The Chief Executive Officer of Financial Derivatives Company Limited (FDC), Bismarck Rewane, has stated that Nigeria is experiencing growth without prosperity even as the citizens are getting poorer.
Rewane specifically added that the economy is growing amidst public financial pressure, noting that while the economy may still be growing in aggregate terms, average Nigerians are getting poorer.
The foremost economist expressed these views in his presentation during the May edition of Lagos Business School Breakfast Session titled ‘Gulf War III and Nigeria: Fiscal Pressure, Political Risk, Social Tension, Oil Price Shocks (Nigeria From Hero to Zero)’.
The chief executive further stated that Nigeria was always sitting at the intersection of oil windfall and income shortfall.
He noted that the country’s debt per head was increasing faster than income per capita and projected that “Nigeria’s inflation will rise to between 17 per cent and 20 per cent in December.”
Rewane stated, “He who goes a-borrowing goes a-sorrowing. The GDP per capita revealed that the living standard is deteriorating while debt burden per person is increasing signalling reduced fiscal comfort and rising economic strain.
“Nigeria is experiencing growth without prosperity and rising fiscal strain. This means that the economy may still be growing in aggregate, but the average citizen is getting poorer. Meanwhile, government financial pressure is increasing.”
According to him, “sectoral linkages are weak, growth is not employment-elastic, and the gains of aggregate expansion are not reaching the average household.
“Debt per head is rising while GDP per capita is increasing marginally, meaning that the economy is expanding in the aggregate while the average citizen is contracting in real terms.”
He stressed that higher oil prices should translate into stronger revenues, higher reserves, and a more stable Naira for Nigeria as an exporting country, “and to some degree, they have.
“However, forward sales of crude are quietly eroding the windfall” expected from the higher prices even as “oil theft and vandalism are creeping upwards, and the structural reality of the economy remains stubbornly unchanged.”
Rewane said that the fuel pump is telling the full story of the country’s decline “From Hero to Zero!” as Nigeria’s PMS pump price has increased by 59 per cent, which is the steepest fuel price surge on the African continent.
This surge, according to him, surpassed what has been experienced in Rwanda, Tanzania, Malawi, and South Africa.
Rewane said, “The bitter irony is that Nigeria is a net oil exporter.
“The country that sits on crude oil is transmitting the highest energy cost burden to the market.
“The government’s response, while not without merit, has followed a familiar toolkit: import duty cuts across 127 items, civil servant allowance hikes, and capped jet fuel prices.
“However, these measures address symptoms rather than structural causes, and they carry their own unintended consequences: fiscal strain, demand-side inflationary pressure, and the real risk of arbitrage and black-market pricing distortions.”
He averred that the ongoing war in Iran is having a dual effect on the Nigerian economy, which are mostly structural constraints and transitory revenue spikes.
According to him, the oil windfall is undermined by forward sales of crude, a slow increase in oil theft and vandalisation, slowing foreign portfolio inflows as interest rates in advanced markets are increasing
He noted that “GDP growth is likely to increase mainly due to the petroleum sector’s upstream investment in Bonga, Agbami and deepwater assets.
“Oil refining sector is outperforming GDP and set to grow rapidly
“The fiscal growth stimulus is not yet impactful
“The sectoral linkages are weak and are not job elastic
“Unemployment data is unrealistic. Very poor distinction between underemployment and unemployment.”
Rewane said that retail investors now account for 35 per cent of activity on the Nigerian Stock Exchange (NGX), having moved up from just 7.0 per cent.
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He, however, warned that “while this broadening of market participation is welcome in principle, it carries a fragility that institutional-led markets do not.
“When purchasing power erodes further under sustained inflation and declining real incomes, the exit of retail participants is unlikely to be orderly or gradual — it will be sharp, sentiment-driven, and self-reinforcing.
“Asset prices have run ahead of earnings fundamentals, and a valuation correction is not a tail risk but a base case.
“The FDC think tank’s counsel remains measured: do not exit prematurely, because the stock market capitalisation is expected to cross the N200 trillion level after the listing of the Dangote Refinery — but enter, and remain, with full awareness of where valuations stand relative to the underlying economic conditions,” Rewane said.
He warned that Nigeria cannot continue to be governed by managing consequences rather than causes, adding that the oligopolistic architecture of key sectors such as fuel supply, financial services, aviation, is compressing competition, elevating costs, and concentrating economic pain among those with the least capacity to absorb it.
Rewane said: “Growth without structural reform is growth without distribution, and growth without distribution is, over any meaningful time horizon, growth without stability. The policy response must be proportionate to the weight of the evidence—and the evidence, this month, is unambiguous.”
