The administration of President Bola Ahmed Tinubu is in its 19th month. We tracked the administration’s economic performance as it heads into its midterm on 29 May. Our findings indicate that the administration is on record to have wrought, arguably, the most significant set of economic reforms. However, the impact of the reforms has continued to draw both flaks and commendations in equal measures in the public space.
Two principal policies signpost the reforms: the removal of fuel subsidies and the harmonisation of the hitherto multiple foreign exchanges. The consequences of the reforms have provoked different reactions from critical stakeholders and opposition politicians alike. In our view, some analysts have wrongly captured the evolving national economic environment as constricted.
They argue that Nigerians are hopelessly grappling with significant economic challenges after the reforms.
For this cadre of critics, Nigeria’s 19-month economic reform programme implementation yielded financial challenges for households and the productive sector, primarily due to poor policy implementation and what they described as putting the cart before the horse.
They further argue that the wholesale withdrawal of subsidies led to a nearly 500 per cent increase in petrol prices within a year, causing a surge in food prices and pushing inflation to 34.8 per cent by December 2024. The liberalisation of the foreign exchange market also resulted in over 100 per cent domestic currency depreciation between October 2023 and October 2024.
However, rather than be situational in our analysis, as demonstrated in the submission of these critics, we reviewed and aggregated the economic environment from a process point of view. This is done by identifying the evolving green shoots consequential to policy deployment and mapping the emerging character and patterns of the national economy.
As a first step, to appropriately contextualise this evolving economic character and patterns, we adopted the analysis of economic fundamentals approach to track possible economic paradigm changes, identify new and potential drivers of economic development and track indications of resilience in the economy as it adapts to policy changes.
Economic fundamentals are the core factors that drive and sustain economic activities and growth in a country or region. These include indicators and variables such as inflation rates, employment levels, Gross Domestic Product (GDP), interest rates, productivity, and consumer spending. Understanding these fundamentals helps assess an economy’s health and predict future performance.
Indicators of Nigeria’s Economic Resilience
As expected, the policies disrupted the nation’s economic ecosystem because they principally reversed the old national policy of suppressing pricing as a financial element in purchasing PMS and foreign exchange. This reversal immediately triggered price increases across all spectrums of goods and services.
Matters were made worse because there was no fiscal buffer to mitigate the impact of the new policies. The situation reflected the historical error of resource dependency and social mitigation expenditures without building the economy’s capacity to create wealth. Help for the economy, in the form of resilience, however, came from the most unlikely sector: the informal sector.
Economic resilience describes the ability of a community or an economy to cope with, adapt to, and recover from shocks or disruptions. It aims to prepare better regions to anticipate, withstand, and bounce back from stress. It involves efficiently using the remaining resources to maintain or restore function. In direct connection to this, we identified how resilience is evolving from Nigeria’s informal economic sector on the one hand and the stimulating impact of tech-driven innovation.
Our study shows that fintech, e-commerce, and digital platforms fill economic gaps and drive growth as reforms are implemented. In short, the digital economy is growing into a catalyst with a multi-sectoral impact on various segments of the nation’s non-oil sector. The effect of the digital economy is reflected in the percentage return of the service sector to Gross Domestic Product in the three quarters of 2024, which shows that GDP grew by 3.46 per cent year-on-year in real terms during the third quarter of 2024.
This marks a notable increase from the 2.54 per cent growth recorded in the corresponding period in 2023 and an improvement from the 3.19 per cent growth recorded in the second quarter of 2024.
Growth in Q3 2024 was primarily driven by the service sector, which covers technology and other industry segments. It expanded by 5.19 per cent, accounting for 53.58 per cent of the aggregate GDP. The industry was the second biggest driver, at 3.5 per cent.
Despite this above-average performance, critics have pointed to economic downturns in job losses and international companies exiting the country with local businesses shutting down. We, however, contrast this to cases of global economic constriction as exemplified in neighbouring Ghana, for instance, where brands such as Glovo, Nivea, Jumia Foods, Dark and Lovely, Bet 365 and Game all exited the country in 2024 as a result of rising inflation, dollar illiquidity and currency weakness.
In this regard, the high number of company insolvencies recorded in the history of the European economic giant, Germany, for the first time since the 2009 financial crisis is more telling. A study from the Halle Institute for Economic Research shows that the fourth quarter of 2024 saw 4,215 company insolvencies, with almost 38,000 jobs affected, while 16,222 companies went bankrupt in the first three quarters of the year.
The institute attributes the negative development partly to the current economic crisis and an increase in the cost of energy and wages. The rise in interest rates and the elimination of subsidies by German authorities triggered the mass insolvencies recorded in the European nation. When this is compared to the Nigerian circumstance, it would appear that the Nigerian economy is more resilient and better managed.
Interestingly, while the Service sector progressed into the equivalent of an economic buffer for Nigeria, the highest growth in insolvencies in the German case was in the service sector, growing by 47 per cent year-on-year, compared with 32 per cent in the manufacturing sector.
The dynamic of appreciating Naira
Naira’s appreciation started in late December 2024, following a turbulent year marked by significant foreign exchange pricing instability. In 2024, the currency experienced a sharp depreciation, losing 40.9 per cent of its value against the dollar in the official market despite an increase in external reserves. However, the naira witnessed a notable recovery, appreciating by N125 against the dollar within a month following the implementation of the Electronic Foreign Exchange Matching System (EFEMS).
According to the Central Bank of Nigeria (CBN), the naira strengthened by 8 per cent as the dollar was quoted at N1,535 on January 3, 2025, compared to N1,660 quoted on December 2, 2024, the official launch date of EFEMS trading. Before the introduction of EFEMS, Nigeria’s foreign exchange market relied on manual or semi-automated trading processes, which were prone to inefficiencies and potential manipulation.
The new system eliminates these challenges by centralising transactions on a single regulated platform and ensuring real-time visibility and seamless processing. This marks shifting towards a more transparent and efficient foreign exchange trading environment.
Furthermore, an analysis of the ratio of demands for foreign exchange in the third quarter of 2024 indicates a new trend in the foreign exchange market. The demand for foreign exchange in the third quarter of 2024 dropped primarily due to a significant decline in invisible transactions. Invisible transactions are non-tangible transactions, such as school fees, student maintenance allowances, medical, and other such eligible transactions.
FX usage for invisible transactions decreased by 32 per cent quarter on quarter to $2.2 billion. As a result, its share of total FX usage dropped to 39 per cent, down from 51 per cent recorded in Q2 2024. This translates to the post-reform foreign exchange rate, discouraging the use of foreign exchange for leisure, educational, and health services that are available in-country.
Therefore, indicative of an emerging pattern in foreign exchange usage, forex consumption for merchandise imports increased by 10 per cent quarter-on-quarter to nearly $3.5 billion, thus boosting its contribution to total FX utilised to 61 per cent, up from 49 per cent in the previous quarter.
In the industrial sector, FX utilisation for imported raw materials, machinery, and equipment accounted for 53 per cent of the total merchandise goods, making it the largest forex consumer in this category.
Food products emerged as the second-largest category within the merchandise goods segment, increasing by 16 per cent quarter-on-quarter to $633.6 million. Analysts opine that the trend in sectoral FX utilisation has primarily declined since Q1 2023. The pattern is attributed to decreased demand for FX for invisible use in preference for productive use following the market depreciation of the naira.
Nigeria’s Era of Trade Surplus Rekindled
CBN data for October 2024 highlights a positive trade performance driven by more substantial export earnings than imports. This reflects a third consecutive quarter of trade surplus in 2024. The trade surplus expanded to US$2.21 billion, up from US$2.07 billion in September. This improvement was fueled by a 3.51 per cent rise in total exports, which increased to US$5.02 billion from US$4.85 billion the previous month.
Export growth was attributed to higher values in crude oil and non-oil products. Though crude oil and gas exports continued to dominate Nigeria’s export landscape, accounting for 87.74 per cent of total exports, the non-oil exports recorded impressive growth, increasing by 19.23 per cent to US$0.62 billion from US$0.52 billion in September. Higher export receipts for key agricultural commodities such as cocoa, beans, urea, sesame seeds, cocoa products, aluminium, and copper primarily drove this growth. Brazil emerged as the top destination for Nigeria’s non-oil exports, followed by the Netherlands, Malaysia, Japan, and Germany.
To highlight Nigeria’s growing export competitiveness in the global market, the Nigeria Customs Service (NCS) declares that it recorded an impressive total Cost, Insurance, and Freight (CIF) value, rising to N136.65 trillion in exports in 2024 from N42.77 trillion in 2023. This translates to an extraordinary 219.5 per cent increase. The volume of exports surged significantly from 3.70 billion kilograms in 2023 to 12.35 billion kilograms in 2024.
The trade surplus, as recorded, reflects the impact of the depreciated naira on international trade. The depreciation of the naira in the official market boosted export values, energising export activities while making imports more expensive. This has contributed to an improved trade balance.
The current positive trade performance is a promising indicator for Nigeria’s economy. It indicates a diversified export base, such as agriculture, manufacturing, and technology. These reduce the nation’s dependence on crude oil while fortifying the economy and ensuring long-term stability. This emerging shape of international trade and the related balance of payment trajectory justifies the need for reforms.
More Money: The Federation Account grows to N6.86tn from corporate tax, VAT, and other sources.
The third quarter of 2024 recorded more money flowing into Nigeria’s federation account, which grew to N6.86 trillion. A CBN economic report showed a 7.48 per cent increase from the previous quarter. The extra money came mainly from increased Company Income Tax (CIT) and Value-Added Tax (VAT). We note with interest that most of the money came from non-oil sources, which brought in N5.56 trillion, while oil revenue made up the rest.
The increase in revenue was due largely to higher receipts from corporate tax and VAT, which accounted for 81 per cent of the inflow into the federation account. This implies a relatively healthy business and operational environment for corporate Nigeria.
Oil revenue dropped by 24.72 per cent to N1.30 trillion compared to the previous quarter. From the total N6.87 trillion collected, the government shared N3.92 trillion among the three tiers of government, indicative of continued revenue growth and more revenue available to be shared since the withdrawal of fuel subsidies and liberalisation of the foreign exchange market.
Increased Forex Inflows through IMTOs
A significant 63.7 per cent increase was recorded in International Money Transfer Operators (IMTO) inflows for the first nine months of 2024. Inflows rose from $2.33 billion during the same period in 2023 to $3.82 billion in 2024. This growth has been variously attributed to a series of targeted reforms introduced under Mr Olayemi Cardoso, Governor of the Central Bank of Nigeria, who assumed office in September 2023.
As part of the applicable free market economic principles, the CBN issued a circular in January 2024 that removed the previous cap on exchange rates quoted by IMTOs. Before the circular, they were required to quote rates within a permissible range of -2.5 per cent to +2.5 per cent around the previous day’s closing rate of the Nigerian Foreign Exchange Market.
By the end of January, the apex bank had released revised guidelines for the operations of IMTOs. In the revised guidelines, the CBN increased the application fee for an IMTO licence from N500,000 in 2014 to N10 million, an increase of about 1,900 per cent in about 10 years. The CBN also established a minimum operating capital requirement for IMTOs at $1 million for foreign entities and an equivalent amount for local IMTOs.
The CBN has strengthened the remittance ecosystem by increasing competition among IMTOs, engaging with the diaspora, and enhancing transparency in foreign exchange transactions. The Central Bank’s reforms have included streamlining processes, onboarding more IMTOs, and improving measures to ensure an increase in the supply of foreign currencies. These measures have paid off, as evidenced by the substantial increase in remittance inflows. The surge in remittance inflows is crucial for Nigeria’s economy, providing much-needed foreign exchange and supporting household income.
Increased Oil Production and Other Emerging Opportunities in Nigeria’s Oil and Gas Industry
Historically, the oil sector has faced persistent challenges, including declining production caused by crude oil theft, pipeline vandalism, and reduced investments. However, 2024 efforts yielded notable improvements in output. For instance, the local refining of petroleum and the complete deregulation of the downstream sector of the oil industry have led to price competition on Premium Motor Spirit (PMS) or petrol and made smuggling of petroleum products across the country’s borders unattractive.
The approval of five oil asset sales and two Final Investment Decisions (FIDs) in 2024 also elicited positive feelings from foreign investors willing to do business in Nigeria’s energy sector. In 2025, oil sector analysts project that production will likely average 1.7 million barrels per day (bpd) and close the year at 1.78 million bpd. This excludes condensates that do not fall within the purview of OPEC’s basket of crude.
This optimistic outlook is underpinned by measures to address oil theft, including the implementation of the Advance Cargo Declaration regime by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). This initiative ensures that all exported crude oil and gas cargoes are uniquely identified, verifying the legitimacy of export documentation and reducing the theft of resources.
Additionally, the NNPC plans to replace ageing crude oil pipelines, some of which have been in use for over four decades to support output and operational efficiency further.
To enhance crude oil production, President Tinubu signed three executive orders (EOs) in February 2024 aimed at improving the investment climate and positioning Nigeria as the preferred investment destination for the petroleum sector in Africa. One of the EOs legally mandates that the contracting cycle be compressed to a maximum of six months in alignment with global industry standards. This significantly reduces delays that historically took up to two years or more, thus improving Nigeria’s competitiveness.
The executive order also mandates Nigerian National Petroleum Company Limited (NNPCL) and Nigerian Content Development and Monitoring Board (NCDMB) to implement a single-level approval process for requalification, technical, commercial, and final stages and ensures that approval is issued within 15 days. This is expected to eliminate redundant multi-stage approvals and ensure that regulatory approvals are obtained more efficiently, fostering timely project execution, and reducing compliance costs.
The plan to hold a fresh oil licensing round in 2025 is focused primarily on handing out oil blocks that remained undeveloped. This is another fillip in the effort to hike crude oil production and raise crude reserves and production. Aggregating policies and implementation templates and other federal government’s efforts in the sector, the federal government will accomplish its target to increase crude oil production to 2.06 barrels per day as proposed in the federal budget 2025.
Expanding Oil Refining Space
Nigeria is emerging as Africa’s undisputed crude oil refining hub. With the streaming of the Dangote 650,000 barrels-a-day refinery and the Port Harcourt and Warri refineries, the Nigerian energy sector would witness significant developments in the first quarter of 2025. With the impending completion of the comprehensive overhaul of the other government-owned refineries in Port Harcourt and Kaduna, Nigeria will be able to boast of a combined capacity to produce 445,000 barrels of oil a day, exclusive of the Dangote Refinery and more than 15 private modular refineries which are being established.
Even now, a group of petroleum marketers are preparing to launch a new 50,000 barrels per day (bpd) refinery. The agreement to establish the new refinery in Nigeria is between Nigerian petroleum marketers and three oil companies, Claridge Petroleum Company Ltd, Oasis Petrochemical Products Limited, and Afrintech like the 250 barrels a day BUA Refinery, the 50,000 barrels a day capacity refinery will be located in Akwa Ibom State.
The increased refining capacity will engender the export of petroleum products to countries in Africa and around the world. The Dangote Refinery, which is described as a major player in the global petroleum sector, has already established a pedigree in the supply of JET-A1, otherwise known as aviation fuel, to countries in Europe while supplying AGO (Diesel), urea, black oil and other petrochemical products to African countries. These petroleum products exports are indications of a genuine diversification of the economy and foreign exchange earnings, while the billions of dollars hitherto expended on importing premium motor spirit (petrol) and petrochemical products are now preserved in the national treasury. The N9.176 trillion spent on the importation of PMS in nine months, from January to September 2024, is now being reallocated to other sectors of the economy and related social needs in the 2025 budget.
On the domestic scene, the Dangote Refinery, according to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), supplied 489,500 metric tonnes of Automotive Gas Oil (AGO) and 29,000 metric tonnes of Jet A1 fuel between April and September 2024. These were distributed via 17 AGO shipments to Lagos, 6 to Warri, 2 to Port Harcourt, and 1 to Calabar, highlighting its key role in domestic fuel supply.
On gas production and LNG, exports are on cue to grow during the first quarter of the year, driven by the government’s “Decade of Gas” initiative and the country’s ambitions to increase its gas reserves to 210 trillion cubic feet (Tcf) in 2025 and 220 Tcf by 2030. Gas production and supply will also increase in response to the federal government initiative on gas for automobiles and the need to meet the shortfalls experienced by power-generating stations and industries.
Weak Naira and Nigeria’s Bustling Tourism Rides Detty December:
Described as a magical time between December and early January when diaspora communities and tourists flock to Nigeria for an unforgettable experience filled with flavourful food, soulful African music and sunshine. Beach parties, festivals, and top-tier performances fuel the energy, while fashion takes centre stage, with everyone dressing to impress.
December 2024 delivered a rare moment of currency appreciation. The naira strengthened by 7.01 per cent on average, climbing from N1,670/$ in November to N1,553/$ – the first December appreciation in five years. This was primarily attributed to targeted reforms by the CBN and the Federal Government, including introducing the Electronic Foreign Exchange Matching System (EFEMS), sales of Eurobonds, and an influx of Foreign Portfolio Investments (FPIs). Diaspora remittances, a critical source of income for many low – and middle-income households, also played a part. CBN data showed a 61 per cent year-on-year increase in diaspora remittances as of October 2024. While remittances alone may not fully account for December’s naira rally, the combination of reforms and inflows brought much-needed relief.
Increasing Forex Inflows
On the back of impressive diaspora remittance, CBN data indicate that the net Foreign Exchange (FX) inflows into the economy increased by 65.7 per cent year-on-year, reaching $46.92 billion during the first ten months of 2024. The CBN Economic Report for the period under review shows that the rise was from $28.31 billion in the corresponding period of 2023. Aggregate forex inflow to the economy rose year-on-year by 41 per cent to $79.8 billion in 10-month 2024 from $55.57 billion in 10-month 2023. The data further indicate that there were fewer forex outflows from the economy showing a 1.4 per cent decline year-on-year to $29.84 billion in 10-month 2024 from N30.29 billion in 10-month 2023, indicating investment comfort.
Analysis of the data also showed that inflows through autonomous sources rose by 0.06 percent year-on-year to $35.82 billion in the first ten months of 2024 from $34.4 billion in the first ten months of 2023. As a result, net foreign exchange inflow from autonomous sources increased by 73 percent year-on-year, totalling $39.7 billion in the first ten months of 2024, compared to $22.93 billion in the prior year.
The figures also show that the CBN inflows grew by 55 per cent year-on-year, amounting to $32.94 billion in 10 months in 2024, up from $21.25 billion in 10 months in 2023. Conversely, outflows via the CBN declined by 1.11 per cent, dropping to $25.74 billion in 10-month 2024 from $26.03 billion in 10-month 2023.
Consequently, net forex inflow through the CBN skyrocketed by a massive 556.8 percent year-on-year, rising to $7.16 billion in 10-month 2024 from a negative figure of—$1.09 billion in 10-month 2023. This establishes the potency of policies deployed by both the federal government and the CBN to attract foreign exchange into the Nigerian economy.
The Next Big Thing in Nigeria’s Forex Market Effective January 1, 2025:
Eligible non-resident Nigerians can open two new account types: the Non-Resident Nigerian Ordinary Account (NRNOA) and the Non-Resident Nigerian Investment Account (NRNIA). These accounts are designed to boost diaspora participation in Nigeria’s economic growth. The accounts can be opened subject to meeting Know Your Customer (KYC) requirements. The NRNOA allows non-resident Nigerians to remit their foreign earnings directly to Nigeria and manage funds in foreign and local currencies. The NRNIA, on the other hand, enables them to invest in assets within Nigeria, either in foreign or local currency. Account holders can maintain foreign and naira accounts to facilitate transactions and participate in investment opportunities.
Interest earned on deposits will be subject to applicable federal taxes, and balances in the foreign account can be fully repatriated without any restriction. Funds can also be freely converted into naira at prevailing exchange rates through authorized dealers.
For the NRNIA, investment principal and profits can be fully repatriated, ensuring ease of capital mobility. This allows account holders to seamlessly invest in local or foreign currency-denominated assets, promoting greater investment diversification. Valid or expired Nigerian passports may be accepted with a valid foreign passport or proof of residency. Alternatively, a valid foreign passport with evidence of Nigerian citizenship of either parent may also be provided.
In addition to the new bank account’s forex-related management strategies, the CBN has halted the extension of export proceeds repatriation for exporters. The apex bank directive applies to both oil and non-oil export transactions. Proceeds of oil and non-oil exports are now to be repatriated and credited into the exporters’ export proceeds domiciliary accounts within 180 days and 90 days from the bill of lading’s date for non-oil and oil & gas exports, respectively.
This policy is expected to tighten control over foreign exchange inflows, ensuring export proceeds are promptly repatriated to support Nigeria’s foreign exchange reserves. By eliminating the option for extensions, the CBN aims to discourage delays in repatriation, which have been a source of concern for regulators seeking to stabilise the naira and improve liquidity in the foreign exchange market.
Removal of Fuel Subsidy and Adoption of Alternative Energy
The partial removal of electricity subsidies has made Nigerians more conscious of their electricity consumption, prioritising energy efficiency. This shift is expected to drive the adoption of renewable energy products, particularly solar power, for domestic and industrial uses. It will lead to increased momentum in energy transition in 2025, driven by global investment flows that prioritize sustainability.
GDP Rebasing: Crop Production, Trade, Real Estate Now Largest Contributors to Economy
Reports emerging from the Gross Domestic Product rebasing template indicate significant structural changes in Nigeria’s economy. Crop production, trade, and real estate are emerging as the three most important economic contributors.
Telecommunications, crude oil, petroleum and natural gas, construction, food beverages, and tobacco are in the top seven brackets of the nation’s anticipated GDP template. Crude oil and natural gas processing have been displaced by real estate from being the third-largest economic activity, placing it at the fifth position. Also, food, beverages and tobacco rank 7th, construction will now be the 6th largest, while public administration is totally displaced from the top seven brackets.
The updated rankings from the GDP rebasing reveal a shift in the Nigerian economy’s structure, signalling a more diversified and dynamic market-driven economic landscape. The GDP rebasing exercise incorporates data from new and previously underreported economic activities. Key areas now covered include:
• Digital Economic Activities
• Modular Refineries
• Pension Funds Administrators
• Domestic Households as Employers of Labour
• National Health Insurance Scheme (NHIS)
• Quarrying and Other Mining Activities
• Nigerian Social Insurance Trust Fund (NSITF)
• Illegal and Hidden Activities
The rise of real estate as the third-largest subsector demonstrates the growing importance of infrastructure, urbanization, and property development. This shift also shows the economy’s reduced dependence on crude petroleum and natural gas, traditionally a dominant sector.
The National Bureau of Statistics (NBS), which commenced the rebasing of the country’s Gross Domestic Product (GDP) and Consumer Price Index (CPI), will release the data later this month. This initiative aims to reflect updated economic conditions as recommended every five years by the United Nations Statistical Commission.
Energising the National Economy Through Credit
The federal government of Nigeria will, shortly, roll out the National Credit Guarantee System (NCGS). To address the estimated $160 billion funding gap for micro, small and medium enterprises (MSMEs), the NCGS would act as a guarantor, helping businesses and individuals secure loans from banks by providing the collateral they lack.
As proposed, bridging a fraction of the credit gap for Nigerian MSMEs through the national credit guarantee system could unlock massive economic potential, create jobs, increase productivity, and drive innovation.
Conclusion
We can say for sure that though the reforms being undertaken have led to high cost of living and high cost of production on individuals and corporate entities, the reality is that the reform policies are accomplishing the objectives they were set out to achieve. While the structure of the national economy epitomises a mix mash of market-driven and controlled approaches, we can submit that. Indeed, the economy is becoming nimble and able to facilitate pricing mechanisms, which, in our consideration, is the most significant requirement of economics for advancing production and productivity through the interface of demand and supply.
This enablement of market-determined prices, especially concerning PMS and foreign exchange, has enhanced the country’s economic fundamentals. From our place of review, we can conveniently submit that Nigeria is on the threshold of an active economy with capabilities for increased material and service-driven production, including food, higher revenue earnings, and, most importantly, the capacity to produce jobs for the populace.
We are persuaded that the evidence of these sovereign economic possibilities will start manifesting in 2025.
•Akinsiju, PhD is Chairman, Independent Media and Policy Initiative (IMPI)
