Economic reforms implemented by President Bola Tinubu’s administration, particularly the liberalisation of the foreign exchange market and the elimination of gasoline Subsidies in 2023, have left Nigerian companies in a dire situation. Costs went up, consumer output down, and corporate confidence went down as a result of these policies. Businesses’ operational costs have skyrocketed as a result of the Devaluation of the naira, which went from ₦460 to $1 in May 2023 to ₦1,690 to $1 (and temporarily ₦1,900 to $1 in February 2019). Between 2023 and 2024, for instance, the overall operational costs of 23 large companies increased from ₦2.56 trillion to ₦5.1 trillion.
Manufacturers are being forced to rely on the more costly parallel market (₦1,730 per dollar) due to the lack of foreign exchange. Businesses that have recorded large net exchange losses include Nestlé Nigeria and Dangote Cement. In addition to higher Electricity rates, inadequate infrastructure, and excessive taxes driving up Logistics costs, Inflation has gotten worse, rising from 22.41% in May 2023 to 33.88% in October. According to a Standard Bank analysis, Nigerian company confidence has fallen precipitously, and international Investors are wary of the country because of currency rate volatility.
Direct financial measures are needed to address productivity difficulties.
Critics contend that these policies put Revenue ahead of economic stability, despite the government’s assertions that these reforms have saved $20 billion. Nigeria has to make significant investments in infrastructure, especially in the areas of rail, roads, and electricity, in order to alleviate this situation. Direct financial measures, such as low-interest loans and manufacturer tariff rebates, are necessary to address Productivity difficulties. Increasing oil exports (now at 1.8 million barrels per day), maintaining infrastructural stability, and promoting diaspora remittances (averaging $20 billion yearly) are all necessary to strengthen the naira.
Restoring trust and stabilising the Naira require strategic FX market operations. Nigeria had long-standing economic problems before to the 2023 changes, which stemmed from its over reliance on oil exports, which accounted for about 90% of its foreign exchange earnings. Industrial expansion and diversification were hindered by decades of underinvestment in infrastructure, pervasive corruption, and an unfavourable business environment. Nigeria suffered from high unemployment, poor Manufacturing output, and growing public debt while having the largest Economy in Africa. Policies like the fuel subsidy, which subsidise consumption rather than the economy as a whole, cost the government more than $10 billion a year.
Coordinating strategic currency actions will stop volatility from worsening.
Wale Edun, the Finance minister, argues that the policies are essential for maintaining Economic Stability over the long run. He cites savings of $20 billion from the elimination of subsidies and a progressive decrease in dependency on oil earnings. Edun asserts that “Nigeria needs this hard Medicine to become a self-sufficient and competitive economy.” The Central Bank of Nigeria (CBN), meanwhile, maintains that once market forces settle, FX liberalisation would ultimately stabilise the naira. Nigeria needs more funding and collaborations with foreign development organisations to upgrade its infrastructure.
Bureaucratic inefficiencies and corruption, however, continue to be major challenges. Prior rail projects, for example, had delays as a result of limited funding and bad project management. The Niger Delta’s Security issues, where productivity has been hampered by theft and vandalism, must be addressed in order to increase oil production and support the naira. Coordinating strategic currency actions, including controlling dollar flows from oil exports and remittances, is crucial to preventing Volatility from getting worse. If these reforms are successfully implemented, Nigeria’s reputation in the international economy may change. Stability and transparency improvements could draw in foreign capital, particularly in the Technology and manufacturing sectors.
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Nevertheless, some international corporations are reducing their activities as a result of the present uncertainty, which discourages investment. Although the current changes address long-standing inefficiencies, economic hardship has been exacerbated by their hasty introduction without sufficient buffers. As in India, the transition would have been made easier with the gradual elimination of subsidies and the implementation of focused social safety nets. A more sustainable economic path can be achieved by diversifying exports beyond oil, as demonstrated by Malaysia’s successful transition to electronics and palm oil. Nigeria’s capacity to combat corruption, upgrade infrastructure, and promote industrial growth will determine its long-term viability. Without them, the reforms run the risk of halting Economic Growth and increasing inequality.