There is no question that Nigeria will face many challenges in early 2015, which could individually or collectively have serious economic implications for the nation and the region. The constant threat of violence from the militant Islamist group Boko Haram, upcoming political elections, and the decline in oil prices all threaten the political and economic stability in Nigeria. The question is will Nigeria be able to weather the economic onslaught that these events could produce.
Boko Haram’s attacks in Nigeria’s poverty-stricken northeast region have stretched Nigerian military forces thin, which now may be unable to provide adequate security for the upcoming general elections. Since the end of military rule in 1999, Nigeria has been holding elections, which have often been prone to violent protests and riots. The upcoming election, which is just over a month away, features the first contest between Nigeria’s two largest parties: the incumbent People’s Democratic Party and the All Progressives Congress. Since 2000, Nigeria has experienced high levels of economic growth, with GDP per capita doubling in this time span. However, this high rate of economic growth is in jeopardy due to mounting costs from the ongoing fight with Boko Haram and expenses related to the upcoming election.
Besides these idiosyncratic issues, Nigeria is faced with the systematic problem of falling oil prices. Nigeria is particularly vulnerable to this global trend because oil and mineral fuels make up 84% of the nation’s exports. Making matters worse, oil demand is especially sluggish in China - one of Nigeria’s top three trading partners. Similarly, the United States, Nigeria’s largest trading partner, has less demand for foreign oil as it is producing more oil domestically through hydraulic fracturing and horizontal drilling.
To continue to grow economically, Nigeria needs significant upgrades to its infrastructure. However, it may be difficult to garner foreign investment if Nigeria is politically and economically unstable. In addition, significant domestic investment in infrastructure may be unfeasible with a struggling oil industry and high security costs.
It will be interesting to see how Nigeria responds to these challenges and whether or not it will be able to maintain a high level of economic growth. What are your thoughts? Feel free to leave a comment below!