After years of economic strain marked by mismanagement, ballooning debt, and relentless inflation, Nigeria’s economy is beginning to show tentative signs of recovery. A recent report by The Economist credits this shift to the far-reaching structural reforms introduced by President Bola Tinubu since assuming office in 2023, measures the magazine aptly describes as “bitter medicine.”
A Troubled Inheritance
“It is difficult to overstate the mess Mr Tinubu inherited,” The Economist observed. By the time he took office, Nigeria’s economy was severely distorted. The Central Bank was weighed down by about $7 billion in unmet obligations, foreign reserves had been poorly managed, and a dysfunctional multi-tier exchange rate regime had effectively collapsed.
Compounding these challenges was the fuel subsidy, which alone cost the government an estimated $10 billion in 2022, draining public finances while delivering little long-term benefit.
Confronted with this legacy, Tinubu’s administration moved decisively: abolishing fuel subsidies, floating the naira, and tightening monetary policy. Though these reforms imposed real short-term pain on households and businesses, they have begun to restore macroeconomic discipline and rebuild investor confidence.
Inflation Eases, Growth Outlook Improves
The early results are becoming visible. Inflation, which peaked at a near 30-year high of 34.8 per cent in December 2024, fell sharply to 15.2 per cent by December 2025. The International Monetary Fund now projects Nigeria’s economy will grow by 4.4 per cent in 2026, signaling cautious optimism for Africa’s largest economy.
Aggressive monetary tightening by the Central Bank of Nigeria has helped rein in inflationary pressures, while improved security in the Niger Delta, combined with tax incentives has lifted oil output. Foreign exchange reserves have climbed to $46 billion, their highest level in seven years, following two significant naira devaluations in 2023 that helped correct longstanding currency distortions.
Renewed Investor Interest
The reform momentum has reignited investor appetite, particularly in the oil and gas sector. Shell is reportedly advancing plans with partners on a $20 billion offshore oilfield project expected to come on stream in 2027, while ExxonMobil has committed $1.5 billion to deepwater investments.
Domestic operators, meanwhile, are making gains onshore, plugging leaks, improving efficiency, and operating in a Niger Delta made safer by enhanced security measures.
Beyond hydrocarbons, a weaker naira could strengthen the competitiveness of non-oil exports such as cocoa and cashew, offering Nigeria a pathway toward broader export diversification and improved fiscal space.
Fragile Gains, Lingering Debt Risks
Despite these positive indicators, The Economist warns that Nigeria’s recovery remains fragile. Much of the savings from subsidy removal has been absorbed by debt servicing, with roughly 60 per cent of government revenues now devoted to repaying obligations.
While the finance minister has signaled a slowdown in borrowing, budget projections suggest fiscal pressures remain intense. The magazine draws parallels with the post-1999 reforms under former President Olusegun Obasanjo, noting that Nigeria could be on the threshold of another period of economic renewal, if reform discipline is sustained.
Naira Firms, Markets Rally
The naira ended January 2026 on a firmer footing at the official Nigerian Foreign Exchange Market (NFEM), closing at ₦1,391/$1, its third consecutive trading day below the ₦1,400/$ threshold. Although slightly weaker than the previous day’s ₦1,385/$1, the currency gained ₦35 over the month, having opened January at ₦1,431/$1.
At the parallel market, the naira appreciated by ₦20 in a single day to close at ₦1,450/$1 and strengthened by about six per cent year-on-year compared to ₦1,475/$1 at the end of December 2025. Analysts, however, urged caution. “We need to first see if the momentum continues,” said Ayokunle Olubunmi, warning that short-term flows could distort the picture.
The equities market has mirrored this cautious optimism. Nigerian Exchange Limited (NGX) market capitalisation rose by ₦6.8 trillion in January, closing at ₦106.15 trillion, up from ₦99.38 trillion at the end of December 2025. The All-Share Index gained 6.27 per cent year-to-date, with Oil and Gas (+13.8 per cent) and Insurance (+11.8 per cent) leading sectoral gains, alongside solid performances in Banking, Industrial Goods, and Consumer Goods.
Market analysts attribute the rally to strong corporate earnings, banking sector recapitalisation, and improving investor sentiment anchored on macroeconomic reforms.
Outlook: Cautious Hope
Nigeria’s economy is showing resilience, but the path ahead remains uncertain. Tinubu’s reforms have delivered early dividends, lower inflation, stronger reserves, a firmer currency, and renewed investor interest. Yet high debt servicing costs and fragile fiscal balances continue to pose significant risks.
Sustaining this momentum will depend on the government’s ability to consolidate reforms, manage debt prudently, and accelerate diversification beyond oil. For now, the “bitter medicine” appears to be taking effect, offering cautious hope that Africa’s largest economy may be edging toward a more stable and sustainable growth trajectory.
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