Nigeria is a country located in West Africa and is the largest economy on the continent. With a population of over 200 million people, Nigeria has abundant natural resources, especially oil and gas reserves, which have helped drive economic growth over the past decades. However, Nigeria still faces major challenges around poverty, inequality, and diversifying its economy away from dependence on oil. Understanding Nigeria’s wealth and how it is distributed provides important context around the country’s economic development path.
Nigeria’s GDP and Economic Growth
In terms of overall economic size, Nigeria has one of the largest economies in Africa. Nigeria’s GDP in 2022 was estimated at around $445 billion, making it the 27th largest economy globally. Nigeria overtook South Africa to become the largest economy in Africa in 2014 and has maintained that position since then.
Nigeria has also seen solid GDP growth rates over the past two decades, averaging around 5-6% annual real GDP growth. This has significantly outpaced population growth and helped drive increases in GDP per capita. Much of this growth has been driven by the oil and gas sector, which accounts for around 9% of Nigeria’s GDP but over 90% of exports and 75% of government revenue.
However, economic growth slowed in recent years along with lower global oil prices. Nigeria’s GDP growth declined from over 6% in 2014 to just around 2% by 2020. The economy fell into recession in 2016 as oil prices crashed. This highlighted Nigeria’s dependence on oil exports and the need to diversify the economy into new sectors like manufacturing, agriculture, and services.
Oil Wealth and Reserves
Nigeria’s oil reserves have provided substantial resource wealth to the country but also created challenges around governance and economic stability. Nigeria has the largest oil and gas reserves in Africa and is the biggest oil producer on the continent. Nigeria produced around 1.9 million barrels per day of crude oil in 2019.
Nigeria’s proven oil reserves are estimated at around 36 billion barrels. At current production levels, Nigeria’s oil reserves represent over 30 years of production. New discoveries and investments to boost production from existing fields could push reserve life even higher. Natural gas reserves are well over 5 trillion cubic feet, providing a major energy source for domestic consumption and potential exports.
Oil exploration in Nigeria began in the 1900s under colonial rule but production ramped up in the late 1950s and 1960s. Oil production reached over 2 million barrels per day in the 1970s as Nigeria joined OPEC. Nigeria’s oil is high quality light sweet crude that trades at a premium to other oil benchmarks like Brent and WTI.
Oil accounts for the vast majority of Nigeria’s exports and government revenues. Taxes and royalties on oil production have provided an important source of public funding. However, the resource curse dynamics around Dutch disease, volatile revenues, and weak governance have created major economic challenges for Nigeria.
Nigeria’s Sovereign Wealth Fund
To better manage its oil wealth, Nigeria established the Nigeria Sovereign Investment Authority (NSIA) in 2011. The NSIA receives contributions from oil revenues to invest in longer-term savings for the country across three funds:
- The Future Generations Fund: saves for future generations by investing in equities, bonds, and real estate abroad.
- The Nigeria Infrastructure Fund: invests in domestic infrastructure projects like roads, power, and healthcare.
- The Stabilization Fund: provides budget support during times of economic stress.
By 2022, the NSIA had over $2 billion in total assets under management across these three funds. While still small relative to the size of Nigeria’s economy, the sovereign wealth fund represents an important step to better utilizing Nigeria’s resource revenue for economic development.
Poverty and Inequality
Despite Nigeria’s resource wealth and large economy, poverty remains widespread. Nigeria ranks very low on human development indicators like health, education, and living standards.
According to the World Bank, around 40% of Nigeria’s population lives below the national poverty line. The poverty rate had been over 50% in the early 2000s before declining to around 35% by 2016. However, the recession and COVID-19 crisis pushed poverty rates back up.
Poverty remains especially severe in rural areas, where around 52% of the rural population lives below the poverty line. Unemployment also remains stubbornly high, at over 30% for the general population and even higher for youth.
High poverty is exacerbated by substantial inequality in the distribution of income and wealth. Nigeria has relatively high income inequality, with a Gini coefficient of 35.1. Wealth inequality is even more severe – the richest 10% of Nigerians own around 85% of total wealth in the country based on estimates.
Billionaires and Multi-Millionaires
Despite widespread poverty, Nigeria is home to a sliver of extremely wealthy individuals. There are over 5,000 millionaires and several billionaires living in Nigeria.
According to Forbes, Nigeria has 7 billionaires with a combined net worth of over $20 billion as of 2022. The wealthiest person is Aliko Dangote, whose business empire in cement, sugar, and other commodities has made him worth around $13 billion.
There are also thousands of multi-millionaires, especially in sectors like oil and gas, banking, and real estate that have benefitted most from Nigeria’s natural resources and uneven growth path. Many of Nigeria’s wealthiest individuals have significant political connections that assisted their business success.
The presence of billionaires alongside widespread poverty highlights the uneven distribution of Nigeria’s resource wealth and shortcomings around governance, institutions, and human capital investment.
State of Healthcare and Education
Two key areas that highlight Nigeria’s broader development challenges are healthcare and education. Despite Nigeria’s natural resource wealth, human capital indicators significantly lag peer countries.
Healthcare System
Nigeria’s healthcare system is underfunded and lacking capacity, reflected in poor health outcomes:
- Total health expenditure is just 3.7% of GDP, far below over 10% in more developed countries.
- There are fewer than 1 doctor for every 2,500 people, compared to 1 doctor for around 400 people in countries like the UK.
- Infant mortality rate is around 55 deaths per 1,000 live births, more than 6 times higher than developed countries.
- Average life expectancy is just 55 years, around 15-20 years below life expectancy in countries like the US and UK.
Limited access to quality healthcare for much of the population exacerbates challenges around disease, malnutrition, and maternal health. Tackling Nigeria’s healthcare constraints remains imperative for sustainable economic development.
Education System
While Nigeria has expanded access to education, learning outcomes and skills remain poor:
- Primary school net enrollment rate is around 70%, but attendance drops significantly at higher levels.
- Less than 1 in 3 adolescents are enrolled in secondary school, one of the lowest rates globally.
- Average years of schooling are just 7.7 years, versus 13 years in comparable emerging economies.
- Learning outcomes, literacy rates, and skill levels consistently rank in the bottom quartile globally.
Boosting both access to education and the quality of learning will be vital for Nigeria to improve living standards and achieve its economic potential.
Outlook for Economic Development
Despite its current challenges, Nigeria still has major potential for future economic growth and development. Several key advantages and emerging trends could support a more prosperous future:
- Large domestic market: With over 200 million people, Nigeria has tremendous scale and scope to support consumer businesses and manufacturing.
- Strategic location: Nigeria is centrally located in Sub-Saharan Africa and a natural hub for business expansion across the continent.
- Youthful demographics: With a median age of 18.4, Nigeria’s young population can drive productivity growth if properly skilled and employed.
- Expanding technology startups: Nigeria has become a key hub for technology startups and digital innovation in Africa.
- Diversifying economy: The economy is slowly diversifying with growth in sectors like agriculture, retail, and entertainment.
However, realizing this potential will require major improvements in areas like infrastructure, education, governance, and business climate. With the right reforms and policy initiatives, Nigeria could accelerate development and achieve more broad-based prosperity.
Conclusion
In conclusion, while Nigeria has substantial resource wealth from oil, this has not yet translated into widespread economic prosperity. Poverty remains high alongside stark inequality in income and wealth distribution. Human capital outcomes around health and education also lag peer countries.
Nigeria’s leaders face major challenges to improve governance, diversify the economy, reduce reliance on oil, and invest in the healthcare and education systems. With its large population, Nigeria has tremendous potential. But fulfilling this promise will require overcoming current challenges around development, policy, and institutions.
If Nigeria can make progress on these fronts, it can transition from a lower-middle-income status to an advanced emerging economy. With the right reforms, Nigeria has bright prospects given its natural resources, domestic market size, and strategic location.