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Has Tinubu’s economic reform started working? 29 Mar 2025

Nigerian President Bola Ahmed Tinubu

Some commentators have said President Bola Tinubu took a reckless gamble when very early in his administration he removed fuel subsidy and introduced the market exchange rate. It was an oversimplified interpretation of his early policy decisions, which itself needs an interpretation. Since no one plays poker to lose, this understanding of the policy moves of Tinubu accepts that the President actually intended to improve the economy. But while many thought that he should have delayed the decisions, others felt the two reform measures constituted an overdose.

But leadership, as it is commonly said, is not a popularity contest. Effective leadership requires understanding of issues, vision, and the courage to take decisions that will help to take the people from one situation or place to a better one. Such show of courage may be misunderstood, and if the leader decides to chat a new or different path to a needed better future, the destination must be insight for the people to believe that they were not just wandering in an economic wilderness.

President Tinubu’s political acumen has been well acknowledged. But his economic vision has either been understated or unrecognised. Tinubu, without a shadow of doubt, is a long-term advocate of the market economy. In 2002, during his tenure as governor of Lagos, the state issued the largest subnational bond in the history of the Nigerian capital market as of that time, raising N15 billion. He was also the first among his contemporary leaders at that time to take a determined step to bring private sector investment into the power sector at the state level. Fifteen years after he left office as governor, he completed the process that launched before his presidency to put in place a constitutional and regulatory framework for the creation of state electricity supply industries. That is a testament to Tinubu’s vision for economic policy direction.

However, the decision to remove petrol subsidy is nothing new. What is new is that Tinubu is the one that completely pulled off the difficult decision. Also, the Nigerian foreign exchange system has been undergoing reform towards its full liberalisation since the mid-1980s. Again, only now, during the Tinubu administration, have we seen a sustained implementation of the market exchange rate policy.

These policies have inescapable effects despite their prospective, long-term benefits. And so, the pump price of petrol jumped from N197 per litre in early May 2023 to over N1,000 per litre in December 2024. The naira also sharply depreciated from N463/$1 in early May 2023 to over N1500/$1 by the end of last year. The impact of these price movements on the general price level was sharp. The headline inflation rate increased from 22.22 per cent in April 2023 to 34.80 per cent in December 2024. Food inflation even accelerated faster, and Nigerians also had to grapple with sharp increases in the cost of transportation.

It should be understood that the negative impacts of these policies, including higher cost of business, reflect the decades-long structural defects of the economy. These issues include limited economic diversification, poor infrastructure, and unfriendly business environment. These issues and insecurity – amongst others – have long constituted an economic noose around the necks of the generality of Nigerians. By 2021, Nigeria had become the ‘poverty capital of the world.’ According to the 2018/19 National Monetary Poverty Line (MPI) of the National Bureau of Statistics (NBS), 40.1 percent of Nigerians were poor. In 2022, the National MPI showed that 63 percent of Nigerians were multidimensionally poor. The country was in an undeclared national economic emergency. This is why the notion that President Tinubu should have delayed his policy reform is not good judgement even if public-spirited.

So, are there signs nearly two years on that the reform may have started yielding results? Recent macroeconomic data answers affirmatively. The gross domestic product (GDP), which measures the total value of economic goods in a quarter or a year, grew by 3.85 percent in Q4 2024. It was the highest rate that has been achieved in the last three years. There is hardly any economic advancement that can be made without an adequate rate of economic growth. While economists believe that GDP growth is not enough, they acknowledge that it is important. Therefore, retuning Nigeria’s economy to high growth is an important narrative. The outlook of Nigeria’s annualised GDP growth rate is now as high as 7 percent.

With regard to the exchange rate, we have recently seen stability over several months, with the rates even trending downward in both the formal and parallel markets, and with the gap between both quite negligible. External factors, especially geopolitical risk, have in recent weeks seen the naira losing part of the previous gains. This is to be expected. But as such risks dissipate, the naira will strengthen again. This will definitely boost the confidence of foreign investors, seeing the Nigerian market functioning well.

Recent data shows capital importation into the country has been improving, with the regular accretion to the foreign reserves of the Central Bank of Nigeria. In 2024, Nigeria’s trade surplus rose by 209% to N18.86 trillion. These trends will count not only for the future stability of the naira but also for the economy as a whole.

Several institutional and programmatic channels have been created to transmit economic gains to Nigerians. At a broad level, the three tiers of government now have more FAAC (Federation Account Allocation Committee) revenue to share. This means the subnational governments can spend more on the real needs of the people, including infrastructure, education, health, and investment to support food security. Despite the increase in the national minimum wage last year, stories of state governments not paying salaries on a timely basis are rare, unlike in the recent past.

Non-salaried people are not neglected in the financial gains of the reform. In June 2023, the Tinubu administration created the Nigerian Education Loan Fund (NELFUND) under which tens of billions of naira are confirmed to have been disbursed as loans to students to support their education. Through Bank of Industry, which the government plans to recapitalise with N500 billion, programmes to disburse a total of N200 billion in conditional grant fund to nano businesses and affordable loans to micro, small and medium enterprises, and manufacturing businesses are already operational. What’s more, the administration plans to recapitalise Bank of Agriculture to be able to provide financially muscular intervention in the agriculture sector.

Other macroeconomic reforms that have been delayed for years are being implemented by the Tinubu administration. In January, the NBS rebased the country’s consumer price index that measures the inflation rate. Inflation for the month fell sharply to 24.48 per cent on year-on-year basis. Once the ongoing rebasing of the GDP is completed, the size of the economy will significantly increase, restoring the narrative and attractiveness of Nigeria as a large – and the largest African – economy.

It is fair to say that President Tinubu has more work to do to make it plain to Nigerians, through our lived economic realities, that the economy is improving. Having enacted the macroeconomic reforms to have general, long-term impacts, he has more work to do at the microeconomic level. We shall turn our attention to what he has done in these areas, the early results, and the additional reform efforts that are necessary in the next two instalments of this three-part series (second part is here).

According to Singapore’s former President Lee Kuan Yew, “a nation’s success is ultimately the result of its leadership. If a nation’s leadership is resolute, committed, and pragmatic, it will find a way to succeed.” This leadership requirements for national success are present with us.

Chinedu Moghalu, Senior Special Adviser on Strategic Communication, Stakeholder Engagement and Advocacy to the Coordinating Minister of Health and Social Welfare, is a lawyer and strategist in sustainable development.