Nigeria: The road ahead

Nigeria stands at a pivotal juncture in its economic journey, navigating a complex landscape shaped by global volatility, domestic challenges, and regional instability. This moment presents not just daunting hurdles but also unprecedented opportunities to reform, restructure, and reclaim a path toward sustainable development and economic resilience.

Global and domestic context

Nigeria’s economy does not operate in isolation. Global events—ranging from the ongoing war in Ukraine to tensions between major world powers—have disrupted supply chains, escalated energy prices, and tested financial stability. Domestically, Nigeria grapples with compounded issues: inflationary pressures, security threats, policy inconsistency, and structural inefficiencies. These challenges impact everyday Nigerians, from farmers in Sokoto to entrepreneurs in Lagos, highlighting the urgent need for strategic action.

Key economic challenges

Inflationary pressures

Nigeria’s inflation rate reached 32.7 percent in November 2024, with food inflation soaring past 40 percent. These figures reflect a crisis driven by rising energy costs, supply chain disruptions, and inefficiencies in key sectors like agriculture and manufacturing. The removal of fuel subsidies, while fiscally necessary, has exacerbated inflation, particularly affecting transportation and food prices.

The Central Bank of Nigeria (CBN) has responded by tightening monetary policy, raising interest rates to over 27 percent. However, monetary measures alone cannot resolve deep-rooted structural issues. Comprehensive reforms in agriculture, supply chains, and industrial sectors are critical for long-term stabilisation.

Inflation hits vulnerable populations hardest, reducing household purchasing power and increasing poverty. Businesses face higher operational costs, stifling growth and employment. Addressing inflation requires a multifaceted approach that combines monetary policy with targeted economic reforms.

2. Debt and fiscal policy

Nigeria’s public debt has ballooned to ₦87 trillion (approximately $113 billion), consuming over 90 percent of government revenues for debt servicing. This limits investments in crucial sectors like education, healthcare, and infrastructure. Rising global interest rates further complicate Nigeria’s fiscal outlook, raising concerns about debt sustainability.

To avoid a debt trap, Nigeria must adopt disciplined fiscal management. Reducing reliance on borrowing for recurrent expenditures is essential. Public-private partnerships (PPPs) offer a viable path for infrastructure development without overburdening public finances. Debt restructuring, improved tax collection, and curbing wasteful spending are also necessary steps.

3. Policy inconsistency and investment hesitancy

Policy unpredictability remains a significant barrier to economic growth. Investors, both domestic and foreign, seek stability to make long-term commitments. Unfortunately, inconsistencies in foreign exchange management, trade regulations, and fiscal policies have eroded investor confidence.

The oil and gas sector, which generates nearly 90 percent of Nigeria’s foreign exchange earnings, suffers from underinvestment due to regulatory uncertainty. Meanwhile, emerging sectors like technology, manufacturing, and services need robust and consistent policy frameworks to thrive.

Creating a stable policy environment is crucial. Coordinated efforts between fiscal and monetary authorities can build investor confidence. Transparent and consistent policies in areas such as taxation and trade regulations are essential for attracting foreign direct investment (FDI) and stimulating economic growth.

4. Security concerns

Economic development and security are inseparable. Persistent insecurity, particularly in the Northeast and Northwest, disrupts economic activities and deters investment. Insurgencies, banditry, and communal conflicts have devastated agriculture, a sector employing over 70 percent of Nigeria’s workforce.

In the Niger Delta, ongoing unrest threatens oil production and infrastructure. Addressing these security challenges requires more than military intervention; it demands holistic, community-driven solutions. Dialogue with affected communities and economic empowerment programs can help break the cycle of violence and foster long-term peace.