Nigeria's economic turnaround: Reforms fuel growth and investor confidence

Zawya

4 hours ago

Two years after Nigeria's economic reforms have gained traction with macroeconomic stability returning, foreign capital flowing in, and the economy on a steady trajectory to full recovery, the nation has achieved progress many thought was impossible, and more can be accomplished if the momentum is maintained, writes JOSEPH INOKOTONG.
TWO years into President Bola Ahmed Tinubu's administration, Nigeria's economy, long mired in oil dependency, structural distortions, and governance challenges, is showing signs of a turnaround. Despite ongoing hardship for many Nigerians, experts and multilateral institutions agreed that macroeconomic fundamentals are stabilizing, reforms are gaining traction, and investor confidence is rising.
Turning the tide with reforms
Tinubu's tenure began with a bold move, the removal of the long-standing fuel subsidy, which had drained public finances. He also put an end to the Central Bank of Nigeria's (CBN) unsustainable financing of fiscal deficits, reined in monetary excesses, and unified the exchange rate.
These reforms, though painful, have begun to yield results. Nigeria's economy is projected by the World Bank to grow by 3.7 per cent in 2024—its strongest performance since 2014 (excluding the post-COVID rebound). Crude oil production has risen from a low of 1 million barrels per day (bpd) to 1.5 million bpd, and the naira, though volatile, has stabilized as the gap between official and black-market rates narrowed significantly.
Foreign portfolio investments surged to $3.48 billion in the first half of 2024, compared to $756.1 million in the same period of 2023. Analysts attribute this uptick to the CBN's enhanced policy transparency, reduced forex market intervention, and successful clearing of a $7 billion FX backlog.
Positive global ratings and Eurobond market re-entry
Fitch Ratings upgraded Nigeria's outlook to 'Positive,' citing improved fiscal discipline, a reduction in fuel subsidies, and higher oil output. Moody's followed suit, lifting Nigeria's sovereign credit rating from 'Caa1' to 'B3,' based on stronger external and fiscal positions. These upgrades reflect growing optimism that recent policy changes are sustainable.
This renewed credibility allowed Nigeria to return to the international Eurobond market in late 2024, raising $2.2 billion despite subscription offers exceeding $9 billion. It marked Nigeria's re-emergence after a two-year hiatus and signals strong global investor appetite.
Managing exchange rate volatility
A cornerstone of Nigeria's stabilization plan has been unifying its multiple exchange rates. By adopting a market-driven naira valuation, speculative arbitrage has drastically reduced. According to Ifeanyi Ubah of Commercio Partners, though the naira depreciated from ₦1,475/$ in January 2025 to ₦1,598/$ by May, the fluctuation has been more orderly and transparent, signaling increased market confidence.
The country's external reserves, despite early 2025 drawdowns, began to rebound by late April, reaching $38.9 billion by mid-May—enough to cover 7.6 months of imports. This underscores the CBN's strategic efforts to rebuild buffers amid external shocks.
Oil price decline: A looming risk
While oil production has improved, declining global prices pose new challenges. OPEC+ countries recently agreed to ramp up production, pushing Brent crude closer to $60 per barrel. Some projections suggest a potential drop below $50 per barrel by year-end—a troubling scenario for an economy still reliant on oil.
At current prices and 1.5 mbpd output, Nigeria's fiscal revenue could fall 10% below its breakeven level. Yet, the CBN is responding proactively by enhancing non-oil exports, supporting backward integration to reduce import dependency, and simplifying diaspora remittance processes.
The apex bank is also encouraging sectors like agriculture, manufacturing, and creative industries to adopt export-led strategies. Nigeria's creative economy alone has the potential to generate $25 billion annually, offering a critical FX diversification pathway.
Capital market surge and Sukuk success
Investor confidence is also evident in the capital markets. In 2024, Nigerian listed firms declared ₦1.1 trillion in dividends, with ₦1 trillion already paid. The Securities and Exchange Commission (SEC) reported ₦3.68 trillion in new issues for the year, ₦3.62 trillion in equities, and ₦59.82 billion in fixed income.
The Debt Management Office's Series VII Sovereign Sukuk, aimed at financing infrastructure, was another highlight. It attracted ₦2.205 trillion in subscriptions, 735% over the ₦300 billion offer. These funds will be used to build roads and bridges across all six geopolitical zones and the FCT, aligning with Tinubu's infrastructure-focused Renewed Hope Agenda.
Meanwhile, mergers, acquisitions, and corporate restructurings continued at a rapid pace. In 2024, the SEC approved 11 M&A deals worth ₦320.36 billion. Major transactions included N Seven's ₦103.7 billion acquisition of a controlling stake in Guinness Nigeria Plc.
Inflation slows, fiscal metrics improve
Inflation, though still elevated, is beginning to ease. The National Bureau of Statistics (NBS) reported a drop in headline inflation to 23.71% in April 2025 from 24.23% in March. Food inflation also declined slightly on a month-on-month basis. The Central Bank's tighter monetary stance is credited with reducing inflationary expectations.
The fiscal position is also improving. The World Bank's latest Nigeria Development Update notes that the consolidated fiscal deficit fell from 5.4% of GDP in 2023 to 3.0% in 2024. Federation revenue surged from ₦16.8 trillion to ₦31.9 trillion, equivalent to 11.5% of GDP.
Moody's expects Nigeria's debt-to-GDP ratio to stabilize at around 50%, with interest payments consuming about 35% of revenue—a manageable, albeit high, burden.
Forward outlook: Stability with inclusive growth
Although the reforms have yet to alleviate hardship for many citizens, analysts agree that they are laying the foundation for long-term recovery. The World Bank warns that maintaining momentum is crucial and calls for deeper reforms to generate jobs, reduce poverty, and ensure inclusive growth.
'Nigeria has made impressive strides to restore macroeconomic stability,' said Taimur Samad, Acting World Bank Country Director for Nigeria. 'The challenge now is to shift public resources away from unsustainable patterns and towards investing in human capital, infrastructure, and social protection.'
Nigeria's economy is far from fully recovered, but the signs are encouraging. With macroeconomic stability returning, foreign capital flowing in, and global institutions offering cautious optimism, the Tinubu administration has achieved progress many thought unlikely. If reforms are deepened and sustained, Nigeria may well be on a path to lasting growth and prosperity.