Nigeria’s Bold Reforms Show Promise, But Poverty and Inflation Remain Stubborn Challenges

Over the past two years, Nigeria has undertaken ambitious economic reforms aimed at reversing a decade-long trend of weak growth, rising poverty, and macroeconomic instability. While early signs of progress are emerging, the country continues to face steep challenges, including high inflation, persistent poverty, and a fragile global economic environment.

According to the latest annual economic assessment by international experts, Nigeria’s reform path has positioned it for a stronger economic future, provided it stays the course and prioritizes inclusive growth and social safety.

A Tough Starting Point

When Nigeria’s new administration assumed office in 2023, it inherited an economy grappling with low growth and widespread hardship. Between 2014 and 2023, real per capita GDP shrank by an average of 0.7% per year. By 2023, the poverty rate had reached 42%, exacerbated by limited access to foreign exchange, a distortionary fuel subsidy regime, and rising inflation driven in part by central bank financing of government deficits.

Reform Measures Begin to Pay Off

In response, the government and the Central Bank of Nigeria launched a series of bold reforms. These included:

• Liberalizing the foreign exchange market
• Ending central bank deficit financing
• Reforming fuel subsidies
• Improving tax collection and revenue systems

These actions have yielded encouraging results. International reserves have risen, the official foreign exchange market is now accessible, and Nigeria has re-entered international capital markets. Credit rating agencies have responded positively, and the launch of a major domestic private refinery is boosting value addition in the oil sector.

Remaining Challenges

Despite this progress, serious hurdles remain:

• Inflation continues to hover above 20%, eroding purchasing power
• Infrastructure gaps, especially in electricity, stifle productivity
• Poverty and food insecurity remain widespread
• Social protection systems are underdeveloped
• Nigeria remains vulnerable to volatile oil prices, with oil revenues still contributing 30% to government income in 2024

Key Policy Priorities Ahead

To sustain momentum, experts recommend Nigeria focus on three strategic priorities:

1. Promote Sustained and Inclusive Growth
   The government must drive broader economic growth to lift millions out of poverty. In the short term, expanding and scaling up targeted cash transfer programmes will help cushion the most vulnerable.
2. Strengthen Budget and Monetary Policy Frameworks
   Effective budget planning and expenditure management are essential to deliver on infrastructure and social investment. Monetary policy must remain focused on fighting inflation and restoring economic confidence.
3. Boost Domestic Revenue Mobilization
   Nigeria’s public finances must be strengthened to fund critical areas like agriculture, infrastructure, and climate resilience. Ongoing tax reforms aim to expand the tax base, simplify compliance, and ensure fair burden-sharing. Over time, this will allow for better alignment with regional tax standards, once economic conditions stabilize.

The report emphasizes that redirecting savings from fuel subsidy removal into productive public spending will be essential to deliver visible improvements in livelihoods and services.

Outlook

Nigeria’s potential as an African economic powerhouse is not in doubt. But unlocking it will require sustained reform implementation, stronger fiscal discipline, and a robust safety net that ensures no one is left behind during the transition.

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