3 years after ‘subsidy is gone’: The real balance sheet of Tinubu’s reforms
On May 29, 2023, President Bola Ahmed Tinubu stood before Nigerians at Eagle Square in Abuja, while being sworn in, and pronounced a sentence that instantly altered the economic direction of Africa’s largest oil producer: “Subsidy is gone.” The declaration lasted barely a few seconds, but its consequences have defined the three years since. In […]
subsidy removal gains, losses
On May 29, 2023, President Bola Ahmed Tinubu stood before Nigerians at Eagle Square in Abuja, while being sworn in, and pronounced a sentence that instantly altered the economic direction of Africa’s largest oil producer: “Subsidy is gone.” The declaration lasted barely a few seconds, but its consequences have defined the three years since.
In those years, Nigerians have lived through one of the most dramatic economic transitions since the Structural Adjustment Programme by President Ibrahim Babangida in the mid-1980s. Petrol prices surged from about N185 per litre in May 2023 to above N600 within weeks, before edging higher to N1,000 in parts of the country in subsequent supply disruptions.
The naira lost more than two-thirds of its value against the dollar following the liberalisation of the foreign exchange market within two weeks of the subsidy removal. Consequently, inflation accelerated to multi-decade highs. Food prices climbed at a pace that fundamentally altered household consumption patterns.
Yet, paradoxically, many macroeconomic indicators had deteriorated before the reforms began to stabilise. Foreign reserves have risen, the exchange market has stabilised, and the interest rate differential has significantly narrowed. This contradiction defines the Tinubu years so far: a period in which the economy became simultaneously more painful and, arguably, more economically coherent.
The question confronting Nigeria three years later is no longer whether the reform was necessary. Increasingly, even many critics concede that the pre-2023 model had become fiscally unsustainable. The more difficult question is whether the administration managed the transition in a way that distributed the burden fairly, protected vulnerable citizens adequately, and created a credible pathway from stabilisation to broad-based prosperity. That is the real balance sheet of Tinubu’s reforms.
The economy Tinubu Inherited
By the time Tinubu assumed office in 2023, Nigeria’s economic contradictions had reached dangerous levels. The federal government was spending trillions of naira annually subsidising petrol consumption in a country that paradoxically exported crude oil but imported most of its refined fuel. The subsidy regime had evolved into one of the largest fiscal burdens in the national budget. In 2022 alone, petrol subsidy costs reportedly exceeded N4 trillion, more than federal allocations to health and education combined in some budget cycles.
At the same time, the foreign exchange system had become increasingly dysfunctional. Multiple exchange-rate windows operated simultaneously, creating arbitrage opportunities for politically connected actors while discouraging productive investment. Manufacturers struggled to access dollars for raw materials and machinery. Foreign investors faced mounting difficulties repatriating profits. Capital inflows weakened sharply.
Meanwhile, public debt servicing consumed an alarming share of government revenue. In some quarters, before Tinubu took office, Nigeria was spending almost all federally retained revenue on debt obligations. The state increasingly relied on borrowing simply to sustain basic fiscal operations.
What Tinubu’s administration did was to confront several distortions simultaneously instead of incrementally. The government removed fuel subsidies, liberalised the exchange-rate regime, and supported aggressive monetary tightening by the Central Bank of Nigeria to contain inflation and restore investor confidence. These reforms represented the most ambitious shift toward market pricing in decades.
Why economists supported reforms
From a purely economic standpoint, the logic behind the reforms was difficult to dispute. Fuel subsidies had long become economically regressive. While politically defended as a pro-poor measure, studies repeatedly showed that wealthier Nigerians consumed disproportionately larger shares of subsidised fuel because they owned more vehicles and generators. Smuggling networks also exploited the price differential between Nigeria and neighbouring countries, diverting subsidised petrol across borders. The subsidy system, therefore, transferred enormous public resources into a structure riddled with inefficiency, opacity, and corruption.
Similarly, the multiple exchange-rate regime had evolved into a mechanism that rewarded arbitrage rather than production. Businesses with privileged access to cheaper official dollars could reap extraordinary profits simply by round-tripping currency, supported by a compromised banking system. Consequently, genuine investors increasingly avoided Nigeria because exchange-rate uncertainty made long-term planning difficult.
International financial institutions, including the World Bank and the International Monetary Fund, and investors welcomed the shift almost immediately. Ratings agencies viewed the reforms as evidence that Nigeria was finally confronting long-postponed structural weaknesses. Foreign portfolio investors have gradually returned to Nigerian assets after years of caution.
For global markets, what separated Tinubu from previous leaders was that the new president appeared willing to make politically difficult decisions that previous administrations had repeatedly delayed. Yet, the reality of living through the reform years has been quite different from what the reform papers said.
The human cost of adjustment
If the reforms improved macroeconomic credibility, they also unleashed one of the harshest cost-of-living crises in Nigeria’s recent history. Transport costs rose immediately after subsidy removal. Because transportation affects virtually every component of the supply chain, food inflation accelerated sharply. The depreciation of the naira further increased the cost of imported goods, industrial inputs, pharmaceuticals, and machinery. By 2024 and 2025, inflation had become the dominant fact of daily Nigerian life. In December 2024, inflation rose to a high of 34.8 per cent.
Food prices became particularly devastating. Staple commodities such as rice, garri, beans, bread, cooking oil, and tomatoes recorded extraordinary increases across urban markets.
Perhaps no reform symbolised the administration’s economic gamble more than exchange-rate liberalisation. Before 2023, the central bank effectively operated multiple exchange rates. The official rate differed sharply from parallel market pricing, distorting investment decisions and encouraging speculative behaviour. Tinubu’s government attempted to unify the market and allow the naira to float more freely, leading to a sharp depreciation.
Within months, the naira lost substantial value against the dollar, reflecting years of accumulated pressure previously suppressed through administrative controls. While painful, many economists argued that the depreciation merely revealed the currency’s underlying market value.
Nigeria’s import dependence meant currency weakness was transmitted rapidly into domestic inflation. Imported inflation affected everything from fuel to pharmaceuticals, education, telecommunications equipment, and industrial machinery. Corporate balance sheets weakened where businesses carried foreign currency obligations.
Yet defenders of the reforms argue that the previous system was already collapsing silently. Artificial exchange rates had created scarcity, discouraged investment, and depleted reserves without truly stabilising prices. In that sense, the naira crisis under Tinubu was not entirely new; rather, it exposed pressures that had accumulated for years beneath controlled pricing. So, the administration’s challenge became how to stabilise the currency without reversing liberalisation. Until now, this remains unresolved.
Did reforms prevent larger crisis?
Supporters of Tinubu’s policies increasingly frame the reforms not as optional choices but as unavoidable corrections. Their argument is straightforward: Nigeria was approaching a fiscal and foreign-exchange cliff by 2023. Continuing subsidies and exchange-rate controls would eventually have produced even more severe instability, perhaps including debt distress, external payment difficulties, or acute import shortages.
Before the reforms, foreign investors had largely retreated from Nigeria. Oil production remained weak. Foreign reserves faced persistent pressure. Fiscal sustainability indicators deteriorated steadily. The government’s capacity to finance infrastructure and social spending was narrowing under the weight of subsidies and debt obligations.
But critics argue that necessity alone does not absolve poor sequencing of policies. This is the greatest sour point of the reforms. The critics contend the reforms were implemented too abruptly and without adequate social cushioning. Public transportation systems were insufficiently developed before fuel prices rose. Social protection programmes remained fragmented and weakly targeted. Domestic refining capacity was still limited at the time the subsidy removal began. Wage adjustments lagged behind inflation severely.
Economic reforms are never purely technical exercises. They are political acts that redistribute costs and opportunities across society. Tinubu’s reforms have tested the limits of public tolerance for economic hardship in a low-trust environment.
Historically, countries that implemented successful adjustment programmes combined liberalisation with strong institutions, targeted welfare systems, industrial policy, and credible communication. On the contrary, Nigeria attempted reform within conditions of weak state capacity, fragile infrastructure, widespread insecurity, and deep public distrust, all of which made social legitimacy difficult.
However, the administration has repeatedly argued that temporary hardship would produce long-term stability. But citizens measure governments less by future projections than by present conditions. Rising GDP statistics matter less to households than transport fares, school fees, rent, electricity bills, and food prices. That disconnect explains why many recent macroeconomic improvements failed initially to translate into political relief.
Still, there are signs that parts of the economy may be entering a more stable phase than the immediate post-reform shock period. Inflation, while still high (at 15.69 percent now) has shown periods of moderation. Investor sentiment toward Nigerian assets has improved relative to pre-2023 levels. One of the signs that international investors are beginning to reassess Nigeria’s economic outlook has been the gradual restoration of the country’s status within frontier market investment conversations after years of declining confidence. This came after FTSE Russell’s March 2026 interim review and will become effective in September 2026. It will upgrade Nigeria from “Unclassified” to “Frontier Market” status. Russell said the reclassification reflects improvements in market accessibility, regulatory oversight, settlement efficiency, and capital repatriation frameworks, with Nigeria receiving “Pass” ratings across key criteria.
For much of the past decade, foreign investors had retreated from Nigerian assets because of foreign exchange restrictions, difficulties repatriating funds, multiple exchange-rate windows, and growing macroeconomic instability.
The liberalisation of the foreign exchange market under the Tinubu administration, despite its painful domestic consequences, has been viewed externally as a major step toward restoring market transparency and improving investor confidence. That shift has contributed to renewed foreign portfolio interest in Nigerian debt and financial markets, even as broader economic pressures persist.
The improving sentiment was reinforced recently when S&P Global Ratings upgraded Nigeria’s sovereign credit outlook, citing ongoing economic reforms, improving policy credibility, and signs of greater stability in the foreign exchange market. The upgrade was symbolically important because sovereign ratings influence how global investors price risk, determine borrowing costs, and assess a country’s economic direction. repatriation frameworks, with Nigeria receiving “Pass” ratings across key criteria.
Sure, the government can flaunt these as part of its achievements under the economic reforms. The country that was almost a pariah state to investors is fast becoming a desired investment destination once more.