Nigeria’s currency, the naira, has recently demonstrated relative stability, trading at approximately ₦1,513 per US dollar in the parallel market as of February 17, 2025. This development has been lauded as evidence of the efficacy of President Bola Tinubu’s economic policies. Key measures contributing to this trend include the removal of fuel subsidies, the unification of exchange rates, and the initiation of local refining at the Dangote Petroleum Refinery. While these actions have provided a temporary respite, the critical question remains: Is this a sustainable path toward economic stability or merely a short-lived alleviation of persistent challenges?
The Central Bank of Nigeria (CBN) has implemented policies aimed at tightening liquidity, which have played a role in easing foreign exchange pressures. Additionally, the commencement of operations at the Dangote Refinery is anticipated to reduce Nigeria’s dependence on imported fuel, thereby conserving foreign exchange reserves. These factors have collectively contributed to a momentary reduction in demand for the US dollar.
However, historical patterns caution against over-optimism. The naira has previously experienced periods of stability, only to be undermined by structural economic weaknesses. The economy remains heavily reliant on imports, and non-oil exports have yet to achieve significant growth. Without sustained investment in productive sectors, the recent currency appreciation may prove transient. Fiscal discipline is also a pressing concern, as government borrowing and expenditure continue at unsustainable levels. Investor confidence remains fragile; without a clear, long-term economic strategy, capital flight could easily reverse recent gains.
A fundamental issue is whether the current policy framework is robust enough to maintain this positive trend. Stabilising the naira requires more than reactive measures; it demands comprehensive reforms that address inflationary pressures, promote local production, and enhance export competitiveness. The government must also improve transparency in foreign exchange management to reassure investors and businesses of its commitment to genuine market reforms.
Despite the temporary relief, several underlying challenges continue to threaten the stability of the naira. One of the most pressing issues is inflation, which remains in double digits, eroding consumer purchasing power and increasing the cost of doing business. While monetary tightening has helped curb some inflationary pressures, rising food prices and energy costs continue to fuel instability. Without addressing these structural issues, economic gains may be short-lived.
Furthermore, the persistent insecurity across Nigeria has deterred foreign direct investment (FDI), limiting the inflow of much-needed capital. Investors seek stability and predictability, both of which remain elusive in the Nigerian business environment. Political uncertainty, policy inconsistencies, and bureaucratic inefficiencies further compound the problem, making it difficult for businesses to thrive.
Another crucial factor is Nigeria’s heavy dependence on oil revenue. While the Dangote Refinery promises to reduce the nation’s reliance on fuel imports, the broader economy remains vulnerable to fluctuations in global oil prices. A sustainable recovery must involve aggressive diversification efforts to reduce dependency on crude oil exports and boost non-oil sectors such as manufacturing, agriculture, and technology.
Additionally, access to foreign exchange remains a challenge for businesses operating in Nigeria. The CBN has made efforts to clear its backlog of forex obligations, but liquidity constraints persist. The government must ensure that forex policies align with market realities, facilitating seamless transactions for businesses that rely on imported inputs.
Beyond economic policies, governance reforms are necessary to restore public and investor confidence. Corruption, inefficiency, and lack of accountability have long plagued Nigeria’s economic landscape. Strengthening institutions, enforcing regulatory compliance, and fostering an environment of transparency will go a long way in ensuring sustainable economic progress.
The role of the private sector in driving economic growth cannot be overstated. The government must create an enabling environment for businesses by addressing bottlenecks such as inadequate infrastructure, multiple taxation, and inconsistent policies. Encouraging entrepreneurship and fostering a business-friendly climate will spur investment and drive long-term economic resilience.
In the immediate term, Nigeria enjoys a reprieve in its foreign exchange challenges. However, without a coherent, long-term economic vision, the naira’s gains could unravel. To achieve lasting stability, the government must move beyond short-term fixes and implement structural reforms that enhance productivity, encourage industrialisation, and restore investor confidence. This includes diversifying the economy, investing in infrastructure, and creating an enabling environment for businesses to thrive. Only through such comprehensive measures can Nigeria hope to achieve sustainable economic growth and currency stability.
Abayomi Fashina (Fash): Tax and Risk Professional | BSc, MSc, AAT, ACA
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