Oil accounts for over 80 percent of exports, a third of banking sector credit, and half of government revenues. 

In 2018, 40% of Nigerians (83 million people) lived below the poverty line, while another 25% (53 million) were vulnerable. The number of Nigerians living below the international poverty line is expected to rise by 12 million in 2019–23.  

As part of its COVID-19 response, the government carried out long-delayed policy reforms in 2020. Notably, it: (i) began to harmonize exchange rates; (ii) initiated reforms to eliminate gasoline subsidies; (iii) adjusted electricity tariffs to more cost-reflective levels; (iv) cut non-essential spending; and (v) enhanced debt management and increased transparency in the public sector, especially for oil and gas operations.

The COVID-19 crisis continues to disrupt Nigeria’s labor market. While it now exceeds pre-pandemic levels, improvements have been primarily due to workers turning to small-scale, non-farm enterprise activities in retail and trade, the revenues of which remain precarious.

Nigeria’s economic outlook remains highly uncertain. Uncertainty around the pace of vaccinations and the duration of COVID-19 persists. Moreover, the modest projected recovery can be threatened by volatility in the oil sector, including an unexpected shock to oil prices, and weaknesses in the financial sector. Even in the most favorable global context, the policy response of Nigeria’s authorities will be crucial to lay the foundation for a robust recovery.

While Nigeria has made some progress in socio-economic terms in recent years, its human capital development ranked 150 of 157 countries in the World Bank’s 2020 Human Capital Index. The country continues to face massive developmental challenges, including the need to reduce the dependency on oil and diversify the economy, address insufficient infrastructure, build strong and effective institutions, as well as address governance issues and public financial management systems.

Inequality, in terms of income and opportunities, remains high and has adversely affected poverty reduction. The lack of job opportunities is at the core of the high poverty levels, regional inequality, and social and political unrest. High inflation has also taken a toll on household’s welfare and high prices in 2020 are likely to have pushed an additional 7 million Nigerians into poverty in 2020.