How Nigeria Can Unleash its Economic Potential.
Nigeria, Africa’s most populous nation, can unlock its vast economic potential by boosting revenues, improving budget management, and expanding its cash transfer system, according to a recent economic analysis. Reforms Yield Progress Amid Challenges Since 2023, Nigeria’s government has tackled longstanding economic issues through bold reforms, including liberalizing the foreign exchange market, ending central bank deficit financing, and reforming fuel subsidies. These steps have stabilized international reserves, restored access to official foreign exchange markets, and enabled Nigeria’s return to global capital markets. A new private refinery has also strengthened the country’s position in a deregulated oil market. However, high inflation (over 20%), poor infrastructure, and widespread poverty (42% in 2023) continue to hinder progress, with volatile global oil prices and high borrowing costs adding further pressure. Key Priorities for Growth To sustain progress, Nigeria should focus on three areas:
- Promote Inclusive Growth: Stronger, sustained economic growth is critical to reducing poverty and food insecurity. Scaling up the cash transfer system can help support vulnerable populations in the interim.
- Strengthen Budget Framework: Effective budgeting, with realistic assumptions and transparent expenditure management, is essential for investing in people and infrastructure while maintaining accountability. Monetary policy must also address inflation to reduce economic uncertainty.
- Increase Domestic Revenue: Raising revenue is vital to fund critical sectors like agriculture, infrastructure, and climate adaptation. Ongoing tax reforms aim to simplify compliance and ensure fair contributions, with potential to align rates with regional neighbors once the cost-of-living crisis eases. Redirecting savings from fuel subsidy removal to priority investments is also crucial, as high interest payments currently limit funding for development.
Looking Ahead Nigeria’s economic potential is undeniable, but sustained reforms and a robust social safety net are essential to ensure inclusive growth and support the most vulnerable.
