“Structural issues, from inadequate infrastructure to widespread poverty, continue to weigh on long-term economic prospects.”
Nigeria’s economy is still developing in an unpredictable manner due to enduring structural issues. As inflation soars and unemployment rises, the country finds itself at a critical juncture where urgent policy action is needed. The Central Bank of Nigeria (CBN), under its new leadership, Governor Olayemi Cardoso, faces the unenviable task of stabilising a volatile economy while managing public expectations. Yet, the focus on monetary policy alone is insufficient to address Nigeria’s deep-rooted economic problems. Fiscal policy and structural reforms must complement monetary measures if the country is to achieve sustainable growth.
At the heart of Nigeria’s economic dilemma is a combination of high inflation, volatile currency, and mounting debt. The economy, heavily dependent on oil, remains exposed to fluctuating global prices and external shocks. Although the CBN has employed a series of interventions—adjusting interest rates, managing foreign exchange, and intervening in currency markets—these actions have only provided temporary relief. Structural issues, from inadequate infrastructure to widespread poverty, continue to weigh on long-term economic prospects.
The immediate aftermath of the 2023 elections raised hopes that a new economic direction would be forthcoming. However, the dismissal of the former CBN governor and the prolonged delay in appointing his successor created a vacuum in leadership at a critical moment. With Governor Cardoso now in office, the pressure to deliver swift and effective reforms is palpable. Yet, it is clear that monetary policy, though important, cannot drive long-term economic growth on its own. It is analogous to trying to lift off an aircraft with one functioning wing. Fiscal policy and structural reforms represent the other wing, and without both working in tandem, Nigeria’s economy risks stagnation.
Monetary policy, by its nature, focuses on short-term economic stabilisation. The CBN’s efforts to curb inflation and stabilise the naira are commendable, but these tools offer limited scope when confronting Nigeria’s broader economic challenges. While monetary interventions can control liquidity and moderate inflationary pressures, they do little to address the more pressing concerns: high unemployment, low industrial productivity, and the lack of critical infrastructure.
Over-reliance on monetary tools may even lead to unintended consequences. Interest rate hikes, while aimed at controlling inflation, can stifle business activity by raising borrowing costs. Currency interventions to stabilise the naira are essential, but they do not solve the underlying issue of Nigeria’s dependence on oil exports. For too long, the focus has been on addressing symptoms rather than tackling the root causes of the country’s economic fragility.
On the fiscal side, the government faces a formidable challenge. Nigeria’s public debt has ballooned to over ₦77 trillion, and its tax-to-GDP ratio, at roughly 6%, is among the lowest in the world. This fiscal imbalance severely limits the government’s ability to invest in critical infrastructure and public services. The need for fiscal reform is urgent, but it is conspicuously absent from the national agenda.
The administration of President Bola Tinubu must chart a clear course that prioritises fiscal responsibility and long-term structural reform. Without a coordinated approach to fiscal and monetary policy, the country will continue to lurch from one crisis to the next. The government’s fiscal capacity—its ability to generate revenue and manage expenditure—must be strengthened. Improving tax collection, broadening the tax base, and eliminating wasteful government spending are essential steps toward restoring fiscal health.
Beyond fiscal measures, structural reforms are urgently needed to diversify the economy and reduce Nigeria’s vulnerability to external shocks. The country’s dependence on oil has left it exposed to volatile global markets, with little progress made in diversifying into sectors such as agriculture, manufacturing, and technology. While efforts have been made to promote non-oil exports, the results have been mixed, with weak infrastructure and inconsistent policies hampering progress.
Countries such as Rwanda and Singapore provide valuable lessons in economic transformation. Rwanda has successfully implemented reforms that focus on fiscal discipline, human capital development, and infrastructure investment. Singapore’s model, built on sound fiscal management and strategic investments, has turned the country into a global economic hub. Nigeria can take inspiration from these examples, but it must first recognise the importance of a coordinated policy framework that addresses both fiscal and structural challenges.
The road to sustainable economic growth in Nigeria will require a shift in policy focus. Monetary policy must be supported by a robust fiscal framework and comprehensive structural reforms. The government should prioritise investments in infrastructure, education, and healthcare—sectors that can drive long-term growth and improve the quality of life for millions of Nigerians.
Additionally, fiscal responsibility must become a cornerstone of national policy. This means not only improving revenue collection and managing public debt but also ensuring that government spending is directed toward high-impact areas. Strategic public investments can spur private sector growth, creating jobs and fostering innovation.
In conclusion, Nigeria stands at a crossroads. The CBN can only do so much with monetary policy tools; the real challenge lies in addressing the country’s fiscal and structural weaknesses. A balanced approach—combining sound monetary management with fiscal reform and structural investment—is the only way to steer the economy towards sustained and inclusive growth. Without such a strategy, Nigeria risks flying with one wing, unable to lift itself to the heights it deserves.
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