Abuja: Over the past two years, Nigeria, Africa’s most populous country, has implemented challenging reforms to address longstanding economic obstacles. While some progress is evident, poverty and food insecurity remain prevalent, and the global economic environment poses additional challenges. The latest annual economic health check of Nigeria suggests that appropriate policies can help the country realize its potential as a significant economic force in Africa and globally.
According to African Press Organization, upon taking office in 2023, Nigeria’s new government faced low economic growth and rising poverty levels. Between 2014 and 2023, real per capita GDP declined by an average of 0.7 percent annually, with the poverty rate reaching 42 percent in 2023. Limited access to dollars forced reliance on the parallel currency market, escalating costs. Public finances were further strained by an opaque fuel subsidy system, leading to petrol scarcity, while central bank financing of the fiscal deficit contributed to rising inflation.
Despite encouraging progress, significant challenges persist. Inflation remains above 20 percent, and poor infrastructure, particularly in electricity, hampers economic activity. High poverty and food insecurity levels continue as Nigeria lacks an effective social safety net to protect its most vulnerable populations.
The global economic environment compounds these issues with elevated uncertainty and high borrowing costs. Nigeria is particularly vulnerable to volatile international oil prices, given that oil revenues accounted for 30 percent of government revenues in 2024.
To overcome these challenges, Nigeria should focus on three key priorities. First, the country needs stronger and sustained growth to lift millions out of poverty and food insecurity. This requires making growth more inclusive and expanding the existing cash transfer system.
Second, Nigeria must establish an effective budget framework to support investments in people and infrastructure. This involves realistic budget assumptions, strong expenditure management, and transparent implementation and reporting to enhance accountability. Monetary policy should continue to address inflation and reduce economic uncertainty decisively.
Third, increasing domestic revenues is essential due to Nigeria’s substantial funding needs in sectors like agriculture, infrastructure, and climate adaptation. Tax reforms are underway to simplify tax payments and improve compliance. As the cost-of-living crisis abates and the cash transfer system matures, there will be opportunities to align tax rates with neighboring countries. Currently, the revenue allocated to interest spending limits investment in people and infrastructure, making it crucial that savings from the removal of fuel subsidies are directed toward priority spending.
Nigeria’s potential is undeniable, but realizing it requires continued reforms and a robust social safety net to support the most vulnerable.