By Jemimah Wellington, JKNewsMedia Correspondent
NIGERIA’s ECONOMIC transformation is gathering momentum as policymakers push through painful but necessary reforms aimed at stabilising the country’s finances and unlocking its vast growth potential.
The impact is beginning to show, but rising inflation, entrenched poverty, and a volatile global backdrop continue to weigh heavily.
The administration that came into office in 2023 inherited a fragile economy.
Real per capita GDP had contracted by an average of 0.7 percent annually between 2014 and 2023, and 42 percent of Nigerians were living in poverty.
The currency market was under pressure, forcing many to rely on costlier parallel exchange rates due to limited dollar access.
Public finances were in disarray, worsened by an unsustainable fuel subsidy regime and monetary financing of the deficit that stoked inflationary pressures.
Over the past two years, the government and the Central Bank of Nigeria have pursued wide-ranging reforms.
These include liberalising the foreign exchange market, halting deficit financing by the central bank, and removing fuel subsidies.
Efforts to improve one of the world’s weakest tax collection systems are also underway.
As a result, Nigeria returned to international capital markets in late 2024 and saw credit upgrades from global agencies. International reserves have grown, and official access to foreign currency has become more transparent.
The start of production at a new domestic refinery is another significant milestone.
By pushing Nigeria further up the oil value chain, this investment could reduce dependency on fuel imports and strengthen the country’s balance of payments position in a fully deregulated market.
Despite these advances, structural challenges persist. Inflation remains above 20 percent, infrastructure gaps, particularly in electricity, continue to constrain economic activity, and the absence of a robust social safety net leaves many Nigerians vulnerable to shocks.
High global borrowing costs and volatile oil prices, which supply 30 percent of the government’s revenue, add further strain.
To counter these pressures, Nigerian authorities are being urged to pursue three strategic priorities. First, inclusive and sustained economic growth must be scaled up to reduce widespread poverty and hunger.
Expanding the government’s cash transfer scheme could help cushion vulnerable groups while longer-term growth gains materialise.
Second, an effective fiscal framework is crucial. This means crafting realistic budgets, enforcing sound expenditure management, and implementing transparent reporting systems that improve accountability.
Tackling inflation through decisive monetary policy also remains essential to reduce uncertainty and strengthen investor confidence.
Third, increasing domestic revenues is vital to meet Nigeria’s development needs.
With reform easing tax compliance, broader coverage and enforcement will boost funding for critical sectors such as agriculture, energy access, and climate adaptation. Aligning tax rates with regional peers could follow once inflation cools and safety nets are in place.
The fiscal room currently occupied by high interest payments must eventually shift towards development spending.
Ensuring that savings from subsidy removal are channelled into priority investments will be key to closing this gap.
Nigeria’s ambition to become a major economic force in Africa and beyond is within reach. But sustaining reform momentum and protecting the most vulnerable remain central to realising that goal, as noted by the IMF.
