Nigeria’s Struggle with Economic Growth Amidst Rising Inflation

Nigeria’s economy is walking a tight-rope between optimism and uncertainty. The country recently witnessed a significant rise in foreign reserves, a bright spot amidst a sea of challenges. According to the Central Bank of Nigeria (CBN), foreign reserves surged by 12.74% to $39.12 billion as of October 2024. This boost, credited to increasing remittances and improvements in the trade balance, gives the nation a much-needed financial buffer. Governor Olayemi Cardoso highlighted this achievement while addressing the House of Representatives, emphasizing that these reserves could finance 12 months of imports and help cushion Nigeria against potential external shocks.

In fact, a Central Bank of Nigeria Household Expectations Survey conducted in August 2024 found that 77.5% of respondents expected transportation costs to rise further, and 71.7% foresaw price increases in food and household goods in the coming months. The survey captures the prevailing mood across the country—one of anxiety and concern about how much worse things might get. While the nation’s financial reserves grow, so too do the financial burdens of its people.

In response to the inflationary pressures, the CBN’s Monetary Policy Committee (MPC) has raised interest rates four times since Governor Cardoso took office. The latest hike in July 2024 pushed rates up to 26.75%. The intention behind these increases is clear: to curb inflation by reducing the money supply. However, the move has sparked considerable debate across Nigeria, particularly among households and businesses struggling with the rising cost of borrowing. The August 2024 Household Expectations Survey revealed that 67.4% of Nigerians prefer lower interest rates, seeing them as essential for economic improvement. Only 11.4% favored the higher rates, believing they would benefit the economy. This divide highlights a central challenge for policymakers: how to strike a balance between controlling inflation and ensuring that businesses and individuals can access affordable credit.

For many Nigerians, the higher interest rates have only compounded their financial woes. Borrowing has become more expensive, with businesses, especially small and medium enterprises (SMEs), finding it harder to secure loans for expansion or to cover operating costs. These rising costs create a feedback loop—when borrowing becomes too expensive, investments slowdown, which in turn hampers economic activity. While some economists argue that higher interest rates are necessary to bring down inflation, the majority of Nigerians feel that these rates make their financial situation even more precarious.

Despite the rise in interest rates and growing foreign reserves, these macroeconomic improvements have yet to translate into tangible benefits for everyday Nigerians. The CBN’s efforts to strengthen the foreign exchange market—such as adopting a “willing buyer, willing seller” model and unifying exchange rates—are steps toward a more transparent financial system. The idea is to make the foreign exchange market more efficient, reducing distortions and ensuring a smoother flow of capital.

Governor Cardoso emphasized that these foreign reserves are a crucial tool in protecting Nigeria from external shocks, and their increase reflects the positive impacts of remittance flows and improved trade balances. However, while these developments are commendable, the question remains: how can these reserves be used to address the real, immediate needs of the population? For the everyday Nigerian, these macroeconomic victories seem distant, disconnected from the lived experience of rising prices and growing financial strain.

 Nigeria finds itself at a crossroads. The country’s foreign reserves have grown, and its GDP is on the rise, yet inflation continues to erode the purchasing power of ordinary citizens. High interest rates, designed to tackle inflation, have led to a slowdown in borrowing and investment, which could have long-term consequences for businesses and job creation. The policies aimed at stabilizing the economy appear to benefit the financial system on a larger scale, but they have yet to trickle down to the average Nigerian household. This disconnect between macroeconomic success and the well-being of the population points to a deeper issue: how can economic growth be measured when it fails to improve the lives of the people it’s supposed to serve?
 
As Nigeria’s economy evolves, the question becomes more pressing: What does progress truly look like? Can economic success be declared when inflation remains a constant thorn, when the cost of living rises faster than wages? And if the numbers point toward growth, but the people continue to struggle, can we honestly call it progress?
 
So, as we march forward on this path, we ask: Is growth real when it doesn’t reach the people, or is it merely a reflection of numbers, fleeting and fragile like a mirage in the desert of everyday life?