Nigeria, often called the Giant of Africa due to its large population and economic potential, is currently facing significant challenges in maintaining its economic prosperity. One of the most pressing issues is the decline in its Gross Domestic Product (GDP) per capita, a key indicator of economic well-being. Recent data from the International Monetary Fund (IMF) paints a concerning picture of the country’s economic system, noting a steady decline in GDP per capita over the past decade. This trend underscores the growing disparity between Economic Growth and population expansion, raising alarms about the country’s future economic stability.
GDP per capita, which measures a country’s economic output per person, is calculated by dividing the total GDP by the population. For Nigeria, this metric has been on a downward trend, falling from $3,222.7 in 2014 to a projected $835.49 in 2025. This represents about a 74.08% decline over the past decade. The current figure places the country among the lowest in sub-Saharan Africa, with countries like South Africa, Morocco, and Egypt boasting higher GDP per capita. For instance, South Africa’s GDP per capita is $6,517.1, while Egypt’s is $3,160.1.
A mismatch between economic and population growth led to this decline.
The primary driver of this decline is the mismatch between economic and population growth. While the national Economy has shown some signs of recovery, with a 3.46% growth rate in the third quarter of 2024, this growth has been insufficient to keep pace with the rapid increase in population. As a result, the average citizen has seen little to no improvement in their standard of living. The situation is further exacerbated by the Devaluation of the local currency and increasing inflation, which have eroded purchasing power and deepened economic hardship for millions.
Inflation, in particular, has reached alarming levels, hitting a 30-year high of 34.88% in December 2024. This has made essential goods and services increasingly unaffordable for the average citizen. The current federal administration has set an ambitious target to reduce Inflation to 15% by 2025, but analysts remain sceptical, predicting that it may only drop below 30%. The depreciation of the naira, which lost 40.9% of its value against the dollar by December 2024, has further compounded the economic challenges, making imports more expensive and stifling economic activity.
IMF projects a gradual improvement as a sign of hope.
Despite these challenges, there are some glimmers of hope. The IMF projects a gradual improvement in the national economy, expecting the gross domestic product to rise to $940.2 by 2026 and cross the $1,000 threshold by 2028. However, this recovery is slow compared to the progress made by other regional and global counterparts. For the nation to achieve meaningful economic transformation, bold and strategic reforms must address the root causes of its economic woes.
One of the critical areas requiring attention is the high cost of governance. The federal government’s recurrent expenditure in the 2025 budget is estimated at ₦13.64 trillion, a figure that reflects the inefficiencies and waste at the federal level. Reducing this expenditure is essential to free up resources for productive investments in infrastructure, education, and healthcare. Another pressing issue is the state governments’ over-reliance on federal allocations. Most states are unproductive and depend heavily on federal funds to run their budgets. To foster prosperity, Nigeria must empower its states to become economically self-sufficient.
Related Article: IMF reports Nigeria’s GDP per capita at $835
Overall, this economic decline serves as a reminder of the urgent need for comprehensive economic reforms. While the challenges are daunting, they are not insurmountable. By addressing issues such as high governance costs, over-reliance on federal allocations, and import dependency, the region can lay the foundation for sustainable economic development. The government must also prioritise policies that reduce inflation, strengthen the local currency, and improve citizens’ living standards. With the right strategies and political will, the nation can overcome its current economic difficulties and reclaim its position as a leading African economy.