How gdp growth, inflation and unemployment


In this individual report I am going to discuss how GDP growth, inflation and unemployment and identify the main macroeconomic developments over the years 2002 until 2009 for Nigeria. Also how far and why has the macroeconomic business environment changed during this period and also business opportunities , risks and profits has improved or they stayed much the same and how the developments of these years affected business confidence in the future.


The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person won't be able to purchase as much with that dollar as he/she previously could. While the annual rate of inflation has fluctuated greatly over the last half century, ranging from nearly zero inflation to 23% inflation, the Fed actively tries to maintain a specific rate of inflation, which is usually 2-3% but can vary depending on circumstances. Opposite of deflation.

The impacts on inflation depend on the degree of changes of commodity prices and the accompanying changes in the terms of trade. Owing to the commodity price boom, inflation rates rose strongly. Officially, Nigeria started experiencing a two-digit inflation rate from the third quarter of 2008. With falling commodity prices, inflationary pressures should subside to some extent as well. A strong and extended downward movement of the exchange rates will keep inflation levels high, most especially since Nigeria is import dependent and has no more foreign earnings to maintain this flair.

On the side of the real sector, with little investment in infrastructure by the government, especially the firms that source their raw material from abroad might suffer greatly. Impacts and their extent would depend on the depth and duration of the crisis: the likely liquidity squeeze emanating from the withdrawal of foreign portfolio investors from Nigeria, the extent to which remittances will decline and, more importantly, investors' confidence in the economy.

According to IndexMundi (2009)


GDP - real growth rate


Percent Change

Date of Information


3.00 %


2002 est.


7.10 %


136.67 %

2003 est.


6.20 %


-12.68 %

2004 est.


6.90 %


11.29 %

2005 est.


5.30 %


-23.19 %

2006 est.


6.40 %


20.75 %

2007 est.


5.30 %


-17.19 %

2008 est.

In this picture I want to say GDP growth on an annual basis accustomed for inflation and expressed as a percent.

Balance of payments:

Macroeconomic developments over the years 2002-2009 in Nigeria:

Nigeria is one of the most popular countries in oil, long hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management, is undertaking some reforms under a new reform-minded administration.

The former Nigerian leaders have failed to diversify its economy away from overdependence on the capital increase in the oil, which provided 20% of GDP that is 95% of the profits and about 80% of budgetary revenues. Nigeria is the most populous country in Africa without a net exporter of food and now must import food. Nigeria has made under the 2000 with the Paris Club and $ 1 billion credit from the IMF.

Nigeria pulled out through the program the IMF in 2002 after the failure to achieve the objectives and costs of exchange rates which makes it eligible for additional debt forgiveness from the Paris Club. Last year the government has begun to show the political will to implement the market-oriented reforms, asked the IMF to curb inflation by blocking the excessive wage claims and the distribution of profits from the oil industry. In 2003 the government enter the deregulation of oil prices and has set up the National Economic Empowerment and Development Strategy. Abuja in 2005 he won the Paris club to approve a debt with the agreement that cleared the 18 billion payments dollars in external debt of Nigeria. With this agreement, Nigeria is subject to rigorous evaluations of the IMF.

The GDP increased in 2007 largely to the addition of increased oil exports. The new president has pledged to continue the economic reforms of his predecessor and the proposed budget for 2008 reflects the administrations emphasis on infrastructure improvements, but infrastructure is the main obstacle to development. The government is working towards the development of public-private partnership for electric energy and roads. In 2009 GDP estimated to be about 7, 5 percent which compares favourably with 6 and 5 percent recorded in 2008.

Unemployment in Nigeria is one of the most critical problems the country is facing. The years of corruption, civil war, military rule, and mismanagement have hindered economic growth of the country. Nigeria is endowed with diverse and infinite resources, both human and material. However, years of negligence and adverse policies have led to the under-utilization of these resources. These resources have not been effectively utilized in order to yield maximum economic benefits. This is one of the primary causes of unemployment and poverty in Nigeria.

As per the report of the World Bank, the GDP at purchasing power parity of Nigeria was $170.7 billion during 2005. Unemployment in Nigeria is a major problem both economically and socially. Unemployment in Nigeria has resulted in more and more people who do not have purchasing power. Less consumption has led to lower production and economic growth has been hampered. Unemployment also has social consequences as it increases the rate of crime. The secondary-school graduates consist of the principal fraction of the unemployed accounting for nearly 35% to 50%. The rate of unemployment within the age group of 20 to 24 years is 40 % and between 15 to 19 years it is 31 %.

Nigeria has had more than its share of problems. One of the most populous countries in Africa with at least 140 million residents, it has a wealth of oil, but its record has been one of military dictatorships and economic failure.

From 2003 to 2006, Nigeria's GDP growth averaged 7.1 per cent per year, which included similar growth from the non-oil sectors.

How far and why has the macroeconomic business environment changed during this period?

Data from the NBS indicated that GDP at 1990 constant basic prices grew by 6.1% in the first half of 2008, from the 5.5% recorded in 2007. Aggregate growth was driven by the non-oil sector, which grew by 8.7% and contributed 80.7% of GDP, as oil sector output declined further by 3.3% and contributed the remaining 19.3% of GDP. Growth in non-oil GDP was broad based, as building and construction grew by 13%, wholesale and retail trade 12.0%, services 10.3% and agriculture 6.3%. Agriculture remained dominant in terms of sectoral contributions, accounting for 39.8% of GDP; industry, services, wholesale and retail trade and building and construction followed it, with contributions of 22.1%, 18.1%, 17.9% and 2.1%, respectively.

The federal government commenced a comprehensive review of its agricultural policy, with a focus on large-scale private sector commercial agriculture as a means of increasing production and productivity. In response to the global food crisis and the concomitant increase in prices, the federal government released 53,610 tonnes of grains (sorghum, maize and millet) between March and May 2008 from the National Strategic Grains Reserves (NSGR) to the states. The government also approved a tax holiday for importers of rice for the period May-October 2008. Moreover, credit facilities were provided to various farmers to ameliorate the food problem, and rehabilitation of infrastructure was undertaken.

The index of agricultural production increased by 4.8% in the first half of 2008, compared with 7.4% recorded in the first half of 2007. All agriculture sub-sectors contributed to this growth. The output from staples rose by 4.9% in 2008, compared with 10.7% in 2007. The output from the livestock, fishery and forestry sub-sectors rose by 5.8%, 4.1% and 1.2% in 2008, respectively, compared with 4.0%, 9.3% and 1.1% achieved in 2007. Furthermore, the composite food index rose by 0.9% in January 2009. The rise in the index, higher than that of the previous year,6 was caused by increases in the price of staple foods like maize, yams, millet, meat, fruits and vegetables.

The average manufacturing capacity utilisation rate, estimated at 52.6% in 2008, fell by 3.1% and 0.2% below the level in the preceding half year and the corresponding period of 2007, respectively. The decline in manufacturing production could be attributed to poor facilities, especially electric power supply, which remained sporadic, as well as increases in the pump price of diesel and the poor road network. Other constraints to increased production include unfair competition from imported finished products, which constrained the demand for locally produced goods.

With regard to business opportunities, risks and profits, explain whether it has improved, deteriorated or stayed much the same. How have the developments of these years affected business confidence in the future?

The consequences of the global financial crisis on growth and development in Nigeria are enormous and widespread. The first point of impact is through the drop in the price of oil. This is followed by the fall in the share price of the stock market. The combined effect of these two led to the depreciation of the naira exchange rate. Further worsening the situation is the withdrawal of foreign portfolio investment (hedge funds) from the Nigerian market. As of January 2009, foreign portfolio investors have withdrawn some US$15 billion from the country's capital markets. Such massive withdrawals compound the crisis of confidence, which has further complicated the capital market recovery process. The transmission of these impacts to the real and financial sector will surely hamper growth and development of the Nigerian economy. Since the extent is just emerging, it may be difficult to gauge the magnitude of what the impact of crisis is at this time.

The oil sector, which serves as the mainstay of the Nigerian economy, has experienced a plunge in the international price of crude oil. This has meant a huge decline in foreign exchange earnings. Some experts are predicting that oil prices may still come down to as low as US$30 per barrel over the coming years. Rather than increasing, the reserve has been depleting since the crisis. This has led to reduction and scarcity in the foreign exchange offered for sale in the Wholesale Dutch Auction System. This reduction has intensified speculative tendency at the WDAS. This has introduced instability into the market and triggered further depreciation of the naira foreign exchange rate. Demand in February 2009 was $3 billion compared with $7.3 billion in the month of March 2008. In the face of dwindling foreign exchange earnings, the CBN had to evolve management tactics that indirectly support the naira. The overall impact is less budgetary allocation at all tiers of government to growth and development-enhancing programmes and high cost of importation for critical infrastructure development, as in the power and health sectors. This will not only deepen the infrastructure finance gap, but also cloud the prospects for achieving the set targets in the new development plan, the Vision 2020 project.

Using the CGE methodology, this study has examined the impact of persistent global financial crisis. The impact of the global financial crisis is transmitted through decreased prices of oil exports to the Nigerian economy. Thus, in line with suggestions from economic theory, oil price shocks, in the form of decreased prices, have tended to affect all net energy exporters adversely, some very significantly, depending on their oil intensity, oil export dependence and energy/oil efficiency, among others. The findings from this study tend to confirm a priori expectations on the impact of negative oil price shocks on macroeconomic variables and poverty/household welfare in the Nigeria. Oil price shocks have had a stagflationary effect on the Nigerian economy; they slow down the rates of economic growth and increase the domestic price level. Also, they have reduced the level of domestic investment and worsened the government account and income position. Besides, the shocks have increased the level of poverty and worsened household welfare over the period August 2008 to January 2009 and are expected to worsen them in 2010. In January-June 2009, for example, the 51.2% decrease in oil prices caused Nigerian GDP to fall by 4.3%, the domestic consumer price indices to rise by 14.8%, investment to decrease by 3.6%, current household income to fall by 4.0% and household consumption to fall by 2.9%, all in relation to the January-July 2008 base period value. There have been observations that the Nigerian economy is very vulnerable to oil price shocks.

The impact of oil price shocks is felt to be more severe in Nigeria than in other countries in the region because of its almost total reliance on oil revenue to run its economy. The further implication of the above is the need for targeted assistance to the poor under conditions of declining oil export prices to enable them to mitigate adverse consequences. Generally, appropriate fiscal and monetary policy responses to oil prices shocks are crucial in order not to worsen the adverse effects of the shocks and to stimulate both domestic and foreign investment and hence boost growth significantly.

In sum, in view of the serious adverse effects of negative oil price shocks on the Nigerian economy the government needs to determine the appropriate monetary, fiscal and exchange rate policy responses. Also, and very importantly, it needs to institute measures to reduce oil dependence, as some other countries have tried to do, and improve the non-oil sector considerably. Finally, targeted assistance to the poor can help mitigate the impact of oil price shocks on them while avoiding the problems inherent in generalised subsidies.

In conclusion:

In conclusion, the global financial crisis has had some major impacts on the Nigerian economy. The massive reduction in crude oil prices has led to a severe reduction in foreign exchange earnings. It has been predicted by some experts that petroleum prices may come down to as low as US$30 per barrel over the coming years. It has aggravated the ongoing stock market crisis. It has been reported that foreign portfolio investors have withdrawn some US$15 billion from Nigerian capital markets.

With reduced development funds and lower oil revenue, there will be less funding available for much-needed investment in infrastructure and other socioeconomic projects. There are reduced capital inflows, investment flows and concessional resources inflows. There have been impacts on the national budget: 2009 federal budget proposals may be substantially changed for implementation. Growth estimates have lowered. Earlier estimates seeing growth exceeding by 10% have had to be revised to 7-8% for 2008. The long-term development plan, Vision 2020 as it is, may have to be revised. Lower growth will also mean a slowdown in the fight against poverty.

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