Nigeria's Economic Reforms — By the Numbers

By early 2023, the fiscal position had run out of room. A full year of petrol subsidy in 2023 was projected to cost about ₦6.7 trillion, about 70% of the Federal Government’s actual revenue. The 2023 budget had provided for only six months of subsidy, an explicit indication that removal was already the planned trajectory. Various assessments found the benefit of fuel subsidy accrued overwhelmingly to wealthier households and to cross-border smuggling, rather than to the poor. The subsidy was consuming the resources that should be deployed into building the roads, schools and clinics.

Phased removal is desirable in principle, but it requires a fiscal runway the country no longer had; a slow transition without pre-funded safety nets would have delivered the same household pain at greater cumulative cost to the treasury. Government therefore paired removal with cushioning measures: a temporary monthly wage award, palliative support to every state, conditional cash transfers, student loans through NELFUND and a CNG transport programme, while the fiscal savings now flow transparently through the Federation Account rather than through opaque under-recovery against federation crude oil revenue.

The objective was not devaluation but the end of the economic distortion and a multiple-window exchange-rate system in which the gap between the official and parallel rates had become a patronage channel: those with access to cheap official dollars resold them at street rates for guaranteed profit, while manufacturers, exporters and Nigerians with legitimate FX demand were starved of the foreign exchange they needed. With net reserves critically low and unmet FX obligations above US$7 billion, defending the official rate had become unsustainable. On 14 June 2023 the CBN collapsed the windows into a single willing-buyer, willing-seller market: a choice between managed adjustment and eventual collapse.

The short-term costs, a sharp fall in the naira and higher import prices, were anticipated and are not in dispute. But a market-reflective rate restores investor confidence and rebuilds reserves rather than depleting them. Since the float, gross external reserves have recovered to over US$52 billion, capital inflows have risen sharply, and a single, transparent market has restored the flow of foreign exchange to manufacturers, importers and investors.

Headline collection figures are gross Federation Account revenue, shared constitutionally across the Federal Government, 36 states and 774 local governments. Strong headline numbers do not accrue solely to the FG. The Nigeria Revenue Service exceeded its 2025 target, about ₦28.3 trillion against a ₦25.2 trillion target, but the Federal Government received less than it needs to meet recurrent expenditure, infrastructure, statutory transfers and debt service.

Borrowing bridges that gap. The 2026 budget of ₦68.32 trillion is set against ₦36.87 trillion of projected revenue, a ₦31.46 trillion deficit, within which capital expenditure is the single largest block at ₦32.29 trillion, ahead of debt service at ₦15.8 trillion. The more important question is whether borrowed funds are invested in projects that grow the economy. The 2025 tax reform is designed to widen the revenue base faster than debt service.

On internationally accepted metrics Nigeria’s debt remains sustainable, though real fiscal risks warrant vigilance. Total public debt was ₦159.28 trillion, about US$111 billion, at 31 December 2025. Much of the dramatic rise in the naira figure reflects recognition of about ₦30 trillion of historical Ways and Means advances and exchange-rate revaluation of existing dollar-denominated debt. On the DMO’s debt sustainability analysis the debt remains sustainable, and debt-to-GDP is around 36% on the rebased national accounts.

The binding constraint is the cost of servicing debt against low revenue. Debt service is expected to claim more than 40% of projected federal revenue in 2026, about ₦15.8 trillion against ₦36.87 trillion of revenue, crowding out health, education and security spending. The structural root cause is Nigeria’s low revenue-to-GDP ratio and the temporary interest-rate hike to tackle inflation, not excessive borrowing.

This concern is real and the government is focused on accelerating how the macro gains translate to meaningful impact for households. Reforms work through a phased transmission: first correcting macroeconomic imbalances and restoring stability; then rebuilding investor confidence and attracting productive capital; and gradually translating growth into jobs, incomes and living standards. The World Bank puts Nigeria’s poverty rate at about 63% in 2025, roughly 140 million people, even as inflation has begun to ease and the exchange rate has stabilised. These reforms did not create Nigeria’s poverty; they collided with it during the adjustment.

The early signals are measurable: the economy grew 3.89% year-on-year in Q1 2026 and headline inflation has been on a downward path. Government is running social investment alongside the macro correction through cash transfers, CREDICORP, NELFUND and tax changes that exempt small businesses and zero-rate essential food, medicines and educational materials.

External reserves are foreign-currency assets held by the Central Bank to meet external obligations, including external debt service and letters of credit for manufacturing inputs, equipment and medicines, and to stabilise the naira against shocks. They sit in a different pool from the naira-denominated federal budget or Federation Account. Nigeria has felt the cost of depleted reserves before: in 2015–16, low reserves tipped the economy into recession, and the poor bore the heaviest burden.

Reserves have recovered to over US$52 billion, a multi-year high, and that buffer is itself the mechanism behind naira stability and recent disinflation. Drawing reserves down to fund government spending would depreciate the currency and reverse those gains. Relief is correctly financed through the budget, alongside cash transfers, wage awards, student loans and support to states.

The premise overstates the FG’s position. Federation revenue is shared by constitutional formula across all three tiers, and in practice the federal share is not dominant. In March 2025, for example, the FG received about ₦528.7 billion from a gross FAAC pool of ₦2.41 trillion, almost identical to the roughly ₦530.4 billion shared among the 36 states, with local governments receiving about ₦387 billion. Once VAT and derivation are added, the Federal Government effectively receives less than 40% share.

Within its own share, the FG has been shifting decisively toward capital: capital expenditure rose to about 35% of the federal budget in 2025 and 47% in 2026, while overhead is around 4%. The task is to raise revenue and convert capital appropriations into completed projects, while continuing to publish implementation reports so citizens can hold institutions to account.

This is a normal pattern in the early phase of a reform rebound. Portfolio capital moves first because it is liquid and responds quickly to improved macro signals; FDI follows once investors are convinced reforms are durable and that infrastructure, rule of law, sanctity of contract and policy continuity are in place. Capital importation hit a record US$10.37 billion in Q1 2026, with foreign direct investment of over US$4 billion.

Investor confidence has returned and is rising. The metric to watch is the composition of inflows, and shifting it toward productive FDI is the explicit aim of initiatives in the oil sector, public-asset optimisation and sector reforms in power, security and logistics. Portfolio inflows confirm that phase one is working; a rising FDI share will confirm that phase two is delivering.

The momentum is real and measurable. On the official rebased national accounts, nominal GDP climbed from about US$250 billion in 2024 to roughly US$291 billion in 2025 and is rising further in 2026. Nigeria has its youngest large population and the continent’s biggest proven gas reserves. The US$1 trillion goal is the anchor that sets the pace.

The roadmap is investment-led and multi-pillar, anchored in the National Development Plan (2026–2030): fiscal and tax reform to raise domestic revenue, industrialisation policy, power-sector reform and security to unlock production, public-asset optimisation to release dormant value, and human-capital investment to lift productivity. Progress will show in 7%-plus growth, formal jobs, diversified exports and falling poverty.

The right answer is a mechanism, not a list of promises: a short set of specific, dated, independently-sourced indicators, published on a fixed calendar whether or not the reading is favourable. Citizens are entitled to demand that they appear on schedule, in plain language, through institutions Nigeria already funds.

A defensible core set includes headline inflation, real GDP growth, debt-service-to-revenue, federal capital-budget execution, external reserves, FDI share of inflows, non-oil revenue-to-GDP and the monetary poverty rate, each with a named source, baseline, direction or target, frequency and source.