Despite reforms, Nigeria’s economic risk worsens — Report

This is indeed not the best of times for Nigeria’s economic managers, as international rating agencies, rather than applaud their efforts, have continued to express loss of confidence in the state of the country’s economy.

The latest vote of no confidence came from SBM Intelligence Africa Country Instability Risk Index which classified the country as vulnerable to instability in its 2024 report.

This position is a downgrade from the stable status, it was classed in 2023, a sign that the economic reform programmes of the present administration, is strangulating rather than building the economy. Since May 29 last year, Nigeria has struggled with high inflation and unstable currency value, with the naira losing over 70 per cent of its value to the dollar.

The high energy cost arising from the removal of fuel subsidy, and the fluctuation of the exchange rate, arising from the floatation of the naira, two major economic reform decisions of the Tinubu administration, have escalated the cost of doing business and made the cost of living extremely high and pushing more citizens into poverty.

Nigeria dropped six points on the Risk Index this year, scoring 45 compared with 39 in 2023.

According to SBM Intelligence, a higher score in the risk index means a higher level of political risk to business.

The implication of this is that Nigeria stands the risk of financial market turmoil, delayed consumption and investment decisions by both businesses and the citizens, and prompt lenders to tighten credit supply, all of which can lead the people into deeper poverty.

The report highlights Nigeria’s deteriorating economic environment, worsened by factors such as rising food inflation, insecurity, and rising poverty level as the drivers of instability in the country.

According to the report, “Nigeria’s economy continues to worsen, with rising food inflation, persistent insecurity across all geopolitical zones, and many people falling into extreme poverty.

“It is more polarised now than ever after the 2023 election and the unpopular reforms of the new government, such as the removal of petrol subsidies, which has worsened living conditions and led to the closure of businesses.”

Other African nations sharing this risk status include Ethiopia, Comoros, Côte d’Ivoire, Benin, and Togo, reflecting broader economic and governance concerns across the continent.

Analysis of the 2024 SBM Intelligence Africa Country Instability Risk Index, shows that Sub-Saharan Africa recorded an average of 45.4 per cent in 2024, an improvement from 47.7 per cent in the previous year.

Out of 48 countries, 31 reported improved performance, while the rest deteriorated. Angola, Burundi, Chad, Togo, and Madagascar were the biggest gainers.

A cutback on governance costs drove Angola’s performance, while Madagascar’s GDP growth improved to 4.4 per cent in 2023 from 4.3 per cent in 2022.

Botswana, Seychelles, Nigeria, Namibia, and Zimbabwe were the biggest losers. Botswana experienced a GDP decline of nearly two per cent in the first quarter of 2024, and Zimbabwe experienced economic challenges such as debt and currency crises.

On a regional count, Central African countries had the most representation, in the top ten, with about 40 per cent of the lot having countries such as Angola, Central African Republic, Chad, and Gabon.

Following closely is West Africa at 30 per cent with Guinea, Sierra Leone, and Togo. The regions with the lowest representations are East Africa, with 20 per cent represented by Burundi and Madagascar, and Southern Africa, at 10 per cent, with Eswatini as its sole representative.

“The worst-performing entities are shared by Eastern and Southern Africa, at 40 per cent each–represented by countries such as Seychelles, Kenya, Mauritius, and Comoros on the East side and Botswana, Namibia, Zimbabwe, and Zambia on the South,” SBM Intelligence stated.

For the second year running, Southern Africa retained its spot as the most stable region, with a score change of -1.3.