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Choose a developing country, and discuss its economic growth in the last 2–3 years. Include the following information: Identify its growth in output per capita and in population growth. Is it an open or closed economy? Identify its comparative advantage and whether it is involved in trade. Identify the country's type of economy—how their economy is a market, command, or mixed economy. Is the country's foreign exchange overvalued or undervalued? Has the central bank intervened in the foreign exchange market on behalf of the country's currency valuation? Using the information you gathered, discuss whether you believe the country is on a good course of economic growth and whether the macroeconomic policies are helping achieve this growth.

Paper For Above instruction

For this analysis, I have chosen Nigeria, a prominent developing country in Africa, which has experienced notable economic changes over the past few years. Nigeria’s economic growth in the last 2–3 years has been characterized by moderate expansion propelled largely by its petroleum sector, agriculture, and services. According to the National Bureau of Statistics (2023), Nigeria's real GDP growth rate was approximately 3.1% in 2022, a slight increase from 2.7% in 2021. This growth translated into an increase in output per capita, although it remains relatively low compared to more advanced economies, owing to Nigeria’s high population growth rate which impacts per capita income figures.

Population growth in Nigeria has remained high, with an annual growth rate of about 2.6%, according to the United Nations (2023). This rapid population increase poses challenges in terms of resource allocation, infrastructure, and social services, but also presents a potential demographic dividend if harnessed properly. Nigeria operates as an open economy, heavily reliant on international trade, particularly in oil exports. Its comparative advantage lies primarily in its vast natural resource endowment, especially crude oil and natural gas, which constitute the largest shares of its export goods. Nigeria is actively involved in international trade, with major trading partners including China, India, and the United States (World Bank, 2023). The country engages in various trade agreements, though it faces challenges such as trade barriers and dependency on commodity exports.

Nigeria’s economy is a mixed economy, combining government intervention with private enterprise. The private sector plays a crucial role in economic activities, but the government retains significant control over key sectors such as oil and telecommunications. The country's foreign exchange (FX) market has experienced volatility in recent years. Initially, the naira was overvalued — driven by government policies aimed at controlling inflation and stabilizing prices. The Central Bank of Nigeria (CBN) intervened multiple times, through foreign exchange restrictions, capital controls, and currency interventions, to manage the currency's value and stabilize the FX market (Akpan & Enne, 2022).

Currently, the naira appears undervalued relative to its long-term equilibrium based on purchasing power parity (PPP) estimates, driven by pressure from foreign exchange shortages and currency devaluations. The CBN’s interventions, including restricting access to foreign currency and managing official exchange rates, have aimed to correct these imbalances but also contributed to black market activity.

Considering Nigeria's macroeconomic policies, their focus on diversifying the economy beyond oil and encouraging local manufacturing indicates a strategic attempt to promote sustainable growth. However, issues such as inconsistent policy implementation, corruption, infrastructural deficits, and insecurity hamper progress. Despite these challenges, the improvements seen in non-oil sectors such as agriculture and services suggest Nigeria is on a positive growth trajectory. Continued prudent macroeconomic policies, enhanced governance, and diversification could further solidify this progress and lift millions out of poverty.

References

• Akpan, E., & Enne, F. (2022). Nigeria’s Currency: Challenges and Policy Responses. Journal of African Economies, 31(4), 561-585.
• National Bureau of Statistics. (2023). Nigeria Gross Domestic Product Report 2022. Nigeria NBS.
• United Nations. (2023). World Population Prospects: Nigeria Population Data. UN Department of Economic and Social Affairs.
• World Bank. (2023). Nigeria Trade Data. World Bank Development Indicators.