World Economy

Nigeria GDP Has Shrunk Drastically

Foreign exchange controls have damaged business confidence and private investments with massive capital flight.Foreign exchange controls have damaged business confidence and private investments with massive capital flight.

A former governor of the Central Bank of Nigeria, Charles Soludo, says the nation’s gross domestic product has shrunk from about $575 billion to about $354 billion.

Soludo said this at an economic talk shop, themed:  “The Hard Facts to Rescue the Nigerian Economy,’’ organized by the Vanguard newspapers on Friday in Lagos, News Agency of Nigeria reported.

Soludo in his keynote speech said that the shrunk GDP was calculated using the official exchange rate of N304 to the dollar. In his estimation, the GDP would be much lower than $232 billion, using the parallel market exchange rate.

“In the previous 16 years, Nigeria’s GDP more than doubled in US dollar terms. But in less than two years, depending on the exchange rate you use, we have more than reduced the value to less than 50% of what we had, in less than two years, in US dollar terms.

“We would get out of recession any moment from now, with oil price increasing. But it would be a miracle if the government is able to return the GDP in US dollar terms back to the previous level, even by 2023.”

He commended the federal government on the unveiling of the Economic Recovery and Growth Plan. Soludo said that the ERGP could still be expanded on how the economic diversification can be actualized. “But it would take all hands to be on the deck to be able to pull out,” he said.

He said that the present government had tried to plug the loopholes and stop the insurgency but solving the foreign exchange volatilities remains a challenge. “To be fair, this government inherited a bad economy. The previous government had an unprecedented rate of debt accumulation, even at a time of unprecedented oil boom and was even depleting our foreign reserves instead of doubling the reserves. Insecurity, especially in the northeast was very high, and corruption was pervasive,” he added.

Soludo also said that the situation called for a state of emergency with a progressive plan to lay the foundation for a post-oil economy. According to him, the foreign exchange control has damaged business confidence and private investments, with massive capital flight.

He said that it had also driven the macro economy into recession and worsened most macro variables in the last two years. He said the inflation rate has increased about 9% to about 19%, unemployment from 7.5% to 14%.

“Market capitalization of the Nigerian Stock Exchange has reduced from N11 trillion ($34.6 billion) to about N8.65 trillion. Poverty is escalating,” he added.

Besides, he noted that the nation’s sovereign credit ratings had worsened and workers’ wages had dramatically shrunk with high inflationary pressure.



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