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It was obvious from the start that the ride would not be smooth. Tasking himself with turning around an economy that twice fell into recession under his predecessor with tough, unpopular reforms that his predecessors dodged said much about Bola Tinubu, who became Nigeria’s president in May 2023. It also pointed to what lay ahead.
“Fuel subsidy is gone” was the most memorable line from his inaugural address. It marked a shift to Nigeria’s best shot at a free market economy since its transition to democracy in 1999—and possibly since independence.
Since winning back international investors required the implementation of policies that would speed up economic liberalisation, price control mechanisms like petrol subsidies and fixed exchange rates had to give way.
However, stopping such interventions sharply worsened Nigerians’ pains by triggering the worst cost-of-living crisis in nearly three decades.
“The reforms have reduced distortions stemming from previous unconventional monetary and exchange rate policies, resulting in the return of sizeable inflows to the official foreign exchange (FX) market,” Fitch Ratings said in a rating action commentary this month.
“Nevertheless, we see significant short-term challenges, notably, inflation is high and the FX market has yet to stabilise, and the durability of the commitment to reform is to be tested.”
The credit rating agency revised Nigeria’s long-term foreign-currency issuer default rating to ‘B-’ after upgrading it to ‘B’ in April, moving its outlook to positive from stable.
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From energy, food, and transportation to imports and manufactured goods, the impact of petrol subsidy removal, power subsidy cuts, and the devaluation of the naira has been overwhelming.
What that means, altogether, is that Africa’s most populous country has reached a crunch time at last.
It must decide whether to keep economic programmes that have a mass appeal but have stifled growth for years or rid itself of them to free up more revenue for development, even if this induces economic pains for citizens.
On Wednesday, Mr Tinubu stated that he would sustain his reforms while acknowledging the pains they have caused millions of Nigerians.
Here is an overview of economic performance across key parameters in the first half of Mr Tinubu’s first term in office:
Exchange rate
Long used to a managed float system, which granted the central bank ample freedom to influence the exchange rate to keep the naira artificially strong, the local currency faced immediate volatility when it switched to a free float.
Right from the COVID-19 pandemic days, when the urgency to restrict dollar supply due to gravely low inflows from oil exports triggered a squeeze in the market, pressure from the IMF and the World Bank on Nigeria to devalue the naira grew.
Multilateral lenders have always believed that a weaker currency is fundamental to attracting foreign capital to the economy, as international investors find it market-friendly. The quick succession of reforms implemented in the first eight months of Mr Tinubu’s presidency loosened naira controls, helping close the gap between the official and street exchange rates. That wide disparity in the two rates had left the naira vulnerable to arbitrage activities in the past.
Two sharp devaluations by monetary authorities between June 2023 and January 2024, according to a Bloomberg estimate in April 2024, set the local currency up for a roughly 70 per cent slide against the dollar.
By 19 May 2025, the dollar, which exchanged for 460.8 to the naira at market close on the day the president took office, closed trade at N1,605.
Inflation
Apart from fuel subsidy abolition and a much weaker naira, escalating food prices were among the basic factors that kept price levels high in the first two years of the president’s first term in office.
Following the removal of fuel subsidies, transportation costs spiked, affecting the cost of moving food from the far north to markets in the rest of Nigeria. The surge, combined with rampant bandit attacks on farmers in the region, has made food the biggest driver of consumer inflation in the country.
Inflation rose year on year for 12 straight months in 2024 and touched its peak level since mid-1996 in December, defying the Central Bank of Nigeria (CBN)’s persistently aggressive rate hikes.
From the administration’s first month to last December, when Nigeria last used the old methodology for computing inflation, inflation surged from 22.8 to 28.9 per cent.
External Reserves
Nigeria’s net foreign exchange reserves (NFER) climbed to $23.1 billion in December 2024, marking their highest level in three years. The increase reflects the impact of recent CBN measures to strengthen the country’s external buffers.
The reserves “stood at $23.11 billion, the highest level in over three years, a marked increase from $3.99 billion at year-end 2023, $8.19 billion in 2022, and $14.59 billion in 2021,” the CBN said in a statement in April.
Gross external reserves, which, unlike NFER, do not factor in forward contracts, currency swaps, and other short-term obligations, increased to $40.2 billion from $33.2 billion in 2023.
“The distortions in the market have been largely removed. Second, the pressure from the importation of petroleum products has also been largely reduced,” Muda Yusuf, founder and chief executive of the Centre for Promotion of Private Enterprise, told PREMIUM TIMES.
“Those things will boost the outlook for the exchange rate in a sustainable manner.”
The central bank attributed the rise to improved foreign investor sentiments, increased oil receipts, and tighter foreign exchange management.
It expects the figures to rise further through mid-2025, with rising non-oil inflows and stabilisation of the exchange rate driving the increase.
Economic growth
Nigeria’s quarterly GDP growth rate has stayed within a 2.5 to 3.8 per cent range year on year since the second quarter of 2023. The peak growth level attained in the last quarter of 2024 also marks the most robust improvement on record since fourth quarter 2024.
Annual growth for 2024 stood at 3.4 per cent, well behind the 6 per cent the government set for itself. That compares to the 2.7 per cent reported for 2023.
Nigeria, the continent’s biggest economy until 2023, fell to fourth place after the two devaluations, trailing South Africa, Egypt, and Algeria. Bloomberg’s estimate put Nigeria’s nominal GDP at $253 billion.
The National Bureau of Statistics is developing the country’s rebased GDP data, which is expected to capture emerging promising sectors such as the marine economy, arts, culture, tourism, ICT, e-commerce, and mining.
According to UNCTAD’s 2024 World Investment Report, foreign direct inflows (FDIs) into the country rose to $1.9 billion in 2023 from $895 million the year before.
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However, the entire stock of FDIs, which accounted for 19.6 per cent of GDP that year, stood at $73.4 billion, lower than the 2022 level, owing to an exodus of consumer goods multinationals from the country.
For manufacturers relying on imports for most of their raw material needs, exchange rate volatility tipped many into a loss from 2023 through 2024, including blue-chip listed companies.
“The past two years have been very challenging for manufacturers, especially for most investors, not just for manufacturers. Most of them are highly dependent on imported raw materials, machinery, spare parts and so on,” Mr Yusuf said.
Tax reforms and revenue
Nigeria has one of the lowest tax-to-GDP ratios in the world. In 2023, the government disclosed plans to increase it from 10.8 per cent to 18 per cent by 2027 as it introduced rigorous reforms to overhaul its obsolete tax laws.
The strategies include imposing a 70 per cent windfall tax on banks’ foreign exchange revaluation gains, centralising tax collection, raising value-added tax (VAT) to 12.5 per cent from 7.5 per cent, and attracting fresh investments to oil and gas via tax incentives.
As far as fiscal policies are concerned, the defining moment of Mr Tinubu’s half-term performance is perhaps the Senate’s approval of four tax reform bills on 7 May. The key highlights include the amendments to corporate income tax, personal income tax, VAT, and the Stamp Duties Act.
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