Nigeria - 2Q2017/18

Impact of Political Uncertainty on Nigerian Growth

Nigeria is the largest economy on the continent in terms of nominal GDP value, having surpassed South Africa in 20141. The country’s potential has not been fully realised however, as the economy is overly reliant on oil exports and internal consumption. A period of strong growth, driven by consumption and high oil prices, has meant a higher rate of job loss, which has exacerbated inequality because of unequal distribution of wealth. In 3Q2014 and 2015 the commodity price slump led to a 70% decline in the price of oil, resulting in a balance of payment challenges and the depreciation of the Naira (NGN)2. Authorities opted to float the NGN in June 2016 to restrain further exhaustion of foreign exchange reserves3. In addition, Boko Haram and Islamic extremism has led to violent attacks against citizens in the East and in the oil sector of the Niger Delta4.

Comprising 7.5% of Nigeria’s land mass, the Niger Delta was historically used as the largest exporter of palm products, this changed upon the discovery of oil in 19565. Creating a shift from the agricultural based economy to a prioritisation of oil. This has created a juxtaposition of the harm and good this shift has caused for the Southern region of Nigeria in particular. Four of the eight states; Rivers, Bayelsa, Delta and Ondo are the greatest benefactors of capital annually, in the form of compensation or revenue derivation from oil from the Federal purse6. It follows that these four have the greatest concentration of oil exploration and exploitation. The delta is of environmental and social concern – 2015 recorded the largest quantity of oil spilled in the last 5 years 52 billion litres7. Spills caused by purposeful sabotage accounted for 75.9 thousand litres of the total 119 thousand litres spills8.

Sabotage occurs because of illegal oil bunkering and pirates. The black market is driven by illegal fuel siphoning and conflict over such resources from rebel groups9. The revenue lost from the spills alone is enough to affect the economy significantly, alongside the drop in oil price. However, the unquantifiable environmental effects on the ocean, space and land are a glooming irreversible result, causing a loss of human life, wild life and environmental degradation. These play a great role in the loss of revenue to both the oil producing companies and the government. Between the years of 1979-2008, revenue lost amounted to USD 175.6 million10. This causes even greater conflict for power and regional control, as communities experience poverty, economic and social degradation so they seek alternative avenues to force the system to redistribute wealth. The regression in the price of crude oil since 2014, resulted in a slow diversification of the economy. The impact on the Niger Delta adversely affected government revenue and export earnings, as well as the fiscal capacity to prevent the economy from narrowing11.

The Economic Recovery and Growth Plan (ERGP), which was launched by the Ministry of Budget and National Planning in February 2017, aiming to increase productivity and enable diversification of the Nigerian economy is a step in the right direction12. One of the goals is to increase export earnings and government revenues by an additional USD22 billion annually13. One of the key areas is the revaluation of oil, strong dependence on oil has promote fiscal stimulus but jointly an unequal wealth distribution has caused the vandalisation of the sector. Nigeria must begin to reformulate its focus away from oil to agriculture-centred stimulus objectives. This will begin to address the environmental damage caused by oil spills; as well as job loss. The agricultural sector shows more promise as an alternative for aiding stimulus in the longer term.


1-2 The Heritage Foundation
3 Central Bank of Nigeria
4 Ministry of Budget and National Planning
5-6 Journal of Socialist Theory
7-9 Department of Petroleum Resources
10 Advances in Management & Applied Economics
11-13 Ministry of Budget and National Planning, ibid.




Khanyisile Mboya

Former Regional Analyst

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