Despite GDP Growth, High Inflation Causes Stagnant Living Standards in Nigeria

Investment and advisory firm Comercio Partners has cautioned that Nigeria’s rising GDP growth rate may not necessarily lead to improved living standards for its citizens. This warning came in response to the latest Gross Domestic Product (GDP) report published by the National Bureau of Statistics (NBS), which showed that Nigeria’s GDP grew by 3.19 per cent, driven largely by increased crude oil production.

Comercio Partners raised concerns that Nigeria’s economic growth might be “immiserizing,” a scenario where GDP growth does not lead to better living conditions for the population.

The firm pointed out that despite the positive GDP figures, high inflation—currently over 33 per cent—and a hawkish interest rate environment of 26.75 per cent could negate any potential benefits from economic expansion. Based on these figures and using Hanke’s Misery Index, Nigeria’s current score stands at 61.96 per cent, highlighting the severe economic pressures faced by Nigerians despite the reported growth.

The report stated, “Despite recent growth, caution is warranted as Nigeria’s economic expansion may be ‘immiserizing,’ where increased GDP does not translate into improved living standards. With an unemployment rate of 5 per cent, inflation at 33.40 per cent, and a challenging interest rate environment of 26.75 per cent, these factors erode the potential benefits of this growth.”

While the GDP growth in Q2 2024 suggests cautious optimism, the report emphasised that sustained economic expansion depends on addressing sector-specific challenges and stabilising key growth drivers. The energy sector, although showing increased oil production from Q2 2023 to Q2 2024, experienced a decline from Q1 2024, underscoring ongoing issues that could impede future growth.

Concerns Over Non-Oil Sector Growth

The firm also expressed concerns about the slowdown in non-oil sector growth compared to Q2 2023, particularly within the manufacturing and agriculture sectors, highlighting potential vulnerabilities. To achieve sustained GDP growth, the report stressed the importance of maintaining momentum in the services sector and continuing the recovery in the industry sector.

According to the NBS in a report published on Monday, Nigeria’s economy expanded by 3.19 per cent year-on-year in real terms during the second quarter of 2024, surpassing the 2.51 per cent growth recorded in the same quarter of 2023 and the 2.98 per cent growth observed in the first quarter of 2024.