By Adedayo Bakare | All reforms are painful and inconvenient but macroeconomic reforms can be particularly devastating. Since the inauguration of President Bola Tinubu in May 2023, Nigeria has moved from reluctance to urgency in macroeconomic reforms.

These reforms, implemented through the removal of fuel subsidies and the devaluation of the Naira, have helped to ease fiscal and external stress which accumulated following the COVID-19 crisis.

For many years, the Federal Government (FG) spent money it did not earn, supported by excess borrowing of over N23 trillion from the Central Bank of Nigeria (CBN). The FG’s fiscal deficit averaged 3.9% of GDP between 2020 and 2023, beyond the 3% limit set by the Fiscal Responsibility Act of 2007. Like the FG, the entire country spent money it did not earn as the CBN financed imports by borrowing in dollars from private investors.

With the country having nothing to show for this spending, as it did not boost growth or exports, it was clear that this behaviour was unsustainable by 2021. The FG used all its revenues to service existing debt in 2021 and the CBN soon defaulted on its obligations to commercial banks, corporates and some international airlines, such as Emirates.

When governments want to resolve a fiscal and external crisis, they crush households and businesses to make it happen. The government increases its revenue by raising taxes, or in the Nigerian case, removing subsidies and devaluing the currency. 

This destroys the purchasing power of anyone who earns, invests and owns assets in the local currency. Rather than creating wealth, the adjustment process destroys wealth. The government benefits the most given that most of its debt is in Naira and it earns part of its revenue in dollars. 

Today, these reforms have partly eased the fiscal and external burden of the public sector. The consolidated fiscal deficit of the FG, states and Local Government Areas (LGAs) narrowed to 3% in 2024, the lowest in five years.  However, the FG continues to struggle with high fiscal deficits prior to GDP rebasing mostly due to refunds to states.

Figure 1: Consolidated Fiscal Deficit 

Source: World Bank, Budget Office, Author’s Computation

In the past three years, foreign investors have bought into Nigeria’s reform story, investing $37.5bn into the Nigerian economy. Consequently, the CBN increased its net reserves to $34.8bn in 2025 from less than $4.0bn in 2023. 

Figure 2: CBN’s Net Reserves

Source: CBN, Author’s Computation

The Painful Costs of Nigeria’s Macroeconomic Reforms

While the FG and the CBN have cleaned their books, Nigerians are still reeling from the impact of the removal of petrol subsidies and the devaluation of the Naira. The average Nigerian is poorer given weak income and the more than doubling of prices of everyday items. 

Prior to the rebasing of the GDP in 2024, Nigeria’s per capita income, a rough measure of spending capacity, declined by 75% from $3,265 in 2014 to $806 in 2024. With the rebasing of the GDP, per capita income rose to $1,295 in 2025 but remains 60.0% below the peak of $3,265 in 2014. 

Figure 3: Per Capita Income Trend Pre and Post GDP Rebasing

Source: NBS, CBN, Author’s Computation

The life of the ordinary Nigerian is not better because the FG and CBN have eased their debt burden. Only the availability of high-quality jobs and a significant income growth will help households to fully recover.

The macroeconomic reforms have partly corrected years of financial recklessness and sanitised public finances, but this should not be the end goal. The reform process must endeavour to return the average Nigerian back to the peak per capita income level of $3,265 in 2014. 

A New Industrial Agenda through Trade and Investment 

The missing piece in Nigeria’s reforms are policies that will enable the Nigerian economy to rapidly grow and raise incomes. The average economic growth rate of 3.8% recorded in 2024 and 2025 is insufficient for any chance at a quick recovery. Nigeria must be growing by at least 22.9% a year in USD terms for a chance at returning per capita income to peak levels by 2030 or 12.0% a year by 2035.

The big task for Nigerian policymakers is to create and implement a coherent set of policies that will facilitate this economic growth target. Unfortunately, the policies of the current administration have come in the form of isolated measures which when put together do not translate to a convincing growth agenda.

One year into the President Tinubu administration, we made the case for more urgency in trade and investment reforms. We advocated for less reliance on the homefront, where businesses and households are struggling, to more focus on the global front through exports to benefit from robust and resilient global demand. Put simply, the Nigerian economy cannot support the kind of growth required to restore income. 

In this memo, we reiterate that Nigeria urgently needs more investment and external trade in tradeable sectors such as oil & gas, agriculture and manufacturing for rapid economic growth. These sectors should make up Nigeria’s industrial agenda as they can support massive job creation, pay living wages and boost export revenues to finance future development.

Monetary Policy Still Doing the Heavy Lifting on Trade

Nigeria’s momentum in repairing its trade accounts and attracting foreign investment has been driven by monetary policy. The FX reforms, which culminated in the devaluation of the exchange rate, raised the current account balance to an eleven-year peak of $19.0bn in 2024 and sustained it at $14.0bn in 2025 from $3.5bn in 2022. 

Figure 4: Current Account Balance

Source: CBN, Author’s Computation

This improvement was driven by a 42.7% decimation of imports of goods and services from $100.8bn in 2019 to $57.7bn in 2025, while exports continued to struggle. The success story in exports has been the exportation of petroleum products due to the Dangote Refinery, but this is a project which has been more than a decade in the making. 

The Ministry of Industry, Trade and Investment has focused on building the foundation for future trade. While it is still early days, my assessment is that the policy measures have a small chance of translating to tangible gains without resolving legacy issues that affect competitiveness. 

In 2025, Nigeria gazetted the AfCFTA tariff concessions schedule that will lower tariffs on 90% of goods trade within Africa. The first intra-Africa air cargo corridor linking Nigeria to East Africa through Uganda Airlines was also launched. In early 2026, the Ministry announced the Nigeria-UAE comprehensive partnership agreement which opens both markets through reduced tariffs. President Trump’s attempts to tear apart existing trade relationships creates opportunities for similar deals.

While these policies are clearly promising, they can create problems in the future if Nigeria is not ready. Removing tariff barriers helps Nigerian goods to be competitive abroad, but local producers also face competition at home. Without improving Nigeria’s competitiveness and export potential, partners can potentially gain more.

Consider the manufacturing value chain where manufacturers still struggle to access inputs as imports take too long to clear, clearing costs are punitive, logistic costs are higher than in the rest of the world and import tariffs are high. These are issues that must be fixed for Nigerian-made goods to take advantage of free or preferential trade agreements.

Nigeria Needs More Foreign Direct Investments in Industry

Foreign investment into Nigeria has been driven by high domestic interest rates compared to the rest of the world and FX reforms which discounted financial assets. Very little investments have come into opportunities in the real sector, which leads to more output and employment.

Nigeria has attracted $37.6bn in foreign investments since 2023 and $30bn of this has flowed into the financial sector as portfolio investments, which are volatile and have very little impact on economic productivity. Most of the $30bn in portfolio investments since 2023 have been invested in the CBN’s Open Market Operation (OMO) securities, which does not flow into the real economy and into productive sectors. 

Figure 5: Foreign Portfolio and Direct Investments

Source: CBN, Author’s Computation

The portfolio investments have mostly been used to repay CBN’s outstanding debt and accumulate reserves to finance future imports. The external reserves reached a peak of $50bn in March 2026, the highest since 2009. Yet, in times of crisis, a sudden reversal of these capital flows is likely to destabilise the economy. The CBN does not earn dollars. How would it pay its dollar debt?

The real sector, comprising businesses and consumers, have benefitted from these capital flows indirectly through exchange rate stability as the Naira recently appreciated from the 2024 lows of N1,670/$1 to $1,360/$1 in March 2026. But this has only provided reprieve from the deterioration in purchasing power—it does not provide a direct boost to incomes. 

What Nigeria truly needs is more direct investment into new and existing businesses to drive output growth and compete in the global exports market. This is necessary for the importation of capital not to be a burden in the future. 

It is the responsibility of the Ministry of Industry, Trade and Investment to come up with an investment thesis that can convince investors that there are investible sectors and the enabling environment for investments to thrive.

Case Study: Vietnam’s Structural Transformation

In my earlier policy paper “Clear Direction, Urgent Reforms Sorely Needed on Trade Policy” published by Agora Policy in June 2024, I used Vietnam as an example Nigeria can follow. 

Vietnam has created prosperity through increasing agriculture productivity, attracting foreign investment into manufacturing and opening itself to foreign trade. These reforms were supported by macroeconomic reforms, which devalued the Vietnamese dong by 80% in 1989 and unified currency markets. Nigeria is at a similar stage Vietnam was in the late 80s to early 90s. The only difference is Vietnam did not stop at macroeconomic reforms.

In 2000, Nigeria had bigger exports, bigger FDI and a higher per capita income than Vietnam. Twenty-four years later, the outcomes have remarkable diverged. Between 2000 and 2004, Vietnam grew per capita income by 1,068% to $4,717 while Nigeria’s per capita income grew by 97% to $1,083. Vietnam exported $404.0bn worth of goods in 2024 from $14.5bn in 2000, and increased FDI from $1.3bn in 2000 to $20.2bn in 2024.

Figure 6: Income per Capita ($) Vietnam vs Nigeria

In the agriculture sector, farmers were granted land use rights, research was funded to develop high yield, climate resilient seedlings, there was massive investment in in rural roads and ports, and there was renewed compliance to exports standards. Through these reforms, Vietnam raised productivity, increased exports and provided a platform to expand manufacturing. From rice farming, Vietnam diversified its agriculture into high-value commodities such as coffee, cashew nuts, fruits and vegetables. 

In manufacturing, generous fiscal incentives were provided to investors and industrial parks and exports processing zones were created to support companies. For instance, there was duty free import of raw materials and equipment. 

The foreign investment law of 1987 made it easier for foreign investors to start businesses, and the trade reforms prioritise free trade deals to large consumer markets which are prime destinations for Vietnam’s exports. In manufacturing, Vietnam started with labour intensive textiles but soon grew its exports to over $39bn by 2018, supported by access to the large US markets where imports tariffs fell to 3% from 40-60%. 

Since the late 2000s, Vietnam has transitioned from the labour-intensive garment and textile industry to an electronics revolution, anchored by Samsung. Electronic and electrical exports have risen 1,093 times from $136.0m to $149.0bn in 2024.

Making Tradeable Sectors Investible

The oil & gas, agriculture and manufacturing sectors must be the destination for investments and the foundation for Nigeria’s industrial agenda. Three years in, the oil & gas sector has received the most attention, while complementary sectors, such as power, have been neglected.

The government has focused on patching the gaps in the Petroleum Industry Act and other Oil & Gas regulations through executive orders. The Presidency has issued a raft of fiscal incentives to make deep water oil & gas projects competitive and to facilitate investment in non-associated gas projects. 

Nigeria’s stringent local content compliance requirements have also been eased to ensure that oil and gas projects do not suffer from insufficient capacity locally. To incentivise lower operating costs, the government is offering tax credits to oil & gas companies operating within cost benchmarks. 

However, in the electricity sector, there has been no tangible reforms beyond tariff segmentation and hikes that punish metered consumers for the inefficiency of the electricity industry. 

Nigeria’s distribution companies continue to record massive deficits in operations, which makes them unable to invest in infrastructure and settle outstanding obligations to upstream sector partners such as power generation companies (GENCOs) and gas producers. The GENCOs have suggested that they are owed over N6tn, which is contested by the FG. So far, the FG has only raised N504bn in bonds towards settling these outstanding obligations. 

Without settling these obligations, there will be weak investment in power and gas production to meet future energy requirements. Without these investments, the oil and gas and industrial sectors will suffer. 

Developing Domestic Supply Chains for Export Competitiveness

In the agriculture sector, there has been little attempt to fix Nigeria’s productivity issues. Farmers struggle to irrigate lands, there is no secure land tenure, high quality seedlings are not available, rural regions are not connected to markets, fertiliser usage is weak and insecurity continues to hurt farming operations. The neglect of agriculture continues to affect secondary sectors like manufacturing, which relies on its raw materials output. 

While policymakers tout manufacturing exports, unprocessed agricultural and raw material exports still have huge potential, given the manageable dollar input costs. In fact, it is one area where Nigerian exports have been competitive post-devaluation as agriculture and raw materials exports grew by 67.3% from $3.8bn to $6.4bn between 2022 and 2025. This is the fastest pace of growth across all goods exports, raising the contribution of agriculture and raw materials exports to 10.8% of total exports from 6.1% during the same period.

Figure 7: Exports of Agriculture & Raw Materials and Manufactured Goods

Source: NBS, Author’s Computation

Meanwhile, manufactured exports weakened by 5% to $1.7bn in 2025 from $1.8bn in 2022. For manufactured exports, the 70% exchange rate devaluation between 2022 and 2025 worsened competitiveness rather than supporting exports. 

Nigeria’s manufacturing supply chains are uncompetitive due to inputs priced in dollar or tracking dollar costs. Even worse, Nigerian manufacturers face higher costs than global peers due in part to weak infrastructure locally and trade policies such as high tariffs and non-tariff barriers, which are reflected in how onerous it is to import and export. The Nigerian Customs Service uses these barriers to raise tax revenues when its primary responsibility should be to support trade and value creation. 

For instance, exporters who are ready to trade with the rest of the continent still struggle to obtain Right of Origin certificates, with Nigeria lagging peers such as South Africa, Egypt, Kenya and Ghana. Producers who are shipping small export volumes also struggle to secure cheap “less than container load” (LCL) freight.

The Launch of the National Single Window in March 2026 to streamline the trade process and reduce costs will be transformative for businesses if well implemented.

The Way Forward

Nigeria must focus on delivering a fast-paced growth to support the recovery of households and businesses who have been crushed by aggressive macroeconomic reforms. 

The ongoing macroeconomic reforms should not go to waste but must be sustained as they provide a foundation for industries to build on. No industry can survive a recurring cycle of massive devaluation episodes that raise production costs.

The next step is reforming priority sectors which have huge export potentials such as the oil and gas industry, agriculture and manufacturing sectors. The recent reforms focused on fiscal incentives, accelerating project timelines, and reducing costs should be sustained to attract investments. 

In the non-oil sectors, building the infrastructure to ease cost of production, supporting the development of local value chains to partially hedge dollar input costs, facilitating seamless and cheaper trade in raw materials, as well as a stable macroeconomic environment are necessary for Nigeria’s manufacturing sector to take advantage of the renewal of AGOA as well as the tariff reduction by African countries that are implementing the AfCFTA. 

Without fixing the supply chains, every devaluation in the exchange rate is fully reflected in production costs, which make Nigerian-made goods less attractive to both foreigners and Nigerians. 

While the macroeconomic reforms are a good start, Nigeria must advance its industrial agenda to ensure that households and businesses quickly recover from the devastating crisis of the past three years. 

*Adedayo Bakare is an investment analyst and economist focused on Emerging Markets.