Follow Us on Google
Nigeria’s economic reforms are beginning to deliver the stability investors have been waiting for but not yet the prosperity citizens were promised.
Oil production is recovering, foreign-exchange pressures are easing, reserves are rising and inflation is momentarily easing.
Yet households remain trapped by high food prices, shrinking purchasing power, expensive transport and unreliable electricity. That is the central challenge facing Nigeria’s reform programme.
According to the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, about N15.8 trillion in subsidy savings was shared across the Federation. The subsidy savings, Oyedele said, was down to the reforms taken in 2023 which created fiscal space for wages, debt servicing and infrastructure.
Oyedele revealed that the Federal Government’s effective share was N5.43 trillion, compared with N6.52 trillion for states and N3.88 trillion for local governments. He added that its wider N20.40 trillion incremental envelope included N3.12 trillion in other revenue and N11.85 trillion in borrowing.
However, on closer look, 58.09 per cent of incremental federal resources came from debt, 26.62 per cent from the subsidy share and 15.29 per cent from other revenue.
The Ministry attributed N9.39 trillion to wage adjustments and N9.37 trillion to the naira impact of servicing existing external debt, with strategic infrastructure, incremental electricity support, domestic debt-service costs and social-welfare initiatives accounting for the balance.
Existing revenues funded the N10.24 trillion gap between incremental resources and spending. The allocation explains the limited discretionary room created by reform but it does not establish the quality, completion or economic return of the expenditure.
The official scorecard places gross reserves at $52.5 billion in July 2026, the official-to-parallel foreign-exchange premium below 5 per cent, capital importation at $10.37 billion in Q1 2026 and stock-market capitalisation near N150 trillion in June 2026. The National Bureau of Statistics (NBS) independently reports real GDP growth of 3.89 per cent in Q1 2026. Its July Consumer Price Index, published on 17 August 2026 and therefore available two days before the briefing, reduced annual headline inflation to 15.43 per cent from 15.91 per cent.
Although stabilising public finances and rebuilding market confidence are necessary steps, they are not the final destination. This is because the figures demonstrate the difficult fiscal arithmetic behind the reforms. The resources created by subsidy removal were not simply available for new development projects. Wage adjustments and the exchange-rate effect on external debt service absorbed N18.75 trillion, representing 61.20 per cent of the stated incremental spending.
Hence, describing subsidy removal as a straightforward fiscal gain can be misleading. Even households and economists argue that the gains have yet to translate into lower food, transport and energy costs or improved purchasing power.
According to them, although the reform removed a major burden from public finances, it also created substantial adjustment costs. The savings have been partly consumed by higher personnel expenses, increased debt-service costs and the wider consequences of currency depreciation.
So, the outcome is therefore more complicated than a simple story of the government gaining money. Nigeria has acquired greater fiscal room in some areas, but that room exists alongside increased obligations and intense pressure on households.
Stabilisation is not transformation
The scorecard points to clear signs of macroeconomic improvement. Foreign reserves, the foreign-exchange premium, capital importation, market capitalisation and real GDP growth have all moved in a direction that suggests stronger buffers and a repricing of sovereign risk.
These developments matter. A more stable foreign exchange market can improve business planning, reduce uncertainty for investors and make it easier for companies to repatriate capital. Higher reserves can strengthen confidence in the country’s ability to meet external obligations. Improved oil production can increase export earnings and support public revenue.
However, macroeconomic stability does not automatically produce broad-based prosperity. Investors may welcome reduced currency volatility while consumers continue to struggle with declining purchasing power. Government revenue may rise while state spending on health and education weakens as a share of total expenditure. Gross financial inflows may increase without generating enough factories, jobs or affordable credit.
Stabilisation is about preventing deterioration and restoring confidence whilst transformation is about changing the structure of the economy and improving living standards. The former may be visible first in reserves, yields, exchange rates and fiscal balances. The latter must eventually be visible in wages, jobs, productivity, food prices, electricity supply and public services. Nigeria is now being judged against the second standard.
The cost-of-living test
The latest inflation data complicate the reform narrative. The scorecard used June 2026 inflation figures, including headline inflation of 17.52 per cent. The National Bureau of Statistics’ July Consumer Price Index, published on August 17, reported headline inflation at 15.43 per cent and food inflation at 20.31 per cent.
Although the decline in headline inflation is encouraging, it does not mean prices have returned to previous levels. Inflation measures the rate at which prices are rising; it does not reverse the accumulated increase in the cost of goods and services.
For many Nigerians, the practical experience remains one of a cost-of-living crisis. Food inflation above 20 per cent means that households continue to lose purchasing power even as the headline rate moderates. Transport costs, electricity expenses, rent, school fees and healthcare bills compound the pressure.
Market complaints have become a recurring feature of the inflation story, with households saying basic food items now take up a much bigger share of their earnings than they did only a few months ago. In public conversations and market interviews, the dominant mood is one of exhaustion, with many describing the price situation as unbearable and unsustainable.
FAAC and the spending question
Recent FAAC receipts illustrate both the scale of public resources and the weaknesses in their transmission to citizens.
The Federation Accounts Allocation Committee (FAAC) disbursement to the three tiers of government rose by 17.9 per cent month-on-month (m/m) to N3.01 trillion in August (July: N2.55 trillion), based on July revenue. Notably, the allocation represents the highest monthly FAAC disbursement in 2026 and the largest allocation since January 2019.
Based on the stipulated revenue-sharing formula, the Federal Government (FGN) received N1.15 trillion (July: N923.44 billion), state governments received N943.35 billion (July: N838.21 billion), local governments received N673.65 billion (July: N591.39 billion). Meanwhile, oil-producing states received an additional N243.48 billion (July: N197.61 billion) as derivation revenue (13.0 per cent of mineral revenue).
But experts argue that this is not about the amount distributed to governments but what could have been achieved if public resources were deployed with greater discipline and clearer priorities.
They added that potential areas include cheaper lending to small and medium-sized enterprises, agricultural support and public transport systems. These interventions could help reduce production and distribution costs, while also providing more direct relief to households.
Co-founder, BudgIT & Chief Executive, Kwerty, Oluseun Onigbinde, argues that the reforms have multidimensional effects and that policymakers must be clearer about who is benefiting and how spending decisions are shaped by incentives.
“There must be clarity on who’s benefiting more and how adjustments are based on norms and incentives,” he said.
That clarity is missing from much of the public debate. Higher allocations are often presented as an achievement in themselves. But the relevant measure is not the size of the transfer; it is the quality and reach of the service delivered with it.
FX rate dilemma
The FX market remains at the heart of Nigeria’s economic adjustment but while there have been calls from presidential candidates for Nigeria to return to subsidy, experts have rejected the idea of an FX subsidy, arguing that exchange rates should reflect productivity and fiscal discipline.
However, they also believe that improved oil production, stronger reserves and greater policy discipline could support a stronger naira within a range of N1,100 to N1,200 per dollar.
Such a position highlights the tension between currency flexibility and the desire for a more stable and affordable exchange rate. A weaker naira improves the domestic value of dollar-denominated oil revenue and can increase naira allocations to governments. But it also raises the cost of imports, external debt service, fuel and imported inputs.
This exchange-rate effect was a major component of the expenditure pressures identified in the scorecard. A weaker naira increases the naira value of external debt obligations, placing additional strain on government finances.
For households, currency weakness also affects food, transport and manufactured goods, even when those products are not imported directly. Farmers and manufacturers may face higher costs for fertiliser, machinery, packaging, spare parts, energy and logistics. Those costs are eventually reflected in retail prices.
Other News
A stronger currency, by contrast, could ease inflationary pressures and lower the naira cost of imported inputs. But it cannot be sustained by intervention alone. Without increased domestic production, a stronger naira could encourage imports, reduce reserves and recreate the conditions that led to previous foreign-exchange pressures.
The sustainable solution lies in raising productivity and earning more foreign exchange from both oil and non-oil sources.
Where is the social protection?
The reform programme was always likely to impose short-term pain. That made credible and well-targeted social protection essential.
Onigbinde questions whether the government has done enough to cushion the impact of subsidy removal and currency depreciation.
He noted that spending on health and education as a share of state expenditure has declined, while personnel costs have also weakened as a share of total spending.
The Federal Government’s personnel expenses have reportedly increased from approximately N4 trillion to N7 trillion, with the possibility that higher military spending could push the figure further upward. Rising wages may be necessary in an inflationary environment, but the increase also underscores how quickly recurrent obligations can consume fiscal space.
He said, “Programmes such as the Nigerian Education Loan Fund, or NELFUND, could form part of a wider social-protection framework if properly designed and presented. But education loans alone cannot address the immediate effects of higher food, transport and energy costs. Social protection must be broad enough to support vulnerable households while also helping people move into productive employment”.
The challenge is to avoid a system in which the government spends more but citizens receive little improvement in welfare. Social programmes must be transparent, targeted and measurable. They should also be connected to long-term economic opportunities rather than functioning only as emergency transfers.
Implementation gap
The reform scorecard is a useful attempt to assess the consequences of subsidy removal and wider fiscal changes. But its estimates must be read carefully.
According to Proshare Research, government counterfactuals about what would have happened without reform are scenario estimates, not observed outcomes.
“They can help policymakers explain the rationale for reform, but they cannot replace evidence of actual improvements in household welfare or economic productivity.
There is also a need to reconcile the scorecard with implementation reports from the Budget Office and other public institutions”, the firm said.
According to Proshare, the evidence threshold should therefore include:
Actual expenditure against budgeted amounts, The number and quality of jobs created, Changes in real wages after inflation, Food production, logistics costs and retail prices.
Others should also include, Electricity availability and the cost of self-generation.
State-level spending and outcomes in health and education, the transparency of refunds, deductions and intergovernmental transfers.
“Without these indicators, the reform debate risks remaining trapped in aggregate numbers”, Proshare Research said.
Confidence to capacity
Nigeria has made progress in rebuilding confidence, but confidence is only valuable when it supports capacity.
Onigbinde suggested that the country must use its improved fiscal and financial position to expand productive investment, strengthen domestic supply chains and reduce the cost of doing business.
“This requires more than higher public spending. It demands better project selection, transparent procurement, stronger institutions and a clear focus on sectors that can generate jobs and foreign exchange.
The government must also confront the structural sources of fiscal weakness: low revenue mobilisation, inefficient spending, costly debt, oil dependence and weak subnational accountability”, he says.
On the other hand, Proshare said the removal of fuel subsidy may have been economically unavoidable, particularly if borrowing was being used to finance consumption.
“But ending an unsustainable policy is only the first step. The credibility of the reform will ultimately depend on whether the resources released are used to build a more productive and inclusive economy”, it said.
Also speaking, Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf noted that Nigeria’s economic reforms are delivering important macroeconomic gains.
He added that government revenues have strengthened, the FX market has become more stable, reserves have improved and investor confidence has recovered.
However, he said stabilisation is only the beginning.
“The real test is whether stability translates into higher productivity, stronger investment, more jobs, lower poverty and improved living standards.
That transmission remains incomplete. Purchasing power remains under pressure, while businesses continue to contend with high energy, financing, logistics and regulatory costs. The next phase of reform must therefore focus much more strongly on productivity, competitiveness and household welfare.
Hence, the reform trajectory should therefore be sustained, while implementation is continuously refined in response to emerging realities. Reform instruments should be continuously recalibrated in response to evidence, implementation experience and their impact on businesses and households.
The next phase must move decisively from stabilisation to productivity; from higher government revenues to better development outcomes; and from improving macroeconomic indicators to tangible gains in jobs, incomes and living standards”, Yusuf said.
Conclusion
For Nigerians, the question is straightforward: when will the gains appear in household budgets?
The answer cannot be found in reserves alone. It must be demonstrated through lower food costs, stronger wages, reliable power, better transport, accessible credit, productive jobs and public services that citizens can see and measure.
Nigeria’s economic reforms have reached the point at which stabilisation must give way to delivery.
The next test for the President Bola Tinubu led administration is whether fiscal gains can be converted into productive investment, formal employment, rising real incomes, affordable food, dependable power and better public services.
