Nigeria’s middle class, a category of people whose economic strata falls between the upper class and the working class, is shrinking. These are the people who are well educated and whose enlightened values are likely to contribute to the larger economy.
The United Nations categorises them as those whose income falls between $10 and $100 per day, while the African Development Bank categorises them as those who earn between $2 to $20 per day.
However, in recent times, there are fears that Nigeria is fast losing this category of people to foreign countries. The service sector especially seems to be at the receiving end of this dilemma as many of the professionals who are contributing to Nigeria’s human capital development seem to have had enough of a poor and unrewarding economy.
A research report by the World Bank revealed that from 2004 to 2014, Nigeria witnessed a surge in the number of middle-income earners as a result of its fast economic growth, which can be largely attributed to a form of structural change in economic activities from the traditional-agricultural sector to the service sector. However, things are no longer the same for the once vibrant ‘Giant of Africa’ as major households continue to get vulnerable to its unstable economy.
This is evidenced by the World Poverty Clock report where Nigeria got tagged as the world poverty capital for three consecutive years until recently when the baton was handed over to India.
Since 2015, Nigeria’s economy has been grappling to survive as its overvalued currency continues to translate into a persistently high inflation rate alongside a high rate of unemployment and poverty that has defied all economic interventions.
Presently, Nigeria’s current minimum wage of N30,000 seems to be a far cry from what it should be given the current economic circumstance. It should be noted that as of 2019, when the figure was approved, inflation rate was 11.40 percent, while the figure increased to 15.63 percent in March 2022.
Presently, the rate of inflation in Nigeria has hit 18.6 percent, which has generated a public outcry as the World Bank revealed that Nigeria needs to urgently introduce a robust economic reform that will address mounting fiscal pressures, boost private investment to create jobs and also come up with policies that will address the poor living standards of its people.
Despite the current realities, there’s no tendency yet that Nigeria will consider an upward review of its minimum wage. To many people, one major way to avoid the impending future danger is to relocate abroad either by schooling or as a skilled immigrant.
What has happened in the last decade?
Nigeria had two different economic issues to contend with over the last 10 years as high rate of inflation continues to take a toll on the welfare of its people, thereby pushing an additional 7 million people into poverty. The rising level of inflation was further worsened by the pandemic outbreak as many businesses were threatened on the account of the worldwide lockdown.
This had a negative effect on the local economy as most people could not afford to purchase the necessary inputs for their businesses, thereby worsening Nigeria’s inflation woes. Pandemic aside, Nigeria’s economic challenges seems to be more like an endless tunnel; some of which are addressed below:
Devaluation of the naira
The value of Nigeria’s currency has always been at the falling side since the 80s when the Structural Adjustment Programme (SAP) was introduced. One major issue with the SAP was the failure of the Nigerian government to develop major industrial sectors which consequently turned Nigeria into a ‘rentier state’. Presently, Nigeria’s exchange rate stands at around N600/$1 despite the intervention of the country’s apex financial institution to defend the naira.
Apart from the fact that the country has failed to diversify its economy, one notable factor responsible for the weak naira in recent times is an increased demand pressure amid a dollar scarcity in the official foreign exchange market. This surge is largely traceable to the fact that the quest to immigrate to foreign countries, especially using the channel of education, has tremendously increased.
Over the years, Nigeria’s economy has been highly volatile to fluctuations in the global prices of crude oil. In fact, the bulk of economic recessions experienced by the country have been on the account of the fall in the prices of crude oil in the international oil market. For instance, Nigeria was forced to seek external assistance from the International Monetary Fund in 1986 as a result of the fall in global oil prices under conditional ties which have been discovered to be of no benefit to the nation.
Also, by mid-2014, the sharp and continuous decline in crude oil prices led to another period of economic recession, majorly attributed to the slow economic growth in China (the largest importer of crude oil in the world). It should be noted that prior to 2014, crude oil was sold for as high as $108.13. However, the global price of crude oil fell to $98.97 by 2014. Also, the year 2016, which marked the beginning of the most recent economic recession in Nigeria, definitely didn’t leave any trail of pleasure for many Nigerians.
This happened as a result of the advent of shale oil in the US, which used to be one of Nigeria’s largest buyers of crude oil. With no other major export, the government was forced to increase borrowing to make up for the shortfall in revenue. Consequently, the naira was further weakened to the dollar, government revenue dropped considerably, salaries got delayed and many construction projects had to be suspended, while inflation rate has also been on the increase.
Insecurity: If there’s one negative life event that is driving up Nigeria’s inflation rate, it is its rising spate of insecurity. The country’s insecurity challenges have grown beyond just insurgency to a full-scale monster that now involves kidnapping, banditry, separatist agitations and most recently, attacks on expensive infrastructures. It has also been reported that in some cases, farmers have to pay taxes to insurgents before they can go to farm while billions of naira have also been paid as ransom to kidnappers.
This has consequently led to scarcity of farm produce, especially since the northern part of the country is at the receiving end of these brutal acts. Consequently, higher food prices have been recorded and food importation has increased, thereby amounting to more demand pressure on the already scarce dollar. The resultant effects of all these issues is that Nigeria’s food inflation has now been in double digits – an issue that has defied all economic interventions.
In a bid to encourage domestic production and create more employment opportunities, the current administration in 2019 decided to adopt some protectionism measures starting with the closure of the country’s land borders. This was subsequently followed by a mix of other policies which involved increased trade tariff and the restriction of foreign exchange on food imports, most significantly rice.
The policy subsequently led to an increased rate of inflation in the commodity market as local farmers and producers have not been able to meet up with the huge level of domestic demand. The average inflation rate for the year 2021 rose to about 16 percent as against 11.02 percent prior to the period of border closure.
A report by the Institute for Security Studies revealed that the policy surely brings back the memories of the same economic measure that was adopted in 1984 under the military regime headed by President Muhammadu Buhari which tends to favour protectionist policies in order to boost economic growth and generate employment.
Fuel scarcity: The issue of fuel scarcity is not a new phenomenon in the history of the nation. It has become a lifestyle, which the citizens have had to adjust to over the years as its leaders have failed to come up with a sustainable solution to end this menace.
Nigeria’s fuel scarcity woes were further worsened by the importation of adulterated fuel this year. Despite the fact that economic activities seem to be stabilising after the adulterated fuel saga, the attendant effects of the fuel scarcity still linger. Consequently, the charges of logistics have significantly increased as the price of commuting in some places has increased by more than 50 percent.
Indeed, the last decade has not been too palatable for Nigerians as the poor living standards, alongside a not-too-convincing government response, which is further aggravated by the country’s bad financial position, continues to plunge the country into a deeper challenge.
Presently, Nigeria is witnessing a mass exodus of its once vibrant skilled labour force as the bulk of its populace seems to have lost hope in Nigeria. In recent times, it seems to be that every sector is currently feeling the heat of the mass exodus of this category of people as many of the professionals who are contributing to Nigeria’s human capital development seem to have had enough of a poor and unrewarding economy.