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By Chinwendu Obienyi
When President Bola Ahmed Tinubu marks three years in office on June 12, 2026, investors may find reasons to celebrate while many households continue to struggle.
The administration’s bold reforms, from scrapping fuel subsidies to liberalising the foreign-exchange market, have reshaped Nigeria’s economic landscape, restored investor interest and strengthened government finances.
Yet, those same measures have fueled inflation, eroded incomes and intensified a cost-of-living crisis that continues to test public patience.
The result is an economy caught between improving market fundamentals and persistent social strain.
But the government argues that it inherited an economy distorted by subsidies, multiple exchange rates, dwindling fiscal revenues and declining investor confidence.
However, the question confronting businesses and investors is whether the economic pain endured thus far is laying the foundation for sustainable growth or merely postponing deeper structural challenges.
The reform gamble
Few presidents have launched reforms as rapidly as Tinubu did during his first weeks in office.
His declaration that “fuel subsidy is gone” ended a decades-long policy that had become one of the largest drains on public finances. The move was followed by foreign exchange reforms that effectively dismantled the country’s multiple exchange-rate system, allowing the naira to trade more freely.
The administration argued that both policies were necessary to correct long-standing distortions that discouraged investment and encouraged arbitrage.
For years, the government spent trillions of naira annually subsidising petrol consumption. The subsidy regime consumed resources that could otherwise have been invested in infrastructure, healthcare and education. Similarly, the multiple exchange-rate framework created opportunities for rent-seeking while deterring foreign investors frustrated by limited access to foreign currency.
By removing these distortions, the administration sought to restore market confidence and improve resource allocation across the economy.
The reforms quickly gained support from multilateral institutions and international investors. Nigeria began to reappear on the radar of portfolio investors who had largely stayed away from the country during years of foreign exchange restrictions and capital controls.
However, the reforms also unleashed powerful inflationary pressures that reverberated across the economy.
Inflation and the cost-of-living crisis
If there is one indicator that best captures the public mood after three years of Tinubu’s presidency, it is inflation.
The removal of fuel subsidies triggered a sharp increase in transportation costs, while the depreciation of the naira significantly raised the cost of imported goods and industrial inputs. Together, these developments contributed to a surge in consumer prices that has eroded household purchasing power.
Food inflation has remained particularly severe, reflecting insecurity in agricultural regions, logistics challenges and currency weakness. For many Nigerians, the rising cost of staple foods has become the most visible consequence of economic reforms.
The result has been a significant decline in real incomes. Salaries in both the public and private sectors have struggled to keep pace with rising prices, forcing households to cut discretionary spending and adjust consumption patterns.
Retail businesses, consumer goods manufacturers and service providers have reported weaker demand as consumers prioritise essential expenditures.
The government has responded with targeted interventions, including cash-transfer programmes, wage adjustments and support measures for vulnerable groups. Nevertheless, the scale of inflation has often overwhelmed these efforts.
Growth returns, but unevenly
Despite inflationary headwinds, Nigeria’s economy has continued to expand.
According to the recently published Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS), the country’s real GDP rose by 3.89 per cent year-on-year (y/y) in Q1 2026, down from 4.07 per cent y/y in Q4 2025.
Growth has been supported by improvements in services, telecommunications, financial services and segments of the oil sector. Banking, fintech, digital services and technology-related industries have demonstrated resilience even amid broader economic challenges.
The services sector has increasingly become the engine of growth, reflecting structural shifts within the Nigerian economy. Financial technology firms, digital payment platforms and telecommunications operators have benefited from rising demand for digital services.
At the same time, higher oil production and efforts to reduce crude theft have provided some support to government revenues and foreign exchange earnings.
Yet growth remains uneven. MoneyAfrica, as reported by Daily Sun last week, stressed that Nigeria’s growth rate remains inadequate for the country’s development needs. The firm argued that growth of around 4 per cent is insufficient to generate the scale of employment and income gains needed to improve household welfare after years of inflation, naira depreciation, and economic adjustment.
According to the firm, Nigeria would need sustained double-digit economic growth to meaningfully restore consumer purchasing power and deliver broad-based improvements in living standards.
Manufacturing companies continue to face significant pressures from elevated energy costs, foreign exchange volatility and high borrowing costs. Small and medium-sized enterprises, which account for a large share of employment, have struggled to absorb rising operating expenses.
Agriculture, traditionally one of Nigeria’s largest employers, continues to be constrained by insecurity, climate-related disruptions and inadequate infrastructure.
Consequently, economic growth has not translated into widespread improvements in living standards. Population growth continues to outpace economic expansion, limiting gains in per-capita income. For many analysts, this remains one of the administration’s biggest challenges: transforming macroeconomic stabilisation into inclusive growth.
The challenge for policymakers remains balancing short-term pain with long-term gains. While inflation has shown signs of moderation compared with peak levels, price pressures remain among the most significant risks to economic recovery.
Fiscal consolidation and government finances
One of the clearest achievements of the Tinubu administration has been the improvement in fiscal revenues.
The elimination of fuel subsidies significantly reduced fiscal pressures and freed resources previously consumed by recurrent expenditure. Higher naira-denominated oil revenues, resulting from currency depreciation, have also boosted government receipts.
Tax administration reforms have sought to expand the revenue base while reducing leakages. The administration has promoted fiscal discipline as a cornerstone of its economic agenda, arguing that sustainable public finances are essential for long-term development.
These efforts have improved fiscal flexibility and reduced some of the immediate pressures on government borrowing.
However, Nigeria continues to face substantial debt-service obligations. According to the Debt Management Office (DMO), Nigeria’s total public debt climbed to N159.28 trillion in the fourth quarter (Q4) of 2025, reflecting a steady accumulation driven by persistent fiscal deficits and weak revenue performance.
A significant portion of government revenues is still devoted to servicing existing debt, limiting the fiscal space available for capital investments.
Moreover, state governments continue to depend heavily on federally distributed revenues, highlighting the need for broader structural reforms aimed at enhancing subnational fiscal sustainability.
The administration’s proposed tax reforms, if fully implemented, could further strengthen revenue mobilisation.
Yet they also face political resistance from stakeholders concerned about their impact on businesses and consumers.
Foreign exchange stability and investor confidence
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Perhaps no reform has been more closely watched by investors than the liberalisation of Nigeria’s foreign exchange market.
Before the reforms, businesses often struggled to access dollars, while a substantial gap existed between official and parallel market exchange rates. Foreign investors frequently cited exchange-rate restrictions as a major deterrent to investment.
The move toward a more market-driven exchange-rate regime has reduced some of these distortions. Foreign portfolio investors have gradually returned to Nigeria’s debt markets, attracted by higher yields and improved transparency in foreign exchange pricing. External reserves have shown periods of improvement, supported by capital inflows and policy measures designed to enhance confidence.
For multinational corporations operating in Nigeria, the reforms have eased some concerns regarding the repatriation of profits and access to foreign currency.
However, exchange-rate volatility remains a challenge. The naira has experienced substantial depreciation since the reforms began, increasing the cost of imports and creating difficulties for businesses with foreign-currency obligations.
For many companies, exchange-rate losses have become a defining feature of financial performance over the past three years.
The administration argues that short-term volatility is an unavoidable consequence of transitioning toward a more sustainable market-based system. Investors generally support this view, though confidence remains contingent on consistent policy implementation.
Banking sector: A period of exceptional profitability
If any sector has emerged as an early beneficiary of Tinubu’s reforms, it is the banking sector.
Nigeria’s leading banks have reported record profits during the past three years, driven largely by foreign exchange revaluation gains, higher interest rates and expanded transaction volumes.
The sharp depreciation of the naira generated substantial gains for institutions holding foreign-currency assets. At the same time, the Central Bank of Nigeria’s aggressive monetary tightening cycle boosted interest income across the industry.
Banks have also benefited from increasing digital transaction volumes as consumers and businesses rely more heavily on electronic payments.
The sector’s resilience has reinforced investor confidence and strengthened the market position of major lenders. Institutions such as Zenith Bank Plc, Guaranty Trust Holding Company Plc, Access Holdings Plc and United Bank for Africa Plc have reported robust earnings growth despite challenging macroeconomic conditions.
Shareholders have generally welcomed the sector’s improved profitability, while international investors have increasingly viewed Nigerian banks as one of the most attractive segments of the country’s capital market.
Yet beneath the headline numbers, risks remain.
Recapitalisation: Preparing for a bigger economy
A major development under Tinubu’s administration has been the apex bank’s decision to initiate a new banking recapitalisation programme.
The policy reflects the reality that Nigeria’s economy, despite current challenges, requires larger and more resilient financial institutions capable of supporting future growth.
Banks have been given timelines to raise additional capital through rights issues, private placements and public offerings.
The recapitalisation exercise is expected to strengthen the sector’s capacity to finance infrastructure projects, industrial development and large corporate transactions.
For investors, the programme represents both an opportunity and a test. Stronger banks could emerge with improved capital buffers and enhanced competitiveness. However, institutions unable to raise sufficient capital may face consolidation pressures through mergers and acquisitions.
The process is likely to reshape Nigeria’s banking landscape over the coming years, potentially creating fewer but larger institutions.
Asset quality risks and economic pressures
Despite strong profitability, Nigerian banks remain exposed to macroeconomic risks.
High inflation, elevated interest rates and foreign exchange volatility have increased pressure on borrowers across multiple sectors.
Manufacturers, import-dependent businesses and smaller enterprises continue to face liquidity challenges. Rising financing costs have heightened concerns about loan repayment capacity.
While non-performing loan ratios remain broadly manageable at industry level, analysts continue to monitor sectors particularly vulnerable to economic stress.
The oil and gas sector, historically a significant source of banking-sector risk, remains closely watched despite improvements in production levels.
Consumer lending also faces challenges as household incomes remain under pressure from inflation. For banks, maintaining asset quality while expanding lending will be a critical balancing act over the coming years
The CBN’s changing role
The relationship between fiscal and monetary policy has also evolved under Tinubu as the apex bank has pursued a more orthodox policy framework focused on inflation control, exchange-rate stability and market confidence.
Interest rates have risen sharply as policymakers seek to contain inflation and anchor expectations. While the strategy has attracted foreign capital and supported monetary credibility, it has also increased borrowing costs for businesses and consumers. Although at its last meeting, the MPC chose to hold rates and leave other parameters unchanged.
The central bank has simultaneously sought to improve transparency, strengthen regulation and restore confidence in financial markets.
For investors, these measures represent an important shift toward policy predictability. For businesses, however, higher interest rates have added another layer of operational pressure.
The effectiveness of monetary policy will ultimately depend on whether inflation moderates sufficiently to allow gradual easing without undermining financial stability.
The road ahead
Three years into Tinubu’s presidency, Nigeria’s economy stands at a critical juncture.
The administration can point to meaningful progress in addressing structural distortions that had accumulated over many years. Fiscal revenues have improved, investor confidence has strengthened, foreign exchange market reforms have advanced and the banking sector remains profitable and well-capitalised.
Yet these gains have come at a significant social cost. Inflation has continued to weigh heavily on households, poverty levels remain elevated and businesses face one of the most challenging operating environments in recent memory. The benefits of reform have yet to be fully felt by large segments of the population.
For the banking sector, the outlook remains cautiously positive. Recapitalisation, digital innovation and improved regulatory oversight could position Nigerian banks for sustained growth. However, asset-quality risks, economic fragility and global uncertainties continue to warrant caution.
Conclusion
The ultimate verdict on Tinubu’s economic programme may depend less on whether the reforms were necessary and more on whether they can deliver tangible improvements in living standards before public patience wears thin.
Three years on, the administration has largely succeeded in changing the direction of economic policy. The next challenge is proving that stabilisation can evolve into prosperity.
For investors, the story is increasingly one of opportunity. For many Nigerians, however, the test remains simpler as to whether the sacrifices demanded by reform will eventually translate into a more affordable, productive and inclusive economy.
