LAGOS – After years of economic stagnation, Nigeria is laying the foundation for a new era of growth through a series of ambitious but painful reforms.
This was contained in a note by IMF’s Axel Schimmelpfennig, the IMF’s mission chief to Nigeria and Christian Ebeke, the fund’s resident representative in Nigeria on the Staff Report for the 2025 Article IV Consultation with Nigeria.
They added that despite early signs of progress, the country faces a daunting challenge: transforming these policy gains into sustained prosperity for over 200 million citizens, many of whom still grapple with poverty, inflation, and food insecurity.
Since 2023, Africa’s most populous nation has taken decisive steps to tackle structural weaknesses that long held back its economy. When President Bola Tinubu’s administration took office that year, it inherited a troubled landscape marked by falling incomes and high poverty.
Between 2014 and 2023, Nigeria’s real per capita GDP shrank on average by 0.7 percent annually, while nearly 42 percent of the population lived below the poverty line.
Fuel subsidies, though politically popular, strained public finances and contributed to recurring petrol shortages.
Meanwhile, limited access to dollars forced businesses and households into a costly parallel currency market, eroding confidence in monetary policy.
Compounding the problem, the Central Bank of Nigeria’s financing of the government’s budget deficit pushed inflation even higher.
In the face of these headwinds, policymakers embarked on reforms described as bold and necessary by international observers.
In 2023, the government and central bank liberalised the foreign exchange market, eliminating the multiple exchange rates that had distorted trade and investment.
The controversial but economically vital fuel subsidy system was dismantled, freeing up resources for other priorities. The government also began strengthening revenue collection—still among the world’s weakest.
“The results so far offer cautious optimism. International reserves have grown, and access to dollars through the official market has improved significantly, narrowing the gap with parallel rates.
“Last December, Nigeria returned successfully to international capital markets and has since earned ratings upgrades from major agencies.
“A new private-sector refinery, part of a fully deregulated market, is also expected to reduce reliance on imported fuel and keep more value-added processing within the country.
“Yet officials and experts alike warn that the work is far from finished. Inflation remains stubbornly above 20 percent, eroding the purchasing power of ordinary Nigerians.
“Infrastructure deficits, especially in electricity, continue to limit private-sector growth and job creation. Most critically, the country lacks a comprehensive social safety net to protect its most vulnerable citizens from the shocks of reform and global uncertainty.
“Food insecurity remains a pressing issue, while global economic conditions—including high borrowing costs and volatile oil prices—pose additional challenges. Oil revenue, still a cornerstone of Nigeria’s public finances, accounted for around 30% of government revenue in 2024, making the country vulnerable to price swings and complicating fiscal planning.”
To address these challenges and fully unleash its economic potential, experts say Nigeria must focus on three core policy priorities.
First, the country needs stronger, more sustained growth to lift millions out of poverty. While reforms lay the foundation for private-sector expansion, making growth more inclusive will require scaling up cash transfer systems to support those most at risk.
Second, Nigeria needs an effective and credible budget framework. Delivering better infrastructure and investing in people requires realistic budgeting, disciplined spending, and transparent implementation.
“Stronger budget management can also reinforce accountability and public trust in government priorities. Meanwhile, monetary policy must continue to focus on decisively reducing inflation and stabilising the economy.
“Third, and perhaps most crucially, Nigeria must continue to boost domestic revenue collection. Given the country’s massive financing needs in areas like agriculture, infrastructure (particularly electricity access), and climate adaptation, raising revenue is essential.
“Tax reforms now underway aim to broaden the tax base, simplify payments, and improve compliance. Over time, once inflation and cost-of-living pressures ease, there will be room to align tax rates with regional peers while maintaining social equity.
“Critically, government officials stress that the savings from fuel subsidy removal must be channelled into priority investments—improving schools, hospitals, roads, and social protection—to ensure that the benefits of reform reach all Nigerians.
“The government, along with its international partners, remains confident that Nigeria’s potential is vast. But realising it will require not just continued policy discipline, but also an unwavering commitment to building an inclusive economy—one where growth translates into real, tangible improvements in the lives of everyday citizens.
“As the reforms deepen and institutions strengthen, Nigeria faces a clear choice: continue the hard work of transformation, or risk slipping back into cycles of missed opportunities and economic vulnerability. The stakes could hardly be higher for a nation determined to lead not just Africa, but the global south, into a new era of shared prosperity”, IMF said.
By Bamidele Ogunwusi @Independent
