When economic reforms are pursued in a fragile macroeconomic environment, their success hinges not only on sound policy design but also on timing, sequencing, and the system’s capacity to absorb shocks. Nigeria’s recent reform agenda offers a compelling case study of this delicate balance.

Since May 2023, the country has embarked on a comprehensive economic reform program with the intention of correcting structural imbalances, enhancing fiscal discipline, and restoring macroeconomic stability. At the heart of this effort lies a recognition that the country can no longer afford the inefficiencies and distortions that have long characterised its economic management.

However, while the policy direction has largely aligned with global best practices, the outcomes have been uneven, and the transition process has imposed significant short-term costs on the economy, businesses, and households alike.

Can any reform truly succeed if it worsens the daily lives of the people it aims to help? Is Nigeria reforming at a pace and sequence that the economy can truly withstand? How much economic pain can businesses and households absorb in the name of long-term gain? These and many more questions have emerged, given the current economic situation of our nation.Top of FormBottom of Form

A key pillar of the reforms was the removal of the long-standing fuel subsidy, which, though fiscally unsustainable, had served as a de facto social support mechanism for decades. Its abrupt removal did produce fiscal savings and allowed for the reallocation of public resources toward more productive sectors such as infrastructure and social welfare.

Nevertheless, the immediate consequence was a sharp spike in inflation, with the consumer price index climbing from 22.8% in mid-2023 to 34.8% by late 2024. The resulting rise in transportation and energy costs eroded real incomes and heightened the cost of doing business, especially for firms with thin operating margins.

Consequently, while the government gained fiscal breathing room, the wider economy, particularly the poor and small enterprises, bore the brunt of the adjustment. Similarly, the unification of the foreign exchange market and the shift toward a market-determined exchange rate were hailed as necessary steps to eliminate rent-seeking, improve investor confidence, and stabilise external balances.

However, the transition led to significant naira depreciation, which, while enhancing transparency in the FX market, also deepened cost-push inflation, worsened import costs, and heightened macroeconomic uncertainty.

Efforts by the Central Bank of Nigeria (CBN) to curtail inflation through aggressive monetary tightening by raising the policy rate to 27.5% helped to reduce excess liquidity, but it also constrained credit expansion, discouraged private investment, and weakened aggregate demand. Similarly, the manufacturing and services sectors struggled to maintain momentum, with the Purchasing Managers’ Index (PMI) remaining below 50 in 2024, indicating continued contraction in real sector activity.

On the fiscal front, there has been a commendable shift toward consolidation. Improved tax administration, expenditure control, and selective VAT exemptions aimed at protecting low-income households reflect a more strategic approach to fiscal policy.

However, despite these efforts, the fiscal deficit remains elevated at around 3.8% of GDP, while public debt has surpassed 50% of GDP, with debt servicing obligations consuming an increasingly large share of public resources.

This crowding out of capital expenditure has had a dampening effect on public investment, even as budgetary allocations to critical sectors such as infrastructure and agriculture have increased. Furthermore, investor confidence, while slowly improving, remains fragile due to concerns about policy consistency and the lingering effects of past mismanagement.

In the agricultural sector, targeted reforms to improve food security, expand rural infrastructure, and promote agro-processing have begun to yield modest growth, with the sector expected to grow by over 3% in 2025 compared to 2.1% in 2023. However, access to finance remains a major constraint, and rising input costs have limited productivity gains.

Although agriculture holds promise for job creation and export diversification, its potential remains underutilised due to persistent structural bottlenecks. The situation is even more complex in the manufacturing sector, which has faced high energy costs, FX constraints, and weak consumer demand.

Tax incentives and regulatory reforms have not yet been sufficient to stem the tide of divestments by multinationals during 2023–2024, reflecting the depth of uncertainty that still characterises the business environment. In the power sector, reforms have focused on reducing subsidies and moving toward cost-reflective tariffs.

However, the sector remains a major bottleneck to growth, with unreliable supply and persistent regulatory rigidity. Despite spending approximately ₦1.9 trillion on electricity subsidies in 2024, meaningful improvements in power generation and distribution have been limited, making it difficult for industries to plan or scale operations efficiently.

Infrastructure development, particularly through projects such as the Lagos-Calabar Coastal Highway and the Sokoto-Badagry Superhighway, offers long-term promise. Yet, these initiatives are often undermined by funding constraints, bureaucratic delays, and questions about implementation efficiency.

Without a coherent maintenance and execution strategy, such capital investments may yield suboptimal returns.

While the digital economy has recorded some gains, particularly in fintech adoption and broadband expansion, its broader impact remains limited by infrastructural gaps and uneven regulatory frameworks. Encouragingly, the sector continues to provide new opportunities for small businesses and digital entrepreneurs, but it requires stronger integration into the wider economy to serve as a robust engine of growth.

 In contrast, the social protection response has been largely inadequate. While targeted cash transfers and welfare interventions were introduced to mitigate the adverse effects of subsidy removal, their reach has been insufficient given the scale of inflation and rising cost of living. Poverty and inequality indicators have worsened, suggesting that current safety nets lack the depth and coverage required to absorb macroeconomic shocks.

Despite policy intentions to attract foreign investment, reform fatigue and inconsistent implementation have discouraged long-term capital inflows. Though some policy-induced green shoots are emerging, including in agriculture, technology, and infrastructure, investor sentiment remains tentative, shaped by both global risks and Nigeria’s domestic policy execution track record.

In this light, the question of whether Nigeria’s economic reforms are yielding the necessary results must be answered with qualified caution. The reforms are directionally sound and structurally necessary, yet their outcomes thus far have exposed fundamental weaknesses in sequencing, coordination, and shock absorption. The balance between short-term pain and long-term gain remains precarious.

Given these realities, directors must act decisively but pragmatically. It is imperative to build organisational resilience through scenario planning, cost efficiency, and adaptive financial strategies that account for inflationary risks and currency volatility. Attention should be given to digital transformation, both as a cost-saving measure and as a platform for future competitiveness.

Directors must also engage proactively with policymakers, advocate for a stable regulatory environment, and prioritise sustainability in business models. In navigating this complex reform terrain, the success of enterprises will increasingly depend on how well their leadership anticipates macroeconomic shifts, manages risk, and aligns corporate strategy with Nigeria’s evolving economic landscape.

Research & Advocacy Department,