BY NIYI JACOBS (EDITOR)
Nigeria’s economic story since June 2023 has been one of dramatic policy change, painful adjustment and gradual stabilisation.
When President Bola Ahmed Tinubu announced the removal of the petrol subsidy at his inauguration on May 29, 2023, with the declaration that “subsidy is gone,” the decision immediately altered the economic realities facing millions of Nigerians.
Weeks later, the administration took another major step by reforming the foreign exchange market, effectively moving towards a unified market in which the naira would be more responsive to market forces.
The two measures became the defining pillars of the administration’s economic reform programme.
More than three years later, the government’s reform scorecard presents a mixed but increasingly significant picture.
On one side are stronger government revenues, improved foreign exchange liquidity, a narrower gap between official and parallel-market exchange rates, rising external reserves and stronger economic growth.
On the other are higher petrol prices, increased transportation and food costs, pressure on household incomes, rising business costs and the broader decline in purchasing power that followed the reforms.
The central question now is no longer whether Nigeria has changed its economic direction. It clearly has.
The bigger question is whether the gains from the reforms will eventually become large enough and broad enough to improve the living standards of ordinary Nigerians.
The Two Big Reforms
The removal of the petrol subsidy and the reform of the foreign exchange market were designed to address longstanding distortions that had become increasingly expensive for the Nigerian government and the economy.
For years, the petrol subsidy consumed a substantial portion of public resources. Government effectively subsidised the price of petrol by paying the difference between the regulated retail price and the higher market cost.
While the policy kept petrol relatively cheap for consumers, it also created significant fiscal pressure, encouraged smuggling and made it increasingly difficult for government to fund other priorities.
The government’s decision to remove the subsidy therefore immediately freed resources that could otherwise be deployed for infrastructure, education, healthcare, security and social programmes.
But the economic consequences were immediate.
Petrol prices rose sharply, and because Nigeria’s economy depends heavily on road transportation, the increase quickly spread through the cost of moving people and goods.
Transport fares increased. Businesses faced higher operating costs. Food prices climbed as the cost of transporting agricultural produce from farms to markets rose.
For households already struggling with inflation, the effect was severe.
The second major reform involved the foreign exchange market.
Before the reform, Nigeria operated with multiple exchange rates, creating distortions between the official market and parallel market. The difference between the two rates became an incentive for arbitrage and made it difficult for businesses and investors to determine the true value of the naira.
The foreign exchange reforms sought to eliminate these distortions by allowing market forces to play a greater role in determining the value of the naira.
The immediate consequence, however, was a sharp depreciation of the currency.
While the weaker naira was painful for consumers and businesses dependent on imports, the government argued that the previous system was unsustainable and that a more transparent foreign exchange market was necessary to attract investment and strengthen the economy.
Government Revenues Receive a Major Boost
One of the clearest benefits identified by the government is the increase in resources available to the Federation.
According to the Nigeria Reform Scorecard, the reforms generated and mobilised about ₦20.4 trillion in incremental resources.
These included subsidy savings, additional revenue and borrowing.
Subsidy savings alone were estimated at ₦15.8 trillion between June 2023 and December 2025.
Of that amount, the Federal Government received about ₦5.4 trillion, while the remaining funds were distributed through the Federation Account to states and local governments.
This represents a major shift in Nigeria’s fiscal structure.
For decades, the subsidy had effectively consumed resources that could have been used for other government priorities. Its removal therefore gave the three tiers of government access to additional funds.
The challenge, however, is ensuring that these additional resources translate into visible improvements in public services.
More revenue does not automatically mean better governance.
The effectiveness of the reform will ultimately depend on how governments at the federal, state and local levels use the additional resources.
Foreign Reserves Stage a Strong Recovery
Another major achievement highlighted by the reform scorecard is the improvement in Nigeria’s external position.
Gross foreign exchange reserves increased from approximately $35 billion in May 2023 to $52.5 billion by July 2026, according to government figures.
That represents a significant increase and provides the country with a stronger buffer against external shocks.
Higher reserves can improve confidence in the economy, strengthen the country’s ability to meet external obligations and provide the Central Bank of Nigeria with greater capacity to intervene in the foreign exchange market when necessary.
The government has also pointed to a dramatic reduction in the gap between the official and parallel foreign exchange markets.
The premium, which was previously above 60 percent, has reportedly fallen to below five percent.
That is an important development because a wide gap between official and parallel exchange rates creates opportunities for arbitrage and undermines confidence in the formal foreign exchange market.
A narrower gap makes the market more transparent and reduces incentives for individuals and businesses to seek foreign exchange outside official channels.
The Naira: From Sharp Depreciation to Greater Stability
The foreign exchange reform initially resulted in significant pressure on the naira.
The currency lost substantial value as the market adjusted to the new system, creating immediate challenges for importers and consumers.
Nigeria remains heavily dependent on imports for many manufactured goods, machinery, pharmaceutical products, industrial inputs and other essentials.
As the naira weakened, the cost of those imports increased.
This contributed to inflation and increased production costs for businesses.
However, the government argues that the reforms have gradually restored greater stability to the foreign exchange market.
The more important achievement may therefore not simply be the current value of the naira against the dollar, but the movement towards a more transparent and functional market.
A stable and predictable exchange-rate environment is crucial for businesses planning investments and making long-term decisions.
Economic Growth Begins to Strengthen
Despite the difficult adjustment period, Nigeria’s economic growth has also shown signs of improvement.
According to the government’s scorecard, real GDP growth increased from 2.31 percent in the first quarter of 2023 to 3.89 percent in the first quarter of 2026.
The improvement suggests that the economy has continued to expand despite the significant policy adjustments.
The government has attributed the stronger performance to reforms designed to improve macroeconomic stability, strengthen public finances and encourage investment.
The oil sector has also provided support as production improved, while activity in the non-oil sector remains important for the country’s long-term growth prospects.
However, GDP growth figures do not always tell the full story.
For millions of Nigerians, the more important economic indicators are the price of food, transportation costs, electricity bills, rent, school fees and the availability of jobs.
An economy can grow while households continue to struggle if the benefits of growth are not widely distributed.
The Heavy Cost of Reform
Perhaps the most controversial aspect of the reforms has been their impact on the cost of living.
Petrol prices increased dramatically after subsidy removal, rising from about ₦185 per litre before the reform to between ₦1,100 and ₦1,400 per litre, according to government figures.
The effect was felt almost immediately across the economy.
Transportation costs increased because of higher fuel prices.
Traders increased prices because transporting goods became more expensive.
Manufacturers faced higher logistics and energy costs.
Farmers also faced increased expenses in transporting agricultural produce.
For ordinary families, the result was a reduction in purchasing power.
A salary that could previously cover a household’s monthly expenses suddenly became insufficient as food, transportation and other essential costs increased.
This is one of the central criticisms of the reforms: while the government’s fiscal position may have improved, household welfare has not improved at the same pace.
The Naira’s Depreciation Also Increased Debt Costs
The foreign exchange reform produced another significant cost.
Because Nigeria has substantial external obligations denominated in foreign currencies, the depreciation of the naira increased the naira value of those debts.
According to the reform scorecard, additional external debt-service costs linked to exchange-rate depreciation amounted to approximately ₦9.37 trillion between June 2023 and December 2025.
This illustrates the complicated nature of the reforms.
A policy can produce significant benefits in one area while creating additional costs in another.
The weaker naira helped eliminate distortions in the foreign exchange market, but it also increased the domestic cost of servicing dollar-denominated debt.
Government Attempts to Cushion the Impact
The Federal Government has introduced several measures aimed at reducing the hardship associated with the reforms.
These have included wage adjustments, minimum-wage increases, social intervention programmes and other measures intended to support vulnerable households.
The government reported that wage adjustments, minimum-wage increases and allowances for public servants accounted for approximately ₦9.39 trillion during the period under review.
It also reported spending about ₦6.47 trillion on strategic infrastructure.
These interventions are intended to ensure that the savings and additional revenues generated by the reforms are partly channelled back into the economy.
But critics argue that more needs to be done, particularly in areas such as social protection, food security, healthcare and employment.
The Reform Dividend Must Reach the People
The biggest challenge confronting the administration is therefore moving from macroeconomic stabilisation to household prosperity.
Strong reserves are important.
A narrower exchange-rate gap is important.
Higher government revenue is important.
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