decade.

This global slowdown has profound implications for Nigeria's already strained public finances. The combination of high interest rates in advanced economies and persistent naira depreciation has dramatically increased the cost of servicing foreign currency debt. With public debt levels having jumped 15 percentage points in just four years across developing economies, Nigeria faces intensifying fiscal pressure that threatens to trigger a return to harsh austerity measures – a prospect that would further squeeze an already struggling population.

What makes this situation particularly concerning is the way global economic conditions interact with domestic vulnerabilities. The UNCTAD report highlights how many commodity-dependent developing countries face a "reprimarisation" effect, where attempts to transition away from extractive sectors stall, leading to industrial decline and diminished prospects for structural transformation.

The return of Donald Trump to the White House introduces additional layers of uncertainty for Nigeria's economic prospects. Much like during his first term, Trump’s approach to international relations in his second term has been defined by transactional diplomacy, scepticism toward multilateral institutions, and a willingness to deploy tariffs and sanctions to advance American interests. Changes in US trade policy could impact Nigeria's export opportunities, particularly if new tariffs or restrictions are imposed. Similarly, shifts in US development assistance priorities will reduce financial support for key sectors. The withdrawal from the Paris Climate Agreement could hamper global climate finance flows, affecting Nigeria's ability to fund its energy transition.

Yet amidst these challenges, strategic opportunities could emerge. A more transactional approach to foreign policy could create openings for Nigeria to negotiate targeted agreements in areas of mutual interest. Moreover, reduced US engagement in certain regions might accelerate the very South-South cooperation that UNCTAD identifies as a promising avenue for developing economies.

Specifically, the UNCTAD report identifies several strategic pathways that offer potential for developing countries to navigate the current global economic landscape. For Nigeria, these translate into four key priorities. First pathway is economic diversification. The time for mere talk about diversification has long passed. Nigeria must aggressively develop non-oil sectors with genuine growth potential: agriculture, digital technology, creative industries, and light manufacturing. The government's rhetoric about diversification must be matched with concrete policy measures such as targeted infrastructure investments, technical skills development, and regulatory reforms that genuinely improve the business environment.

South-South cooperation offers the second strategic pathway. As Africa's largest market, Nigeria should position itself as a regional trade hub, leveraging the African Continental Free Trade Area (AfCFTA) to expand access to markets across the continent. This requires moving beyond merely signing agreements to addressing practical implementation barriers, including poor transportation infrastructure, cumbersome customs procedures, and non-tariff barriers that continue to hamper intra-African trade.

Institutional reform provides the third pathway. As noted in the November 2024 feature article of Financial Nigeria, Nigeria's development challenges are fundamentally institutional, as backed by research from the winners of the 2024 Nobel Prize in Economics: Daron Acemoglu, Simon Johnson, and James Robinson. The scholars have demonstrated that a country's welfare is shaped primarily by the quality of its political and economic institutions. Nigeria's institutional weaknesses – manifested in corruption, regulatory inefficiency, and policy inconsistency – continue to undermine economic performance and deter investment. Real reform requires more than reshuffling ministers or merging ministries; it demands transforming the ideological foundation of a political economy that perpetuates extractive systems. This means confronting entrenched interests, strengthening judicial independence, and building genuine public accountability mechanisms.

Perhaps Nigeria's most promising pathway lies in embracing the green transition. The Energy Transition Plan (ETP) provides a framework for addressing Nigeria's massive energy deficit while simultaneously reducing greenhouse gas emissions. With nearly $100 billion in annual sustainable investment opportunities identified by the United Nations Environment Programme, Nigeria has the potential to leapfrog certain development stages by adopting clean technologies from the outset.

The country has already demonstrated leadership by becoming the first African nation to issue a sovereign green bond. Building on this foundation requires introducing robust sustainability regulations across major economic sectors, developing green skills in the workforce, and creating incentives for private sector participation in renewable energy and circular economy initiatives.

Nigeria stands at a crossroads in 2025. The convergence of domestic economic challenges, the "new, low normal" for global growth, and shifting geopolitical dynamics creates both profound risks and potential opportunities. The Renewed Hope Agenda will remain mere aspiration unless backed by concrete policy actions that prioritise genuine structural transformation through economic diversification, leverage regional integration via South-South cooperation, implement comprehensive institutional reforms to combat corruption and inefficiency, and decisively embrace the green transition as a pathway to sustainable development.

What remains to be seen is whether Nigeria's political leadership possesses the vision, courage, and political will to make the difficult choices necessary to translate renewed hope into renewed prosperity for all Nigerians.

Martins Hile is a sustainability strategist and editorial consultant.