The depreciation of the naira, low productivity, and stagflation – a confluence of high inflation, slow economic development, and high unemployment – have all contributed to Nigeria’s $310 billion GDP loss over the past ten years.
After Nigeria’s GDP was rebased in 2014, the economy, formerly the biggest in Africa, is now in fourth place, behind South Africa, Egypt, and Algeria.
The International Monetary Fund (IMF) estimates that the economy of Africa’s most populous country reached $199.7 billion in 2024 from $510 billion in 2014.
CFG consultancy, a research and consultancy firm located in Lagos, said in its report, “From Reform Fatigue Quagmire to Sustainable Growth,” that Nigeria’s GDP, which is $195 billion, has decreased over the past ten years, losing almost $300 billion in value due to devaluation, low productivity, and stagflation.
The nation’s economy is now the fourth largest in Africa, behind Algeria, Egypt, and South Africa. It said, “This is because of the long-term policy inconsistency since the economy recovered from the post-COVID recession.”
According to Adeola Adenikinju, president of the Nigerian Economic Society, Africa’s most populous country must diversify its economy and boost productivity to regain its status as an African behemoth.
“Rebasing will result in a considerable increase in the value of GDP since new sectors will be included, hence GDP will be higher than it already is. Long-term, though, Nigeria will need to figure out how to boost the economy and diversify its sources of income,” he stated.
According to him, Nigeria’s GDP has increased in naira terms but decreased in dollar terms due to the depreciation of the exchange rate.
“The exchange rate has fallen dramatically over the last two years, resulting to a drop in GDP measured in dollars. In actual terms, the Naira GDP has increased, albeit at a very modest rate,” Adenikinju noted.
Can Nigeria Regain Its Status As Africa’s Largest Country?
Though analysts say it might not make Nigeria the largest African country, it is on track to rebase its economy.
According to Muda Yusuf, director and CEO of the Centre for the Promotion of Private Enterprise, Nigeria’s $300 billion GDP loss may be the result of exchange rate depreciation, which has caused the GDP’s dollar value to decline.
He stated that more industries that have expanded over the past ten years will be included in the GDP rebasing and that the country’s GDP is expected to rise significantly even in dollar terms.
According to Yusuf, Nigeria’s economy must expand and overcome all barriers preventing it from becoming the largest in Africa once more, as well as any issues harming investment and productivity.
“The focus on policy should be on improving productivity, growing investment, increasing export and improving the regulatory environment and the level of infrastructure which are the things that need to be done to bring Nigeria back to being Africa’s largest economy,” he added.
The Naira’s Decade-Long Devaluation
When the latest rebasing was completed in 2014, the naira’s value fluctuated between 168 and 199 dollars. On Tuesday, though, it was at 1,549.65/$. Accordingly, the naira has lost 16 percent of its value since 2014 and was once listed as one of the worst currencies in the world in 2024.
The South Sudanese pound, Nigerian naira, and Ethiopian birr were among the worst-performing currencies in the area by August 2024. According to a World Bank study, as of the end of August 2024, the Nigerian naira has depreciated by almost 43% year to date.
But with refineries coming up and dollar bonds floating in 2024, the naira’s prospects for 2025 are better.
“With increased domestic refining capacity, we expect a significant decline in fuel imports, which will ease pressure on foreign exchange demand and strengthen the naira,” stated Uche Uwaleke, director of Nasarawa State University’s Institute of Capital Market Studies.
The parliament’s approval of $2.21 billion in external borrowing (Eurobond and sukuk issuance) should increase foreign exchange reserves and boost trust in foreign exchange stability, according to Razia Khan, managing director, and senior economist, Africa and Middle East Global Research, Standard Chartered Bank.
