Nigeria’s Economy in 2023: What Would It Look Like?

2023 is a decisive year for the near future of Nigeria. It signals a year of hope, possible positive growth, anticipated change, and a halt to the flaggerbasting problems that Nigerians are constantly faced with. In the minds of every Nigerian, there is a silent burning prayer and worry for what would happen in the nation. Hearts are invisibly fast-racing and preparations are being made for the event that will determine the fate of every Nigerian in Nigeria. Here’s an ironic announcement: the Nigerian Presidential Elections will be held once again in 2023.

Obviously, the succeeding outcome of this anticipated event and the event itself would inadvertently determine the economic growth of Nigeria. “Will our economy change course and move in the direction we’ve dreamed of?”, “Will it go southwards as usual?”; these are troubling questions to which (positive) answers are anticipated. While we cannot determine who will win Nigeria’s 2023 Presidential Elections, we can make a forecast of the possible effect it will have on Nigeria’s economy. With this article, one of the open-ended questions you’d desperately love to have an answer to would be answered:  What would Nigeria’s Economy look like in 2023?

Before we dive into that, let’s take a look at an overview of this year’s economic performance.

An Overview of 2022 – The Year of Inflation

This year, 2022, has been filled with ups and (mostly) downs. So many exasperating events posed a serious threat to the overall well-being of Nigerians, Nigeria, and its economy. The economy was thrown into a series of disarray, with consumers withstanding sticker shock like highly guaranteed insulators. This year had been very much unlike the relief Nigerian citizens hoped for coming out  from the COVID-19-induced recession in 2021.

It all started with a record of 15.60% inflation rate at the end of January. This was 0.03% lower than the previous December, where the prices of consumer goods blew over the roof because of the usual December-derived demands. February saw inflation up ticking to 15.70% as a result of fuel scarcity in some major cities in the nation. The circulation of the adulterated petrol caused the fuel suppliers to call them back causing a significant gap in the supply system. Hence, prices of goods and services increased as business costs drove higher because of fuel scarcity and the epileptic electricity supply in Nigeria. Of course, this one increase in fuel prices as a result of scarcity negatively affected other areas of the economy. In March, the steady rise in inflation rates did not relent as it reached an alarming(not anymore though)15.92% as a result of stubborn food prices increase. The rise in inflation rate went on and on and on, and it will be quite exhausting to individually list them out in a thorough explanation (as this is not the topic of discourse). Needless to say, the inflation rate had a field day (or year) in Nigeria in 2022.

The graph below gives a succinct description of the 2022 inflationary rise.

Many factors led to the rise in inflation this year, particularly food inflation. Apart from the increase in fuel prices, the Russian-Ukrainian War had a considerable effect on Nigeria’s economy. It was a significant factor in the increase in food prices as wheat and fertilizer raw materials became a scarce resource, the increase in fuel prices as the restrain on Russia’s export of crude oil affected the landing cost of fuel, resultant increase in transportation costs and then, scarcity of foreign exchange currencies.  Nigeria couldn’t sufficiently partake of the good meat shared when a barrel of oil prices hit as far as over $100. While we enjoyed good revenue, the import of refined oil products was a lot higher. And this ate into the excess profit we earned. In July, Nigeria recorded zero revenue from the exportation of crude oil. Apparently, the amount spent on petrol subsidies exceeded the total oil sold for the month.

And then, there was flood and insecurity, the two nefarious factors that badly affected food security in Nigeria.

The apex bank did what they could to control inflation. CBN constantly increased the Monetary Policy Rate (MPR) (a common policy targeted at curbing demand-derived inflation) to fight down the soaring inflation rates.  Contrary to what they thought they were fighting, the supply-derived inflation stubbornly paved its way up as production costs and the depreciation of the naira pushed the prices of goods and services upward.

The recent cashless policy by the CBN is yet to begin its manifestations on the economy. Maybe 2023 will reveal what impact a reduced withdrawal rate and the change of the highest denominations will have on the economy.

Reiterating, it is safe to say that the year 2022 was the year of inflation. The background information that this section has provided has given us enough push to envision what Nigeria’s economy would look like in 2023.

2023: The Anticipated Year

Puerile, inane, dim-eyed: these are words that would aptly describe the thought of a miraculous economic turnaround upon the emergence of a particular candidate as the winner of the presidential elections. Enough damage has been done already, more than enough that will take a considerable amount of time to create a structural restoration that will impact Nigerians. However, this does not rule out the impending effect of the election on Nigeria’s economy. The election will indeed affect the 2023 economic year, but not from the perspective of who will win but from the electioneering event itself.

Considering the above statement, here are 4 themes (election or non-election-wise) that would set the course for Nigeria’s economy in 2023.

• CBN’s latest cashless policy: Everyone’s been talking about this. From increasing interest rates sporadically, the apex bank decided to take the monetary policy a step further by, first, redesigning the naira note, imposing its use by considering old designs legally useless as of Jan 31st, 2022, and then, placing major withdrawal restrictions. Reactions, analyses, and concerns have ensued from the move made by CBN. While a group of people is wholly against the new policy, others are in favor of its implementation. In the words of Samson Soyebi in an interview with TVC on this matter, paraphrasing ” It will come with its pains and gains”. Firstly, the CBN will gain control of the money in circulation once more which will lead to the effectiveness of the monetary policy. Perhaps, this will contribute to the reduction of inflation in 2023. Secondly, vote buying is theoretically canceled out in the forthcoming elections, unless the big dogs find a way around it(which they will). But how possibly will this policy be? The technological structural barriers are too overwhelming to pull down within a short while. Not many states, or people in the informal sector, have enough internet connection to carry out a cashless transaction. And the informal sector carries out transactions in billions of naira every day. However, this move will not stop its activities because people need to buy and sell things, rather people might be forced to give into the new system, which will eventually yield positive results.

• Impacts of the 2023 budget: The 2023 budget is no different from every other budget proposed by the Buhari administration. It is filled with debt repayments and empty structural reformation promises as usual. Next year, according to the budget, we would incur the highest amount of expenses ever. Up to 20.51 trillion naira (US$43.7 billion) in expenses, and more than half of this money will be used to finance new debt. Appropriately, the country will exceed the 3% of GDP threshold stipulated by the Fiscal Responsibility Act of 2007.

Also contained in the budget are power projects, clean water, road and rail projects, the construction of irrigation infrastructure and dams across the country, and critical health projects. These are all nice and good until they leave the paper. Every Nigerian knows how this thing works. Empty promises are made on paper only to never fulfill them or start without completing them.

In all, the 2023 budget does not address core issues that are fundamental to the growth of the economy. However, since it’s an election year, with a possible change in government and party, there can be a change, a positive one hopefully.

• Political transition: Every election year leaves a country temporarily fiscally unstable. This would affect the confidence of domestic and foreign investors. They can decide to take their money elsewhere which will be detrimental to the growth of the economy. Or perhaps take on the wait-and-see attitude to determine their economic course of action for the rest of the year. As opposed to developed countries, presidential elections in Nigeria would stifle aggregate demand simply because of the aforementioned reason – investment apathy. Already, vote buying has been crippled by the CBN cashless policy.

Already, the elections are taking the front stage at the beginning of the year, which eventually leaves the economy temporarily out of view of politicians.

• The aftermath of the flood in 2023: It is no news that the nation experienced serious flooding this year. Already, the National Emergency Management Agency (NEMA) warned of more dangerous floods if precautions are not taken. Many people lost their lives, many more were displaced and a good few lost their means of livelihood – agriculture – due to the floods. This has worsened food insecurity leaving a possibility of more people in hungry states. Obviously, food inflation will rise, and it might become more of a luxury good. If not for anything, food will greatly increase the tendency of inflation rising again in 2023.

Concluding Thoughts

Despite the themes listed above, what will be will be. And what we think will be, might not be what becomes. Forseeing the exact future is still beyond the scientific advancements of humans. But economic organizations that we know and respect have given their take on the 2023 economic possibilities of Nigeria.

The Nigerian Economic Summit Group (NESG) has said there are tough times ahead for Nigerians no matter who becomes President in 2023. Already, the World Bank sees Nigeria facing “an elevated risk of recession over the next two years, reflecting the greater potential for the geopolitical tumult, stubbornly high inflation that reduces households’ real disposable income, and central banks’ intense focus on fighting inflation first, which raises the risk of financial accidents on top of the sharp tightening of financial conditions already seen.”

Tough times truly lie ahead. But amid these tough times, there is hope and will to survive amongst Nigerians. Perhaps, the people’s wish will be granted during the elections and good leadership follow thereafter.