What are the economic activities in Nigeria

Recent macroeconomic and financial developments

Nigeria’s economy grew by 3.6% in 2021 from a 1.8% contraction in 2020, underpinned on the supply side by 4.4% expansion in the non-oil sector against 8.3% contraction in the oil sector; non-oil growth was driven by agriculture (2.1%) and services (5.6%). On the demand side, public and private consumption were contributors to GDP growth. Per capita income grew by 1.0% in 2021. The fiscal deficit narrowed to 4.8% of GDP in 2021 from 5.4% in 2020, due to a modest uptick in revenues, and was financed by borrowing. Public debt stood at $95.8 billion in 2021, or about 22.5% of GDP.
Annual average inflation stood at 17.0% in 2021 against 13.2% the previous year and above the central bank’s 6–9% target. Inflation was fueled by food price rises at the start of the year and exchange rate pass-through. The central bank kept the policy rate unchanged at 11.5% in 2021 to support economic recovery. The current account deficit narrowed to 2.9% of GDP in 2021 from 4% the preceding year, supported by recovery in oil receipts. Improved oil exports and disbursement of the SDR allocation of $3.4 billion (0.8% of GDP), pending decision on its use, helped to boost gross reserves to $40.1 billion in 2021. The ratio of NPLs to gross loans was 4.9% in December 2021 (regulatory requirement 5%), while the capital-adequacy ratio was 14.5% (regulatory benchmark 10%). Poverty and unemployment remained high, broadly unchanged from 40% and 33.3%, respectively, in 2020.

Outlook and risks

Growth will decelerate, averaging 3.2% during 2022– 23, due to persistent low oil production and rising insecurity. Inflation is projected to remain elevated at 16.9% in 2022 and to stay above pre-pandemic levels in 2023, fueled mainly by rising food, diesel, and gas prices and persistent supply disruptions amplified by the Russia– Ukraine conflict. Capital inflows are projected to recovery, while oil exports are projected to increase slightly. The benefit of a forecast positive oil price shock on exports may, however, be partly offset by a weak output effect due to lower oil production, stoked by infrastructure deficiencies and rising insecurity. The projected marginal current account surplus of 0.1% of GDP in 2022 could turn into deficit of 0.2% in 2023. Improved revenue collection will help narrow the fiscal deficit to an average of 4.5% of GDP. Public debt targeted to reach 40% of GDP by 2024 on fresh borrowing. The headwinds to the outlook may be exacerbated by rising insecurity and policy uncertainty underpinned by reversal of initially planned removal of subsidies on premium motor spirit a year before the 2023 elections.

Climate change issues and policy options

Climate change’s impact is seen in crop yields declining by 7% in the short term (2006–35) and by 25% in the long term (by 2050). Projected increases in annual maximum temperature of 3–4°C between 2050 and 2070 could further undermine agricultural productivity and cause greater water stress. Already, shortages of water and grazing land are generating communal conflicts. Nigeria is 73 on the 2021 GCRI.
Transition to low carbon highlights the plight facing Nigeria’s oil sector and energy infrastructure. Oil and gas account for more than 85% of exports and about half of revenues. Eliminating fossil fuels will act as a drag on the transition to higher income but provides a chance for inclusive and green development. The revised NDC 2021–30 and National Adaptation Plan 2021 set emission targets for 2030 at 453 MtCO2eq, around half the level forecast in 2015. This is a 2.6% annual increase, with total financing estimated at $177 billion. The Climate Change Act (2021), aligned with the Medium-term National Development Plan, provides the legal framework. Investing in clean energy, smart agriculture, and climate-proofing technology are vital for the economic transformation’s resilience and export-led diversification. Nigeria’s policy efforts bode well for meeting SDG 13 on climate action by 2030, but risks abound.

• African Economic Outlook 2022

The Agricultural sector (25.08% of GDP), Trade sector (16.86% of GDP,) and the Real Estate sector (6.85%) dominate Nigeria’s economy. There was also a significant growth in the Financial Services, Communications, and Entertainment sectors. The Oil and Gas industry’s contribution to the economy is at approximately 8.86%.

Nigeria’s economic potential is constrained by many structural issues, including inadequate infrastructure, tariff and non-tariff barriers to trade, obstacles to investment, lack of confidence in currency valuation, and limited foreign exchange capacity. 

Sustained broad-based economic growth and poverty reduction are critical to its economic stability. USAID supports the Government's poverty alleviation efforts to improve agricultural productivity and expand jobs in rural areas. It also works to improve market access, increase the country's energy supply, reduce obstacles to trade, and expand access to clean water. We help develop a policy environment for small businesses and expand access to market-driven vocational and technical training linked with private sector employment opportunities. U.S. assistance also focuses on expanding access to commercial financial services, including microfinance.

Trade and Regulatory Reform

We support customs regulation and policy reform to encourage internal and external trade, encouraging the use of U.S. African Growth and Opportunity Act incentives for trade with the United States, and developing private sector capacity to meet international trade and export standards.

We work closely with the Government of Nigeria to implement activities that promote increased trade. These activities include assisting the National Customs Service for customs reform and modernization, reducing congestion at the Lagos seaport and increasing transport flows along the Lagos-Kano Jibiya Transport Corridor; and building trade capacity at the Ministry of Commerce and Industry. At the same time, we support private enterprises to stimulate exports through training and capacity building. This includes topics such as access to finance, export competitiveness, and linkage to international markets and partners.  

Energy

Nigeria’s economic growth is also constrained by insufficient electricity generation capacity, which results in a lack of a reliable and affordable supply of power. At the same time, Nigeria flares considerable amounts of associated gas, a by-product of offshore crude oil extraction. Flaring generates significant greenhouse gas emissions and wastes a considerable amount of energy. To reduce gas flaring and increase generation of clean energy generally through greater private sector participation, we support the Government of Nigeria’s efforts to better manage the sector.

Markets

How do you transform agriculture in a country the size of Nigeria? A pioneering USAID project is showing the way with a private sector approach that's producing dramatic results.

The World Bank is helping to fight poverty and improve living standards for the people of Nigeria with more than 130 IBRD loans and IDA credits since 1958.