Nigeria: Tinubu's Economic and Financial Reforms - Gains, Pains, and Missed Targets

Prior to assuming office three years ago on May 29, 2023, President Bola Tinubu pledged to pursue two broad monetary policy objectives. In his campaign policy document, he stated: "Monetary policy must focus on the exchange rate, interest rate and price levels. This trio must serve the objective of fiscal policy, which is broadly shared prosperity. We can protect our exchange rate, guard against inflation and preserve foreign currency reserves by limiting our exposure to large debt obligations denominated in foreign currency. Our policy will be such that new foreign currency debt obligations will be linked to projects that generate cash flows from which the debt can be repaid." So much for vision

The Orthodox Monetary Policy FrameworkIn the three years of the administration, the Central Bank of Nigeria, CBN, led by Mr. Olayemi Cardoso, embraced orthodox monetary policy, which focused on use of the Monetary Policy Rate, Cash Reserve Ratio, Liquidity Ratio, and Open Market Operations (OMO) to influence money supply, interest rates and to some extent, exchange rates.

CBN pursued tight monetary policy, raising the Monetary Policy Rate (MPR) in a bid to address rising inflation.

CBN also implemented wide ranging foreign exchange reforms, chiefly the elimination of multiple exchange rates to curb arbitrage, enhance transparency and boost investors' confidence.

Exchange Rate Reforms and Naira DepreciationThe most notable policy of the CBN under President Tinubu, is the unification of the exchange rates and introduction of willing buyer-willing seller framework for determining exchange rate in the official market.

As a result, the Naira depreciated sharply in the official forex market by 198 per cent to N1,373.65 per dollar as of May 19, 2026, from N464.67 per dollar at the beginning of the administration. It also depreciated in the parallel market by 80 per cent to N1,385 per dollar from N770 during the same period.

FX Market Confidence and Reserve AccretionTo restore confidence in the forex market, CBN cleared the foreign exchange obligation of about $7 billion, which combined with other reforms, including introduction of FX market code of conduct, enhanced foreign exchange inflow into the country.

Reflecting the impact of the reforms, the Naira has enjoyed relative stability with the exchange rate stabilising under N1,400 per dollar since 2025, despite global economic headwinds including global tariff war and the ongoing US/Israel war on Iran.

Also, the gap between the official and parallel market exchange rates narrowed to N11.35 on May 19, 2026 from N305.33 per dollar in 2023.

As a result of the enhanced investor confidence, Nigeria's foreign capital importation rose for two consecutive years to $23.21 billion in 2025, in sharp contrast to the steady decline to $3.9 billion in 2023, from $21.3 billion in 2013.

Again, reflecting the increased dollar inflow, the nation's external reserve rose steadily hitting $50.027 billion on March 11th, 2026 the highest level in 13 years, from $33 billion at the end of 2023.

Inflationary Fallout of Reforms

However, the sharp depreciation of the Naira resulting from the unification of the exchange rate, combined with the impact of the fuel subsidy removal announced by the President on May 29, 2023, triggered widespread increase in prices of goods and services, and persistent rise in the inflation rate.

Another negative impact of the Naira depreciation, is the N2.17 trillion foreign exchange losses recorded by major firms in 2024.

Price Stability and Tight Monetary Policy

In the last three years Nigerians experienced steady and sometimes sharp increases in prices of goods and services. This is reflected in the 88 per cent increase in the Cost of a Healthy Diet, CoHD between January 2024 and December 2025.

According to the National Bureau of Statistics, the CoHD rose to N1,611 per adult per day in December 2025 from N858 per adult per day in January 2024, when the metric was introduced.

As a result of the widespread increases in prices of goods and services, the annual inflation rate rose steadily to 34.8 per cent in December 2024, the highest in 28 years.

To address this trend, the Cardoso-led CBN raised the Monetary Policy Rate, MPR six times in 2024 to 27.5 per cent by November of the same year.

The CBN also raised the Cash Reserve Ratio, CRR, of commercial banks two times, in February 2024 and September 2024, to 50 per cent from 32.5 per cent.

The CRR for Merchant Banks was also adjusted. It was raised from 10% to 14% in early 2024, and subsequently moved to 16% in September 2024, where it remained through 2025.

These measures came along with adjustment in the inflation parameters bringing down inflation rate for 12 consecutive months to 15.06 per cent in February this year before the trend resumed upswing in the months of March and April 2026.

High Interest Rates Squeeze Businesses

But the hike in MPR by the CBN triggered a high interest regime, with average lending rates of banks rising by 8.55 percentage points to 35.17 per cent in March 2026 from 26.62 per cent in December 2023.

The severe impact of the high interest rate regime on businesses across the country is reflected in the 81 per cent increase in combined finance cost of 12 leading companies to N1.15 trillion in 2024 from N664.556 billion in 2023. This was in spite of a 6.4% decline in their banks' borrowing to N 1.733 trillion from N 1.852 trillion in 2023.

The companies are Nestle Nigeria, Cadbury Nigeria, Unilever Nigeria, Nigerian Breweries Plc, BUA Foods, Guinness Nigeria, Northern Nigeria Flour, Dangote Sugar, Honeywell Flour Mills, Flour Mills Nigeria, UAC Nigeria, and Golden Guinea.

Rising Debt Profile and Contradictions

Under President Tinubu, the total debt stock rose by 219 per cent to N159.27 trillion at the end of 2025 from N49.85 trillion at the end of 2023, according to the Debt Management Office, DMO.

While most of the huge increase in debt stock was fueled by the depreciation of the Naira to N1,435 per dollar at the end of 2025 from N460.35 at end of March 2023, another major factor was the plethora of new foreign loans acquired by the President during the three years.

As a result, the total foreign loan rose by 21.5 per cent to $51.85 billion at the end of 2025 from $42.67 billion at the end of 2023, contrary to the campaign promise of the President.

Debt Sustainability Indicators Improve

However, owing to the GDP rebasing and stronger economic growth in 2024 and 2025, Nigeria recorded improvement in its debt sustainability indicators, namely Debt-to-GDP and Debt Service-Revenue.

The debt-to-GDP ratio fell to 36.9 per cent at end of 2025 from 40.57 per cent at end of 2023, while the Debt Service-Revenue ratio also dropped to 65 per cent at end of 2025 from 73.5 per cent at end of 2023.

Impact of Economic GrowthOn the surface Nigeria has recorded a major forward leap in its macroeconomic numbers due to the reforms.

The Gross Domestic Product grew for two consecutive years, to 3.38 per cent in 2024 and further to 3.87 per cent in 2025, unlike the decline recorded in 2023.

Cost of living and Standard of living take the hit

One major impact of the Tinubu's economic reforms is the sharp rise in cost of living. Informed estimates put the monthly cost of living in Nigeria at about ₦505,780 for a single person and ₦1,818,926 for a family of four, excluding rent. Before 2023 the average was put at N150,000 per person and N520,000 for a family of four per month.

However, the direct implication of these figures is that over 75% of Nigerians are living below these numbers. This also means that the standard of living for most Nigerians have gone down drastically over the past three years.

The quality and standard of life in Nigeria is highly fragmented, characterized by a stark divide between a small, affluent elite and a majority struggling with severe economic pressures. While the country possesses a vibrant tech scene, rich cultural influence, and premium gated communities in cities like Lagos and Abuja, macroeconomic shifts--such as high inflation, currency devaluation, and fuel subsidy removals--have drastically lowered the daily purchasing power and welfare of the general population.

Economic Welfare and Purchasing Power

Wage vs. Inflation Gap: The national minimum wage is ₦70,000 per month, yet a single urban resident requires over ₦505,000 monthly for basic expenses (excluding rent).

Income Allocation: Due to soaring food prices, the average Nigerian household spends roughly 60% to 70% of its total income strictly on feeding, severely limiting disposable income for savings, leisure, or emergencies.

Middle-Class Shrinkage: High inflation has pushed millions of former middle-class citizens into lower economic brackets, driving a massive wave of professional migration ("Japa") out of the country.

QUOTE (BOX THIS INSTEAD)

Economic Welfare and Purchasing Power

Wage vs. Inflation Gap: The national minimum wage is ₦70,000 per month, yet a single urban resident requires over ₦505,000 monthly for basic expenses (excluding rent).

Middle-Class Shrinkage: High inflation has pushed millions of former middle-class citizens into lower economic brackets, driving a massive wave of professional migration ("Japa") out of the country.

Read the original article on Vanguard.

Nigeria: Tinubu's Economic and Financial Reforms - Gains, Pains, and Missed Targets

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