Nigeria’s economic paradox: Progress amid pain

The paradox of growth amid persistent hardship

At first glance, Nigeria’s macroeconomic indicators tell a story of gradual recovery. GDP growth has ticked upward from 2.9 percent in 2023 to 3.4 percent in 2024 (National Bureau of Statistics), with projections suggesting 4.17 percent in 2025. Foreign exchange reserves have swelled to over 40 billion, while non-oil exports are driving a $13.17 billion trade surplus—a rare bright spot for an economy long shackled by crude oil dependency.

Yet, for the average Nigerian, these statistics feel disconnected from reality. Inflation, though down from its January 2025 peak of 34.8 percent, remains punishing at 24.23 percent. The naira has stabilised but only after a precipitous fall from ₦900 to ₦1,535. Unemployment figures (officially 4.3%) and mass widespread underemployment, with millions trapped in subsistence-level hustles. Most alarmingly, 38.8 percent of Nigerians still live below the poverty line—a figure that has barely budged despite the uptick in headline growth.

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This dissonance between macroeconomic improvements and microeconomic suffering defines Nigeria’s current economic moment. President Bola Tinubu’s administration has made bold, necessary reforms—floating the naira, removing fuel subsidies, and courting foreign investment—but the benefits have yet to trickle down. The question now is whether Nigeria can turn these painful adjustments into broad-based prosperity or if the reforms will stall in the face of structural bottlenecks and political resistance.

The reform agenda: Hits and misses

1. The good: Stabilising fundamentals

a) Foreign reserves and trade rebalancing

Nigeria’s external accounts have strengthened significantly. The 40 billion in reserves provides a buffer against external shocks, while the 6.83 billion balance-of-payments surplus reflects improving fiscal discipline. Non-oil exports—particularly agriculture (cashew, cocoa) and services (fintech, entertainment)—are rising, reducing reliance on crude oil.

Key insight:

· State governments: Offer tax holidays for export-orientated factories.

· Private Sector: Partner with universities for R&D in agro-tech.

“Most alarmingly, 38.8 percent of Nigerians still live below the poverty line—a figure that has barely budged despite the uptick in headline growth.”

b) Investor confidence rebounds

Portfolio investments doubled to $13.35 billion in 2024, signalling that foreign investors see long-term potential despite short-term volatility. The Chatham House report declaring Nigeria at its “most competitive level in 25 years” further validates this trend.

c) GDP growth: Slow but steady

The 3.4 percent growth in 2024, while modest, suggests the economy is adjusting to reforms. If sustained, the projected 4.17 percent expansion in 2025 could mark the beginning of a more robust recovery.

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2. The bad: Inflation, unemployment, and poverty

a) Inflation’s stranglehold

At 24.23 percent, inflation remains one of Africa’s highest. Food prices, in particular, are crippling household budgets. The central bank’s 27.5 percent monetary policy rate (MPR) has helped curb money supply but at the cost of suffocating small businesses that rely on credit.

b) The unemployment mirage

The official 4.3 percent jobless rate is misleading. Underemployment is rampant, with millions working in low-productivity informal jobs. Without meaningful job creation, GDP growth will remain “jobless”—benefiting corporations but leaving workers behind.

c) Poverty’s persistent grip

Despite export gains, 38.8 percent of Nigerians remain below the poverty line. Weak social safety nets and stagnant wages mean that even those employed struggle to afford basics.

3. The ugly: Exchange rate volatility

The naira’s free float was necessary but poorly executed. The currency’s plunge from ₦900 to ₦1,535 eroded purchasing power and spooked businesses. While recent stabilisation is encouraging, confidence remains fragile.

The path forward: Policy prescriptions

For the Federal Government:

✔ Prioritise power sector reform

Nigeria’s growth will remain stunted without reliable electricity. Fast-tracking privatisation of distribution companies (DISCOs) and incentivising renewable energy investments should be top priorities.

✔ Overhaul tax policy

Simplify VAT collection and reduce corporate taxes for SMEs to spur formalisation. Introduce sector-specific interest rates—lower for agriculture and manufacturing, higher for luxury imports.

✔ Expand social safety nets

Conditional cash transfers (via BVN-linked digital wallets) can provide immediate relief to the poorest. A National Job Creation Fund could finance youth-led startups.

For State governments:

✔ Unlock agribusiness potential

Digitise land titles to attract agri-investors. Establish processing zones to add value to raw exports (e.g., turning cocoa into chocolate).

✔ Invest in tech hubs

Partner with firms like Flutterwave and Andela to train coders and expand Nigeria’s digital economy.

For Local Governments:

✔ Community-based lending

Support microfinance initiatives targeting market women and artisans.

✔ Price stabilisation boards

Negotiate with farmers and traders to curb food price volatility.

✔ Community banks

Support grassroots lending for traders.

For High-Net-Worth Individuals (HNIs):

✔ Impact investing

Back mid-sized farms, renewable energy projects, and vocational training centres.

✔ Policy advocacy

Lobby for business-friendly reforms, particularly around forex access and export incentives.

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Conclusion: A fragile recovery at a crossroads

Nigeria’s economy is at an inflection point. The Tinubu administration has made tough but necessary reforms, laying the groundwork for sustainable growth. However, without urgent action to tackle inflation, unemployment, and poverty, the recovery will remain elitist—boosting corporate balance sheets while leaving ordinary Nigerians behind.

The next 12 months will be critical. If policymakers can implement inclusive reforms—power, jobs, social protection—Nigeria could finally turn the corner. If not, the current progress may unravel, leaving the country stuck in its familiar cycle of false dawns.

Final thought:

“Economies grow on spreadsheets, but people thrive on jobs and affordable food. Nigeria’s challenge is to close that gap—before it’s too late.”

Dr Oluyemi Adeosun is BusinessDay’s Chief Economist.