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LAGOS – Nigeria’s sweeping economic reforms have succeeded in restoring macroeconomic stability and rebuilding investor confidence, but the gains have yet to translate into improved living conditions for millions of Nigerians, according to analysts at Agusto & Co.
In its report, titled ‘Nigeria’s Reform Dividend: Stabilisation Without Prosperity?’, analysts acknowledged that the Federal Government’s bold policy reforms—including the removal of petrol subsidy, foreign exchange liberalisation, aggressive monetary tightening and fiscal consolidation—have achieved key macroeconomic objectives that were long considered elusive.
However, it cautioned that worsening poverty, food insecurity and declining household purchasing power threaten the sustainability of the reform programme as the country approaches the 2027 general elections.
According to Agusto, Nigeria has recorded one of its strongest macroeconomic turnarounds since the return to democratic rule, with improvements in external reserves, exchange rate stability, inflation moderation and renewed access to international capital markets.
The report noted that, measured by the International Monetary Fund’s orthodox policy benchmarks, the reforms have largely been successful.
It stated that macroeconomic stability has improved considerably, external buffers have been rebuilt, and Nigeria has successfully regained access to the international capital market through Eurobond issuance.
Nevertheless, the economic advisory firm stressed that these positive macroeconomic indicators have failed to significantly improve the welfare of ordinary Nigerians.
“The official narrative of stabilisation increasingly contrasts with the lived reality of households battling shrinking incomes, high food prices, inadequate public services and worsening insecurity,” the report stated.
It warned that the widening disconnect between economic statistics and citizens’ welfare could undermine confidence in the reform agenda and increase political pressure as the 2027 elections draw closer.
Agusto observed that despite stronger foreign reserves and a healthier current account balance, Nigeria’s economy continues to depend heavily on crude oil exports while productive sectors remain constrained by structural bottlenecks.
The report explained that global capital flows remain concentrated in advanced economies, limiting the availability of long-term investments needed to transform Nigeria’s infrastructure and industrial base.
Instead, Nigeria continues to rely largely on volatile portfolio investments that strengthen the balance of payments without creating significant employment opportunities or expanding productive capacity.
According to the report, export surpluses have been driven mainly by higher crude oil earnings and lower import bills rather than a diversified export sector.
It added that non-oil exports remain constrained by poor infrastructure, weak electricity supply, logistics bottlenecks and regulatory uncertainties.
Agusto maintained that stronger reserves should therefore be viewed primarily as a buffer against external shocks rather than evidence of broadbased economic prosperity.
The report highlighted the favourable macroeconomic outlook presented in the IMF’s 2026 Article IV Consultation.
Real Gross Domestic Product was estimated to have grown by 3.87 percent in 2025 and is projected to rise further to 4.1 percent in 2026, supported by agriculture, oil production, information and communication technology, and the real estate sector.
Inflation has also moderated considerably from its peak of 34.8 percent in 2024 to 15.06 percent in February 2026 before edging slightly higher to 15.93 percent in May following global commodity price pressures.
Agusto attributed the moderation in inflation to tighter monetary policy, improved exchange rate stability and better domestic agricultural harvests.
The report noted that the Central Bank of Nigeria’s transition towards an inflation-targeting framework is expected to improve monetary policy effectiveness by anchoring inflation expectations and lending rates more effectively.
The country’s external position has equally strengthened.
According to Agusto, Nigeria recorded a current account surplus equivalent to 4.8 percent of GDP in 2025, supported by stronger oil exports and lower refined petroleum imports following increased domestic refining capacity.
Gross external reserves climbed to $45.8 billion by the end of 2025 and approached $50 billion by June 2026, supported by sustained current account surpluses, portfolio inflows and a successful $2.3 billion Eurobond issuance.
The report added that the naira appreciated by about 12 percent year-on-year to approximately N1,370/$ in June 2026, reflecting renewed confidence in the liberalised foreign exchange market.
Agusto also acknowledged significant progress in financial sector reforms. It noted that Nigerian banks collectively raised N4.65 trillion in fresh capital under the CBN recapitalisation programme, with 33 out of 37 commercial banks meeting the revised minimum capital requirements by March 2026.
Additional reforms, including Basel III implementation and Nigeria’s removal from the Financial Action Task Force grey list, have further strengthened investor confidence.
However, Agusto warned that tighter banking regulations and elevated interest rates are creating unintended consequences for private sector credit.
The report observed that banks now allocate about 22 percent of their assets to government securities because of their attractive yields, while pension funds remain heavily invested in government debt instruments.
This, it argued, has crowded out lending to businesses, with private sector credit remaining low at about 12 percent of GDP after adjusting for exchange rate movements.
According to Agusto, Nigeria’s structural deficiencies continue to limit the transmission of macroeconomic gains into lower prices and stronger economic activity.
The report identified poor transport infrastructure, congested ports, underutilised rail networks and weak road systems as major drivers of persistent inflation.
It argued that while monetary policy has succeeded in reducing demand pressures and stabilising the exchange rate, it cannot resolve structural supply- side constraints responsible for high transportation and food costs. Consequently, businesses and consumers continue to bear the burden of elevated operating costs despite improvements in macroeconomic indicators.
The report further painted a troubling picture of household welfare. It estimated that about 63 percent of Nigerians now live in extreme poverty while approximately 27 million people experienced severe food insecurity in late 2025.
It added that insecurity across farming communities has continued to depress agricultural production, worsening food shortages.
Although about 9.2 million households benefited from the Federal Government’s cash transfer programme, Agusto argued that the support remained inadequate relative to the scale of economic hardship.
Beneficiaries reportedly received no more than three transfers of N25,000 each, an amount the report described as insufficient to cushion the effects of the reforms.
The report also highlighted growing dependence on Buy Now, Pay Later financing and other forms of micro-credit among middle and lower-income households.
According to Agusto, this trend reflects financial distress rather than improved consumer sophistication, as households increasingly rely on borrowing simply to finance daily consumption.
It warned that with both low-income earners and the middle class focusing on survival and wealth preservation rather than spending and investment, domestic demand could remain subdued, thereby weakening corporate earnings and government revenue.
Agusto also questioned whether the fiscal savings realised from fuel subsidy removal have been effectively deployed.
While the IMF estimated subsidy removal generated savings equivalent to about two percent of GDP, consolidated government revenue reportedly declined from 10.8 percent of GDP in 2024 to 10.2 percent in 2025.
The report pointed to significant off-budget expenditures and an unusually large statistical discrepancy in national accounts estimated at 2.7 percent of GDP, suggesting substantial government spending occurred outside the formal budget process.
At the same time, interest payments consumed 53.2 percent of Federal Government revenues in 2025, severely limiting fiscal space for capital projects and expanded social protection.
Looking ahead, Agusto warned that the approach of the 2027 elections presents a major test for the reform programme.
Historically, election cycles have encouraged fiscal expansion, wage increases and policy reversals.
The report cautioned that mounting pressure from organised labour and households struggling with the high cost of living could trigger unbudgeted public spending, widen fiscal deficits and weaken recent macroeconomic gains.
It concluded that Nigeria must now shift from achieving macroeconomic stabilisation to ensuring inclusive and sustainable economic growth.
