• 27th February, 2023

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      Nigeria’s Incoming Administration Faces Multiple Challenges Outside Ailing Oil Sector

      Nigeria's next administration faces monumental task of reversing multi-sectoral decay.

      Nigeria’s Incoming Administration Faces Multiple Challenges Outside Ailing Oil Sector

      As Nigerians await the results of the 2023 general elections, one thing is abundantly clear: the incoming administration will inherit a country with a myriad of problems. The country’s struggles are plentiful, ranging from inflation and food insecurity to a rising housing deficit. Mustard Insights will attempt to outline some of the challenges which the next president will be facing.  

      We have decided to limit this review to non-oil challenges as part of Mustard Insights’ drive to promote the diversification of the Nigerian economy. In addition, the issues facing the Nigerian oil industry are well-documented, from the issues to possible solutions. Without much ado, let’s jump into it. 

      Mining: Nigeria is awash with solid minerals. However, the country has failed to benefit from this mineral wealth due to an under-utilized mining industry and illegal mining. The Institute for Security Studies estimates that 80% of mining in Nigeria’s North-West region is carried out illegally. As tends to be the case, most illegal mining is artisanal – small-scale mining carried out on a low-scale and with very little machinery.  

      While the presence of “small-scale” in its definition may lead some to assume that this sort of mining is not profitable, this is far from the case. After all, most gold mining on the African continent is artisanal, and yet that industry is worth billions of dollars. The World Bank estimates that Nigeria loses US$9 billion annually to illegal mining. Thus, the illegal mining trade in Nigeria deprives the country of revenue from minerals like gold and precious stones like amethyst and sapphire. Apart from illegal mining, Nigeria has yet to develop its minerals sector for commercially useful minerals such as tantalite and columbite. 

      Agriculture/Food: Food insecurity has become a constant problem in Nigeria in recent years. 2022 saw rising food inflation all through the year, with the price of food commodities soaring to previously unseen levels. According to the United Nations’ Children’s Fund (UNICEF), nearly 25 million Nigerians are at risk of rising hunger in 2023. This is an increase of nearly 8 million from the current number of Nigerians facing food insecurity, which stands at 17 million.  

      The new administration will have to tackle drivers of the food insecurity which include conflict in a lot of the country’s food basin, climate change and soil degradation, energy price-driven cost inflation, and a continued reliance on subsistence agriculture. Weather patterns are predicted to get more extreme in the future, and heavy floods have already begun to affect harvests, as was the case in 2022, where flooding damaged nearly 676,000 hectares of farmland.  

      Climate change: Nigeria is one of the African countries which is vulnerable to the effects of climate change. Being in the Sahel-Sudanian Bioclimatic Zone, the country is at present in danger of desertification, as land closer to the north of the country grows more arid. This displaces cattle herders, who are often forced south and into conflict with farmers. The country also features two large rivers, the Niger and the Benue. The latter has been known to be particularly prone to overflowing its banks in the rainy season, and all reports state that the rainfall will only get heavier in coming years. 

      The new government must commit to developing anti-flood infrastructure to avoid a repeat of 2022’s destructive floods. The Director-General (DG) of the National Emergency Management Agency (NEMA), Mustapha Habib Ahmed stated that the floods left 612 people dead; 3,219,780 persons affected; 1,427,370 persons displaced, and 2,776 others injured. The floods also left 315,407 houses with varying degrees of damage and as much as 569,152 hectares of farmland partially or wholly destroyed. 

      Most of the issues in climate change crossover or overlap into agriculture; after all, the effects of climate change will be heavily felt in weather and subsequently, soil systems. This is where the issue with soil degradation comes in. Land degradation is a serious environmental issue that Nigeria must deal with. According to the United Nations’ Convention to Combat Desertification, drivers like unsustainable agricultural practices and mining/quarrying have acted to degrade Nigeria’s arable land, further enhancing the threat of food insecurity.  

      Real estate: Nigeria’s still-growing population has come with a rising housing crisis. In the Nigerian Bureau of Statistics Multidimensional Poverty Report released in 20222, lack of proper housing ranked as high as food insecurity and inadequate healthcare among causes of poverty in the country. Access to affordable housing remains out of the reach of most Nigerians, especially low-income earners and increasingly the middle class.  

      The rising cost of construction in Nigeria (the price of cement has risen by more than 200% in recent years); increased urbanization leading to higher population densities in major cities; rent hikes from landlords; underfunding of the Federal Mortgage Bank of Nigeria; and the nation’s own Land Use Act of 1978 have all contributed to a rising housing deficit which has gone from 7 million in 1981 to 28 million in 2022, per the World Bank. Only about 1% of lending by the country’s Deposit Money Banks (DMBs) go into mortgage lending, and those that do are difficult to access for much of the nation’s population. Various Nigerian governments have also not made the construction of affordable social housing a priority.  

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      Energy & Power: This remains a chronic issue in Nigeria and has been across administrations. While access to electricity has grown in recent years – the share of the population without electricity access has fallen from 52% to 43% in the last eight years – the nation’s power generation is still very low for a nation of its size. As of 26th February, the nation’s grid was generating 4.9 GW of electricity. By comparison, a nation like South Africa generates approximately 58 GW for a significantly smaller population. 

      Nigeria has an issue of power infrastructure: installed capacity is much higher than the amount generated, and a lot of electricity is lost during transmission. However, this does not change the fact the installed capacity must rise if Nigeria is ever to become a fully industrialized country. It is not uncommon to find businesses, industries, and homes having to supply their electricity themselves, burning petrol or diesel through generators. This inadvertently leads to a high demand for those products, especially petrol, which most small- and medium-enterprises rely on for power. The demand for petrol is what has led to the much-maligned petroleum subsidy, which is a drain on the country’s resources, costing as much as NGN3 trillion annually. 

      The incoming administration will be remiss not consider other forms of large-scale electricity generation, especially with regards to renewable energy. While most of the country’s grid is powered by gas thermal and hydropower, with plans to install more hydroelectricity underway, the country is awash with renewable energy resources from solar to wind. The administration should also consider, perhaps on the regional level, the possibility of mini-grids, creating decentralized power in areas without access to electricity.  

      While there are more issues that can and should be discussed, we will limit ourselves to these for the sake of brevity. However, it is apparent that the country’s coming leadership will have a significant task on their hands. Despite the challenges, there are opportunities. The administration will have to get the persistent debt issue under control, as well as diversifying the economy away from oil. The country still possesses abundant arable land for agriculture, renewable energy resources for electricity generation, and human resources aplenty. It will behoove the next administration to find a solution to the country’s ongoing brain drain to the Global North, and significant investments will have to be made in education and healthcare. It’s a long road ahead, but there’s a road. 

      • Published: 27th February, 2023


      Emmanuel is an economic researcher and writer who likes to investigate systems, connect the dots, and find solutions.


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