For years, Nigeria’s biggest economic challenge was stability. The naira was under pressure. Foreign investors stayed away.
Inflation spiralled. Government finances struggled under the weight of fuel subsidies and exchange rate distortions.
When President Bola Tinubu’s administration launched a series of sweeping reforms, from removing petrol subsidies and liberalising the foreign exchange market to tightening monetary policy and pursuing fiscal consolidation, the promise was clear: endure short-term pain for long-term prosperity.
Three years later, the numbers suggest the strategy is working. But for millions of Nigerians, daily life tells a very different story.
That is the central message from Agusto & Co.’s latest report, Nigeria’s Reform Dividend: Stabilisation Without Prosperity?
Macroeconomic recovery is real
According to the economic advisory firm, Nigeria has recorded one of its strongest macroeconomic recoveries since returning to democratic rule.
The reforms have rebuilt investor confidence, strengthened foreign reserves, moderated inflation, stabilised the exchange rate and reopened access to international capital markets.
Measured against the International Monetary Fund’s orthodox policy benchmarks, Agusto said the reforms have largely achieved their objectives.
Foreign reserves climbed from $45.8 billion at the end of 2025 to nearly $50 billion by June 2026, supported by stronger oil earnings, portfolio inflows and a successful $2.3 billion Eurobond issuance.
The naira also appreciated by roughly 12% year-on-year, trading around ₦1,370 per US dollar in June 2026, reflecting renewed confidence in the liberalised foreign exchange market.
Economic growth has also shown signs of recovery.
Nigeria’s GDP expanded by 3.87% in 2025, with the IMF projecting 4.1% growth in 2026, driven by agriculture, oil production, ICT and real estate.
Inflation, which peaked at 34.8% in 2024, eased significantly to 15.06% in February 2026, before edging up slightly to 15.93% in May following renewed global commodity price pressures.
The report credits tighter monetary policy, improved exchange rate management and better agricultural harvests for helping slow inflation.
But households are telling another story
While economists celebrate stabilisation, many Nigerians continue to battle rising living costs.
Agusto argues that the country’s strongest macroeconomic indicators have yet to translate into meaningful improvements in household welfare.
“The official narrative of stabilisation increasingly contrasts with the lived reality of households battling shrinking incomes, high food prices, inadequate public services and worsening insecurity,” the report noted.
According to the firm, approximately 63% of Nigerians now live in extreme poverty, while nearly 27 million people experienced severe food insecurity towards the end of 2025.
Although the Federal Government’s cash transfer programme reached about 9.2 million households, beneficiaries reportedly received no more than three payments of ₦25,000 each—support Agusto considers insufficient given the scale of economic hardship.
Strong reserves, weak productive economy
The report cautions that Nigeria’s stronger external position masks deeper structural weaknesses.
Much of the country’s current account surplus continues to come from crude oil exports and reduced petroleum imports following increased domestic refining, not from diversified exports or industrial expansion.
Non-oil exports remain constrained by unreliable electricity, weak transport infrastructure, congested ports, regulatory uncertainty and logistics bottlenecks.
As a result, Agusto believes Nigeria’s stronger reserves should be viewed primarily as protection against external shocks rather than proof of broad-based economic prosperity.
Investors are returning, but businesses are borrowing less
The report also highlights significant progress in financial sector reforms.
Under the Central Bank of Nigeria’s recapitalisation programme, commercial banks collectively raised ₦4.65 trillion, with 33 of the country’s 37 commercial banks meeting the revised minimum capital requirements by March 2026.
Nigeria’s removal from the Financial Action Task Force (FATF) grey list and ongoing Basel III implementation have further strengthened investor confidence.
However, Agusto warns that higher interest rates are producing unintended consequences.
Banks now allocate about 22% of their assets to government securities, attracted by higher yields, while pension funds continue to favour government debt.
This has crowded out lending to businesses, leaving private sector credit at only about 12% of GDP after adjusting for exchange rate movements.
Structural challenges remain unresolved
Agusto argues that monetary policy alone cannot solve Nigeria’s deeper economic constraints.
Poor roads, underutilised rail systems, congested ports, unreliable electricity and insecurity continue to drive production costs and food prices higher.
Even as inflation slows statistically, businesses and consumers continue to grapple with elevated operating costs.
The report also points to growing dependence on Buy Now, Pay Later (BNPL) services and micro-credit among middle- and lower-income households.
Rather than reflecting greater financial sophistication, Agusto says the trend signals increasing financial distress, as more Nigerians borrow simply to finance everyday consumption.
The political test begins
The report raises fresh concerns about whether the fiscal gains from subsidy removal are being effectively deployed.
Although the IMF estimates the policy generated savings equivalent to about 2% of GDP, consolidated government revenue declined from 10.8% of GDP in 2024 to 10.2% in 2025.
Meanwhile, interest payments consumed 53.2% of Federal Government revenue last year, leaving limited room for infrastructure investment and expanded social protection.
As Nigeria moves closer to the 2027 general elections, Agusto warns that political pressure could threaten recent gains.
Historically, election cycles have encouraged higher public spending, wage increases and policy reversals.
The firm believes mounting pressure from organised labour and households struggling with the high cost of living could widen fiscal deficits if reforms lose momentum.
The next challenge
For Agusto & Co., stabilising the economy was only the first step. The harder task now is ensuring that stronger reserves, lower inflation and renewed investor confidence translate into jobs, lower living costs, stronger industries and improved household incomes.
Until that happens, the report concludes, Nigeria’s economic recovery may continue to look impressive in spreadsheets, but remain difficult for millions of citizens to experience in their everyday lives.
