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From Adanna Nnamani, Abuja
Nigeria’s economy was on the brink of collapse as mismanaged petroleum subsidies and foreign exchange distortions drained resources equivalent to six percent of GDP, the Central Bank of Nigeria (CBN) has said.
The apex bank’s Deputy Governor for Economic Policy, Muhammad Abdullahi, revealed that net foreign reserves had fallen to a mere $800 million before reforms were initiated, describing the situation as a “breaking point” for a country of over 200 million people.
Abdullahi spoke on Thursday at a policy forum organised by Agora Policy, highlighting the years of economic distortions that undermined investor confidence and discouraged capital inflows.
The CBN official said Nigeria faced a $7 billion backlog owed to businesses and investors, which, alongside declining foreign exchange flows, threatened government operations at all levels.
However, he noted that aggressive macroeconomic reforms since October 2023 have stabilized the economy, restored investor confidence, and boosted net foreign reserves to over $32 billion.
The Deputy Governor further pointed to a recovery in non-oil exports, which generated $6 billion last year, with a target of $12 billion in the near term. Inflation has reportedly been declining for 19 months, and food inflation is at its lowest in 13 years.
Abdullahi stressed that the combination of multiple exchange rates and petroleum subsidies had encouraged rent-seeking, reduced investment, and eroded revenues. He said the reforms have put the country back on a “strong footing toward a positive economic trajectory,” even as social challenges remain.
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According to him, “What we were worth as an economy of over 200 million people was about $800 million in net reserves. Today we’re at $32 billion.
“At that time, FX flows had consistently declined. Foreign portfolio investment wasn’t coming in, and we had a $7 billion backlog that the nation simply could not absorb.”
“These distortions, alongside petroleum subsidies, were costing the economy about six percent of GDP. These were monies that companies had paid into the Central Bank, and the Bank had not been able to cover over one or two years. You can imagine the loss of confidence.
“We were really in a crisis situation… if you had a choice, do you not move out of the way and take the right decisions, however painful they may be?
“There was one exchange rate where the privileged parts of society got access, and you could flip it immediately when you came out as a billionaire.
“FDI had consistently been tanking because of multiple exchange rate policies. Non-oil exports had also collapsed. Cocoa exports that were $2 billion in 2015 had fallen to less than $300 million by 2018.
“Inflation has been declining for 19 months, food inflation is at its lowest level in 13 years… portfolio investors now rank Nigeria first among emerging markets.
“Today we are an economy that is inspiring confidence everywhere we go. We have turned away from the imbalances we met and are on a strong footing toward a positive economic trajectory.”
