Nigeria is a multi-ethnic and culturally diverse federation of 36 autonomous states and the Federal Capital Territory. The political landscape is partly dominated by the ruling All Progressives Congress party (APC) which controls the executive arm of government and holds majority seats at both the Senate and House of Representatives in parliament, and majority of the States.
President Bola Ahmed Tinubu was sworn into office on May 29, 2023, having won the February 2023 Presidential election. Nigeria continues to face many social and economic challenges that include insecurity such as banditry and kidnappings especially in the northwest region, continued insurgency by terrorist groups in the north-east, and separatist agitations in the south-east. President Tinubu has continuously pledged to turn around the economy and ensure security across the country. Civil society, the media and other civil groups have committed to sustain advocacy for reforms and actions towards better economic and social outcomes for citizens.
Economic Overview
During 2015-2022, growth rates declined, and real GDP per capita fell, driven by policy missteps and shocks. Monetary and exchange rate policies became increasingly distortive, eroding confidence. Fiscal deficits increased due to lower oil production and costly subsidies, notably to sustain an overvalued exchange rate. The economy was also buffeted by external shocks such as the COVID-19 pandemic, higher global food and fertilizer prices following Russia’s invasion of Ukraine, and domestic shocks such as a destructive demonetization policy in early 2023, and devastating floods in October 2022 and September 2024.
Following a change in administration in May 2023, Nigeria has been pursuing bold reforms to re-establish macroeconomic conditions for stability and growth. The gasoline subsidy has been completely eliminated, and the exchange rate has been unified and allowed to be market-reflective, eliminating the parallel market premium and generating large fiscal and broader economic benefits. The Central Bank of Nigeria has appropriately tightened monetary policy and refocused on its price stability mandate, and ended deficit monetization. While these measures are helping Nigeria’s economy turn the corner, inflation remains high, making it vital for the authorities to stay the course with tight monetary policy, exchange rate flexibility, and fiscal discipline. Poverty and hardship levels remain high following years of slow growth and high inflation. To support the poorest and most economically at-risk households, the government has been implementing targeted, temporary cash transfers, an effort that should be accelerated and expanded.
The macroeconomic reforms, if sustained, create a new platform to ignite inclusive growth and poverty reduction, while also calling for deep structural reforms. Nigeria’s new policy direction boosts international competitiveness, increases the attractiveness of Nigeria for domestic and foreign investments, and has started to reduce debt-related fiscal risks and reopen fiscal space. Yet, addressing deep-rooted constraints is key to sustaining stronger growth in Nigeria. This requires reducing trade barriers, facilitating trade, increasing access to reliable power supply, and improving the business environment. Transport infrastructure investments could integrate the domestic market, creating new opportunities. Productivity growth could be spurred by lowering import barriers and improving competition policy and its enforcement. Reducing insecurity, including along trade corridors, is essential to support production in key sectors.
Development Challenges?
Despite having the largest economy and population in Africa, Nigeria offers limited opportunities to most of its citizens. Nigerians born in 2020 are expected to be future workers 36% as productive as they could be if they had full access to education and health, the 7th lowest human capital index in the world. Weak job creation and entrepreneurial prospects stifle the absorption of the 3.5 million Nigerians entering the labor force every year, and many workers choose to emigrate in search of better opportunities. The poverty rate is estimated to have reached 38.9% in 2023, with an estimated 87 million Nigerians living below the poverty line — the world’s second-largest poor population after India.
Spatial inequality continues to be large, with the best-performing regions of Nigeria comparing favorably to upper middle-income countries, while the worst performing states fare below the average for low-income. In most areas of Nigeria, state capacity is low, service delivery is limited, and insecurity and violence are widespread. Infrastructure gaps constrain access to electricity and hinder the domestic economic integration that would allow the country to leverage its large market size, which is aggravated by trade protectionism. Emerging problems such as the increased severity and frequency of extreme weather events, especially in the northern parts of the country, add to these long-standing development challenges.
Recent reforms offer a launching pad to a new social compact for Nigeria’s development. Strengthening macroeconomic fundamentals will allow structural reforms to be pursued and economic growth to be restored. The current low social and economic equilibrium could be switched to one marked by a better funded and more effective State that provides efficient public services, public goods, and a conducive economic environment for the private sector to flourish and create more quality jobs for Nigerians.
Last Updated: Apr 10, 2025
