Nigeria’s output gap widens as GDP falls to $195bn, debt hits N150trn
BY MOTOLANI OSENI
Nigeria’s economy expanded by 3.40 per cent in 2024, up from 2.74 per cent in 2023, according to recently released data from the National Bureau of Statistics (NBS).
However, the country’s Gross Domestic Product (GDP) fell sharply to $195 billion from $363 billion in 2023, reflecting the severe impact of currency devaluation, which saw the naira plummet from N500 to N1,600 per dollar.
Despite the improved growth rate, Nigeria’s GDP remains inadequate for a population exceeding 200 million, growing at about 3 per cent annually.
The economy continues to grapple with stagflation, pushing GDP per capita to an all-time low. This underscores the widening output gap—the shortfall between the country’s actual and potential economic growth.
To address this challenge, the federal government must revamp its trade and industrial policies, particularly through reforms in Harmonized System (HS) codes, enhanced investment incentives, and targeted interventions in manufacturing, industry, and agriculture. These measures are crucial for stimulating productivity and economic expansion.
Fiscal concerns remain high, with Nigeria’s debt burden reaching N150 trillion and a cumulative deficit of N40 trillion over the past two years. In the 2025 budget, N16 trillion has been allocated for debt servicing—exceeding the combined allocations for defence, education, health, and infrastructure, which stand at N14 trillion.
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Although sovereign bond spreads have improved to a five-year low, Nigeria’s credit rating remains at junk status.
To improve its fiscal position, the government must optimise its capital structure by divesting assets to reduce debt and improve credit ratings. Additionally, industrial policies should focus on import substitution to strengthen key sectors.
The successes recorded in cement, fertiliser, and petroleum refining should be replicated in other industries. A key area of opportunity lies in the sugar industry, where major refineries owned by Dangote, BUA, and FMN could eliminate raw sugar imports and boost foreign exchange earnings under the African Continental Free Trade Area (AfCFTA).
A policy-driven roadmap to integrate local farmers into the supply chain could enhance agricultural productivity, create jobs, and contribute to closing the output gap.
Achieving a trillion-dollar economy requires deliberate policies to enhance productivity, stimulate investment, and drive sustainable growth.
