AN EXAMINATION OF THE EFFECTS OF ECONOMIC STAGNATION ON NIGERIA ECONOMIC GROWTH AND DEVELOPMENT (A CASE STUDY OF BOLA AHMED TINUBU ADMINISTRATION.

CHAPTER ONE

INTRODUCTION

Background of the Study

It is well acknowledged by all citizens that Nigeria and other countries are currently experiencing a significant decline in oil prices. This decline began years ago when the price of bonny light crude oil dropped from $145.00 per barrel to just about $40.00 per barrel.  According to Adams (2023), it is also contended that the current oil price scenario exacerbates the necessity for promptly devising and implementing appropriate measures to establish a sustainable economy and restore economic growth. The Nigerian government relies on oil for more than 60% of its overall revenues and the country depends on oil for over 90% of its foreign exchange gains. Additionally, state governments depend on the federal government for over 90% of their revenues, with the remaining 10% coming from their own created revenues. If not managed appropriately, the decline in oil prices will undoubtedly have an immediate and perhaps catastrophic effect on the budgets of all levels of government in the federation, including local, state, and federal. This is because the nation's economy is not immune to the global economic downturn. 

According to Uzochi (2023), the Nigerian economy has experienced several significant downturns in the 21st century, notably during the global financial crisis of 2008 and the oil price crash of 2014. The latter had a particularly severe impact, leading to a recession in 2016, the first in over two decades (World Bank, 2018). The COVID-19 pandemic further exacerbated economic challenges, as global demand for oil plummeted, leading to reduced government revenues and increased economic strain on businesses and households (Ozili, 2020).

Consequently, the economic downturns have had profound socio-economic impacts. Unemployment and poverty rates have surged, with the National Bureau of Statistics reporting that over 40% of the population lives below the poverty line (NBS, 2019). Additionally, inflation has eroded purchasing power, making it increasingly difficult for average Nigerians to afford basic necessities. These challenges have contributed to widespread social discontent and instability, as evidenced by the increasing frequency of protests and civil unrest (International Crisis Group, 2021).  Economic stagnation in Nigeria has led to reduced Gross Domestic Product (GDP) growth rates. During periods of stagnation, the economy's overall productivity declines, and growth in key sectors such as manufacturing, agriculture, and services is hampered (World Bank, 2018). This reduction in GDP growth limits the country's ability to generate wealth and improve living standards.

One of the most significant effects of economic stagnation is the increase in unemployment rates. With slowed economic activities, businesses are less likely to hire new employees or may even lay off existing staff to cut costs. High unemployment rates contribute to increased poverty levels and social instability (National Bureau of Statistics, 2019). Economic stagnation often leads to a decline in foreign direct investment (FDI). Investors are typically wary of putting money into economies that exhibit slow growth and high levels of uncertainty. This lack of investment further exacerbates the economic stagnation, creating a vicious cycle of low growth and limited capital inflow (Egbetokun, Adeniyi, & Siyanbola, 2010). On the other hand, Nigeria is confronted with numerous social and economic issues, including insecurity in the form of banditry and kidnappings, particularly in the northwest region. Additionally, there is an ongoing insurgency by terrorist groups in the north-east, as well as separatist agitations in the south-east. Moreover, the current administration is now gradually addressing the long-term consequences of previous misguided policies.  .

President Bola Ahmed Tinubu assumed office on May 29, 2023, after being victorious in the Presidential election held in February 2023.  Since the change in administration in May 2023, the country has been actively implementing significant changes to restore stable and favourable macroeconomic circumstances for growth. A portion of the petrol fiscal subsidy has been removed, and foreign exchange (FX) reforms have resulted in the consolidation of FX markets and the establishment of an exchange rate that accurately reflects market conditions. In order to mitigate the inflationary consequences of these reforms on the most susceptible individuals, the government has started executing interim monetary transfers to reach a total of 15 million households. Additionally, there are endeavours underway to enhance monetary policy and reorient the Central Bank of Nigeria (CBN) towards its primary objective of ensuring price stability.  Nigeria must maintain the ongoing reform momentum in order to fully realise its benefits. The initial shock of the reforms will gradually dissipate, leading to the stabilisation of macroeconomic conditions. This will result in a steady, albeit sluggish, expansion in the non-oil economy. 

At the same time, the oil sector is expected to reach a state of stability. Implementing structural reforms will be necessary to achieve higher growth rates. The liberalisation of the exchange rate should have a positive impact on both the fiscal and external balances. Anticipated reductions in inflation are likely to occur gradually due to the implementation of measures to tighten monetary policy and stabilise the currency rate. Consequently, it is anticipated that poverty rates will rise in 2024 and 2025, followed by a stabilisation in 2026. However, Nigeria's prospects face significant risks, particularly if there is a decline in the pace of reforms or if they are reversed. The risks encompass a relatively inadequate implementation of monetary policy tightening, neglecting to rectify imbalances in petrol pricing, and failing to increase non-oil revenues. Economic recovery would be negatively affected by increasing insecurity, unfavourable climate shocks, and public dissatisfaction with inflation. Therefore, a survey will be conducted in order to evaluate the impact of economic stagnation on the survival of poor socioeconomic households in Kaduna state.

Statement of the Problem

Over the years, Nigeria has faced numerous structural challenges that have hindered sustainable economic growth. Issues such as poor infrastructure, corruption, political instability, and an over-reliance on oil have created a fragile economic foundation (Egbetokun, Adeniyi, & Siyanbola, 2020). Various administrations have attempted to address these challenges through policy reforms. For instance, the Structural Adjustment Program (SAP) of the 1980s, implemented under the guidance of international financial institutions, aimed to diversify the economy and reduce dependency on oil (Okonjo-Iweala, 2018). Despite these efforts, progress has been inconsistent, with many policies failing to achieve their intended outcomes. The lack of adequate infrastructure hampers the availability of energy and obstructs the country's ability to fully integrate its internal economy, so preventing it from taking advantage of its substantial market size. In a study by Adewumi and Olude (2023) economic stagnation hampers the government's ability to invest in critical infrastructure projects. Poor infrastructure, such as inadequate power supply, poor road networks, and insufficient social amenities, further restricts economic activities and development

The administration of President Bola Ahmed Tinubu, inaugurated in May 2023, has inherited these complex economic challenges. In response, Tinubu's government has outlined several policy measures aimed at stabilizing the economy and fostering sustainable growth. Key initiatives include efforts to improve infrastructure, diversify the economy, and attract foreign investment (Presidency of Nigeria, 2023). Additionally, the administration has emphasized the importance of fighting corruption and enhancing governance to create a more conducive environment for economic development. Max and Uzo (2023) argued that the recent reforms provide a solid foundation for a new agreement that will drive Nigeria's development. Enhancing the underlying economic conditions will enable the implementation of structural changes and the revival of economic expansion. While it is too early to fully assess the impact of these measures, there is cautious optimism that strategic policy implementation may help steer Nigeria towards a more stable and prosperous economic future. Hence, it is in the light of these that the study seeks to evaluate the impact of economic stagnation on the survival of poor socioeconomic households in Kaduna state.

 1.3  Objectives of the Study

The main purpose of this study is to evaluate the effects of economic stagnation on Nigeria economic growth and development. Specifically, the study will;

Investigate the factors associated with economic stagnation in Nigeria under Tinubu administration.

Assess the impact on economic stagnation on GDP of Nigeria under Tinubu administration.

Investigate the impact on economic stagnation on FDI of Nigeria under Tinubu administration.

Determine the impact on economic stagnation on Human Capital Development of Nigeria under Tinubu administration.

1.4  Research Questions

The following questions have been prepared for the study:

What are the factors associated with economic stagnation in Nigeria under Tinubu administration?

What is the impact on economic stagnation on GDP of Nigeria under Tinubu administration?

What is the impact on economic stagnation on FDI of Nigeria under Tinubu administration?

What is the impact on economic stagnation on Human Capital Development of Nigeria under Tinubu administration?

1.5 Research Hypotheses

H0: Economic stagnation has no significant effect on economic development of  Nigeria .

Ha1: Economic stagnation has significant effect on economic development of  Nigeria.

1.6 Significance of the Study

The study findings will assist the government in addressing the underlying causes of economic stagnation and work towards creating a more inclusive and prosperous economy. NGOs and social activists will be able to advocate for policies that protect vulnerable populations from the adverse effects of inflation. Nevertheless, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the impact of economic stagnation on the survival of poor socioeconomic households in Kaduna state.

1.7 Scope of the study   

The scope of this study is boarded on the impact of economic stagnation on the survival of poor socioeconomic households in Kaduna state. Empirically, the study will investigate on the level of economic stagnation experience by Nigeria citizens,  whether economic stagnation has a significant impact on the psychological well-being,  the factors associated with economic stagnation and evaluate the psychological impact of economic stagnation.

Geographically, the study will be delimited to residents of Kaduna state.

1.8 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Economic stagnation: refers to a prolonged period of slow or negligible growth in an economy.

Economic:  relates to the economy, which is the system of production, distribution, and consumption of goods and services in a particular country or region.

Socioeconomic: refers to the combination of social and economic factors. It encompasses the way in which an individual's social status (including education, occupation, and income) and economic conditions influence their overall quality of life and opportunities.