…But policy now broader, local
When Nigeria floated the naira in mid-2023 and ended its decades-long fuel subsidy, economists called it bold. Investors called it overdue. However, ordinary Nigerians called it familiar, painfully.
For many, the current reform agenda feels like a revival of the Structural Adjustment Programme (SAP) of 1986. Then, as now, the government devalued the naira, removed subsidies, liberalised trade, and promised a new path to growth. Then, as now, inflation followed, food prices spiked, and public trust eroded.
Echoes of the past
In 1982, President Shehu Shagari raised petrol prices from 15.3 kobo to 20 kobo per litre without calling it a subsidy cut. By 1986, under President Ibrahim Babangida, the message was different: subsidy removal came with sweeping International Monetary Fund (IMF)-backed reforms.
That year, Nigeria launched the Structural Adjustment Programme (SAP). The naira was floated, fuel subsidies were reduced, and trade barriers came down. But the promise of recovery quickly turned into hardship. Real wages collapsed, inflation surged, and unemployment rose. By 1989, the streets erupted in protest. The economy didn’t adjust and it unraveled.
The memory lingers. Today’s reforms, while designed locally, carry similar economic pain. Following the subsidy removal, food inflation rose sharply, and petrol prices doubled. In communities like Otukpo and Ifo, traders say they’ve stopped restocking.
“We just wait and watch,” one shopkeeper said. “People are only buying rice and painkillers.”
What’s different this time?
First, this reform cycle wasn’t imposed by foreign lenders. President Tinubu owns the policy. The naira float and subsidy cuts were made without formal IMF conditionalities.
Second, the scale of fiscal relief is unprecedented. According to NEITI’s FAAC Quarterly Review, total allocations to all tiers of government rose from N10.9 trillion in 2023 to N15.26 trillion in 2024, a 40 percent increase within one year, driven largely by subsidy removal and exchange rate liberalisation.
States alone received N5.81 trillion in 2024, up from N3.58 trillion in 2023, a 62 percent increase giving them more room for capital investment if well-managed. Local government allocations rose by 47 percent, while the federal share increased by 24 percent, reaching N4.95 trillion.
The sharp rise reflects a genuine fiscal windfall. But without disciplined budget implementation and stronger capital spending oversight, the additional funds risk being absorbed by recurrent expenditure or political patronage, as seen in past cycles, experts say.
Third, there’s a new emphasis on revenue mobilisation and institutional transparency. Tax reform is on the table. Nigeria’s oil production has returned to pre-2022 levels, hovering between 1.4 million barrels per day (mbdp) and 1.6 mbpd. Inflation, while high, is slowing from 34.6 percent in late 2024 to 22.2 percent by June 2025.
Still, execution remains Nigeria’s old weak spot.
The Real Effective Exchange Rate (REER), by Renaissance Capital’s estimate, suggests the naira is now 25 percent overvalued, threatening export competitiveness, a trap Nigeria fell into in the late 1980s.
Inflation data is another concern. Though official figures say inflation is moderating, the IMF recently warned of incomplete Consumer Price Index (CPI) data and methodological flaws, making it harder to assess real price trends.
Budget projections also rest on shaky ground. Nigeria’s 2025 fiscal plan assumes oil at $75 per barrel and 2 million barrels per day. Yet prices remain around $65, and oil theft and pipeline downtime haven’t disappeared. If pre-election spending ramps up again, exchange rate stability may not last.
So, is this SAP all over again?
Not quite. Today’s reforms are broader, more locally initiated, and unfolding in a more decentralised, data-conscious economy, one equipped with digital tools and civic watchdogs that didn’t exist in 1986. But the risk of failure remains exactly where it was then: in poor execution and weak political will.
“What makes this moment different is also what makes it urgent,” said a Lagos-based political leader. “Nigerians are less patient, more sceptical, and far better informed.”
They’ve heard the promises before. What they want now is proof, visible in better schools, working clinics, safer roads, and food they can actually afford.
Make it count, or repeat the past
To avoid repeating the economic disillusionment that followed the Structural Adjustment Programme (SAP) of the 1980s, experts say Nigeria’s reform path must be anchored in discipline, transparency, and continuity.
First, the fiscal windfall from subsidy removal must translate into visible and productive investments, not just paperwork or expanded bureaucracy. “Citizens need to see the roads, schools, and hospitals not just hear about budget reallocations,” said a Lagos-based public finance analyst.
Second, the government must urgently address growing concerns over inflation data. Analysts warn that opaque methodology and delayed CPI reporting risk eroding both market trust and policy credibility.
Policymakers must also guard against currency overvaluation and the emergence of speculative bubbles. With the naira’s real effective exchange rate flagged as overvalued by up to 25 percent, the danger of repeating 1980s-style competitiveness loss is real.
Lastly, reform efforts must outlive the current administration. “Political will is often a seasonal commodity in Nigeria,” one policy advisor warned. “If the momentum stalls in 2026 due to election-year populism, we risk throwing away hard-won gains.”
(BusinessDay)
