Nigeria’s economic reforms have helped improve macroeconomic stability, strengthen the country’s external position and restore confidence in some parts of the economy. However, experts say many households are yet to experience meaningful relief from the effects of the reforms.
The reforms introduced since 2023, particularly the removal of petrol subsidies and changes to the foreign exchange market, have significantly altered Nigeria’s economic landscape.
While the government has pointed to stronger revenues, improved foreign exchange liquidity, rising reserves and moderating inflation as signs of progress, households continue to deal with high living costs and pressure on their incomes.
The International Monetary Fund has acknowledged that Nigeria’s reforms have improved macroeconomic outcomes and built greater resilience. However, it also noted that conditions remain difficult for many Nigerians. (International Monetary Fund)
Economic stability improves
The foreign exchange market has become more stable following reforms that reduced distortions associated with Nigeria’s previous multiple exchange-rate system.
The IMF has reported improvements in the functioning of the foreign exchange market and stronger external buffers, while Nigeria has also seen renewed portfolio inflows and greater access to international capital markets.
The World Bank similarly said Nigeria has made meaningful progress in restoring macroeconomic stability, with inflation easing, fiscal and external positions strengthening and economic growth remaining relatively strong. (World Bank)
The removal of the petrol subsidy has also increased the amount of revenue available to the federal, state and local governments through the Federation Account.
For some state governments, the additional funds have supported salary payments and other financial obligations, while governments have also reported increased spending on infrastructure and development projects.
However, these improvements at the macroeconomic level have not automatically translated into better living conditions for households.
The cost-of-living problem remains
For many Nigerians, the economy is experienced through food prices, transport fares, rent, electricity bills, school fees, healthcare expenses and the amount of money left after meeting basic needs.
The World Bank has noted that household incomes have not fully recovered despite improvements in the wider economy, while poverty remains high. (World Bank)
This has created a noticeable gap between economic indicators and everyday experiences.
Businesses may benefit from greater exchange-rate stability and improved economic conditions, while households continue to struggle with reduced purchasing power.
The problem is particularly significant for low-income families, who devote a large share of their earnings to basic necessities.
Reforms have come with significant costs
The removal of fuel subsidies immediately increased transportation and living costs, while foreign exchange reforms contributed to a substantial depreciation of the naira and increased the local cost of imported goods.
Although the government has argued that these measures were necessary to correct long-standing economic distortions, the transition has placed considerable pressure on households and businesses.
The IMF has said Nigeria’s reforms have strengthened economic resilience but warned that higher food and transport costs can continue to weigh on economic activity and worsen poverty and food insecurity. (International Monetary Fund)
This creates a central challenge for policymakers: maintaining the gains from economic stabilisation while ensuring that the benefits reach ordinary Nigerians.
Stronger growth needs to reach households
Economic growth alone does not necessarily mean that households will immediately become better off.
For growth to improve living standards, it needs to translate into higher incomes, productive employment, affordable goods and services and better access to essential infrastructure.
The World Bank has therefore called for Nigeria to build on its macroeconomic progress by accelerating inclusive growth and improving livelihoods. (World Bank)
This includes addressing infrastructure gaps, improving access to finance, strengthening human capital and creating conditions that allow businesses to expand and generate more jobs.
The institution has also stressed the importance of targeted support for vulnerable households while the benefits of economic reforms take time to become more widely felt.
The next phase of reform
Nigeria’s economic policy challenge is gradually shifting from stabilising the economy to ensuring that the stabilisation produces tangible improvements in people’s lives.
The government has pointed to stronger foreign reserves, improved fiscal conditions, greater exchange-rate stability and moderating inflation as evidence that its reforms are beginning to deliver results.
However, these achievements will ultimately be judged alongside household incomes, employment, food prices and the overall cost of living.
The IMF has similarly emphasised the need for policies that allow the benefits of reform to reach more Nigerians, particularly vulnerable households. (International Monetary Fund)
For the reforms to gain broader public acceptance, the improvement in economic statistics will need to be accompanied by visible improvements in everyday life.
Nigeria may be moving towards greater macroeconomic stability, but the bigger challenge is ensuring that this stability becomes stronger purchasing power, better jobs and improved living standards for households across the country.
