Nigeria’s Economic Crossroads: A critical review of Tinubu’s first two years

—harsh operational environment trails economy, poverty intensifies

Since assuming office in May 2023, President Bola Tinubu’s administration has embarked on sweeping economic reforms aimed at stabilizing Nigeria’s economy. However, these measures—particularly in interest rate policy, inflation control, and foreign exchange management—have led to significant economic turbulence, affecting the livelihoods of millions of Nigerians.

Interest Rates: Tightening Amidst Inflationary Pressures

To combat soaring inflation, the Central Bank of Nigeria (CBN) adopted a contractionary monetary policy stance. The Monetary Policy Rate (MPR) was increased from 18.5% in May 2023 to 27.5% by November 2024, marking an 875 basis point hike within a year. This aggressive tightening aimed to curb inflation but also led to higher borrowing costs, stifling investment and consumer spending. This has not only affected the lubrication of the economy, but borrowers are hardly able to get credit to fund their businesses. BH research revealed that interest rates in banks now stood at 35 – 40 per cent, depending on the capacity of who is borrowing and the bank that is lending.

Inflation: A Persistent Challenge

Inflation has remained a pressing issue, with the annual rate escalating from 22.41% in May 2023 to a peak of 34.80% in December 2024. Food inflation was particularly severe, reaching 40.53% in April 2024. Although a rebasing of the inflation calculation led to a reported decline to 24.48% in January 2025, the underlying cost pressures persisted, especially in essential commodities. Analysts believe that the rebased inflation is deceptive as food inflation is still very high, with only a few goods moderating in price.

Foreign Exchange: Naira’s Volatility and Depreciation

The naira experienced significant depreciation following the unification of exchange rate windows in June 2023. From an official rate of ₦462/$1 in May 2023, the naira fell to approximately ₦1,900/$1 by March 2024. Although some stabilization occurred, the currency’s volatility continued to pose challenges for businesses and consumers alike. Many are of the view that devaluation and floating the naira should have been strategic and brought about aggressive productivity and exportation of Nigeria’s products.

Socioeconomic Impact: Rising Costs and Public Discontent

The removal of fuel subsidies led to a sharp increase in petrol prices, from ₦238.11 per litre in May 2023 to over ₦1,000 by October 2024. This surge contributed to higher transportation and production costs, exacerbating inflationary pressures. Essential food items saw dramatic price hikes; for instance, the price of 1kg of local rice rose from ₦555.18 in May 2023 to ₦1,399.34 in April 2024, marking a 152.05% increase. Such economic strains have led to widespread public dissatisfaction and increased hardship for many Nigerians.

As a result, the World Bank recently observed a troubling trend in Nigeria, revealing that 75.5 per cent of the rural population now lives in poverty. This statistic emphasizes the growing inequality and economic challenges facing the nation. According to the April 2025 Poverty and Equity Brief, rural Nigerians are suffering more acutely from economic stagnation, inflation, and various structural issues, with poverty rates in these areas nearly double those of urban regions, where 41.3 per cent of the population lives below the poverty line.

Before the COVID-19 pandemic, in 2018/19, the Bank reported that 30.9 per cent of Nigerians were living below the international extreme poverty line of $2.15 per day. However, since then, multiple shocks—including increased insecurity and rising inflation—have exacerbated the situation, with projections suggesting that over 54 per cent of the population will be living in poverty by 2024.

The report also sheds light on significant disparities in poverty across regions and demographics. In 2018/19, the poverty rate in northern Nigeria was 46.5 per cent, in stark contrast to just 13.5 per cent in the southern region. Children aged 0–14 faced a poverty rate of 72.5 per cent, while 63.9 per cent of females and 63.1 per cent of males lived below the $3.65 per day lower-middle-income poverty line.

Educational attainment played a crucial role in determining poverty outcomes. The report found that adults lacking formal education experienced a staggering poverty rate of 79.5 per cent. Those with only primary education had a poverty rate of 61.9 per cent, and secondary school graduates fared slightly better at 50.0 per cent. In contrast, individuals with tertiary education enjoyed a significantly reduced poverty rate of 25.4 per cent, highlighting the importance of education in alleviating poverty.

Navigating Economic Reforms Amidst Challenges 

President Tinubu’s economic reforms have aimed to address structural issues within Nigeria’s economy. However, the rapid implementation and resultant economic shocks have led to significant challenges, including high inflation, currency depreciation, and increased cost of living. As the administration continues its reform agenda, careful calibration of policies and targeted support for vulnerable populations will be crucial to mitigate adverse effects and foster sustainable economic growth.

However, Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, has highlighted that heightened global uncertainty may lead to significant economic repercussions for emerging markets like Nigeria. He pointed out that as global investors become more risk-averse, there could be increased capital flight, placing further pressure on the already vulnerable Naira. “The fear of uncertainty often drives investors to safety, and unfortunately, emerging economies are usually the first to feel the heat,” Rewane noted.

According to him, the strengthening of the U.S. dollar could exacerbate Naira depreciation, especially as Nigeria continues to face limited foreign exchange inflows. Slower global demand is also expected to reduce the country’s oil exports, which remain a primary source of foreign earnings. This scenario could result in dwindling foreign reserves, making it more difficult for Nigeria to defend its currency and maintain macroeconomic stability.

Rewane also raised concerns about a potential decline in remittances from Nigerians living abroad, particularly those in the United States. These remittances have traditionally served as a critical source of foreign exchange and support for many households. With growing economic strain in the U.S. and other advanced economies, the flow of funds back home could weaken, further tightening the nation’s foreign exchange position.

Despite these challenges, he noted a possible marginal benefit—Nigeria’s import bill might decrease slightly due to falling global manufacturing input costs. However, this silver lining may not be enough to offset the broader impact of persistent geopolitical tensions, which continue to dampen investor confidence in global trade and hinder the recovery of capital inflows into countries like Nigeria.

CBN struggles to temper inflation

Since President Bola Tinubu took office in May 2023, the Central Bank of Nigeria (CBN) has implemented a series of significant monetary policy reforms aimed at stabilizing the economy, curbing inflation, and restoring investor confidence. These measures include aggressive interest rate hikes, exchange rate liberalization, banking sector recapitalization, and enhanced regulatory oversight. While these policies have shown some positive macroeconomic indicators, they have also led to short-term challenges for banks and Nigerian citizens.

One of the most notable actions by the CBN has been the consistent increase in the Monetary Policy Rate (MPR). Beginning at 18.75% in July 2023, the MPR was raised multiple times, reaching 27.50% by November 2024. These hikes were intended to tackle soaring inflation, which hit a three-decade high of 33.2% by mid-2024. The CBN also increased the Cash Reserve Ratio (CRR) for deposit money banks to 50%, further tightening liquidity in the banking system.

In a move towards exchange rate liberalization, the CBN allowed the naira to float freely in June 2023, abandoning the previous currency peg. This led to a significant devaluation of the naira, reaching ₦1,524 to $1 by early 2024. While the policy aimed to attract foreign investment and eliminate arbitrage opportunities, it also resulted in increased import costs and inflationary pressures.

A retired university Professor who pleaded anonymity lamented, “The Naira is now worthless. My small pension is no longer able to feed me. We are facing one of the hardest times.”

To strengthen the banking sector, the CBN announced a recapitalization program in March 2024, raising the minimum capital requirements for banks. The new requirements set a two-year timeframe for compliance, aiming to enhance the resilience of banks and their capacity to support a $1 trillion economy.

The impact of these policies on banks has been multifaceted. Higher interest rates have improved banks’ net interest margins; however, the increased CRR and tighter liquidity conditions have constrained their ability to lend. Furthermore, the naira’s devaluation has exposed banks to foreign exchange risks, prompting the CBN to limit banks’ Net Open Positions in foreign currencies to 20% of shareholders’ funds.

For Nigerian citizens, these monetary policies have resulted in mixed outcomes. On one hand, the reforms have led to a balance of payments surplus and increased foreign exchange reserves, signaling improved macroeconomic stability. On the other hand, the combination of subsidy removals, currency devaluation, and high inflation has eroded purchasing power, leading to an increased cost of living and public discontent.

In conclusion, the CBN’s monetary policy actions under President Tinubu’s administration have been aimed at long-term economic stabilization and growth. While these measures have shown some positive macroeconomic indicators, they have also posed significant short-term challenges for banks and the general populace. The success of these policies will depend on continued implementation and the government’s ability to mitigate their adverse effects on citizens.

Banking Industry on a high note  

Over the past two years, Nigeria’s banking industry has demonstrated remarkable resilience and adaptability amidst significant economic challenges. The sector has navigated through currency devaluation, inflationary pressures, and regulatory reforms, emerging stronger and more innovative.

In 2023, the banking sector contributed 4.6% to Nigeria’s GDP, underscoring its pivotal role in the nation’s economy. Total assets and contingents grew by 53.8% year-on-year, surpassing ₦100 trillion to reach ₦128.8 trillion ($143.2 billion) by December 31, 2023. This growth was fueled by aggressive deposit mobilization, branch expansions, and partnerships with fintechs and exporters.

Profitability soared in the same period, with profit before taxation increasing by 168.4% to an all-time high of ₦3.5 trillion. The pre-tax return on average assets (ROA) improved to 3.3% from 1.7% in 2022, while the pre-tax return on average equity (ROE) rose to 44.9% from 21.6%.

Digital transformation has been a significant driver of this growth. Over 70% of banking transactions now occur through digital channels, with mobile and internet banking adoption accelerating due to improved infrastructure and customer demand. Banks have invested heavily in enhancing their digital capabilities, with five major banks collectively investing ₦178.77 billion in IT infrastructure in the first half of 2024, marking a 203% increase from the previous year.

The fintech sector has also played a crucial role in expanding financial services. In 2023, mobile money transactions increased by 140%, reaching ₦46.6 trillion ($29.31 billion), while personal loans grew by 19% to ₦2.28 trillion ($1.43 billion). Investments in fintech exceeded $1.5 billion in 2024, a 30% growth from the previous year, highlighting the sector’s dynamism and appeal to investors.

Despite these advancements, the industry faced significant challenges. Inflation remained a persistent issue, reaching 33.88% in October 2024, surpassing the anticipated target of 26.72%. The Central Bank of Nigeria (CBN) responded by raising the benchmark lending rate to 27.5% in November 2024, marking the sixth consecutive rate hike that year.

Currency volatility also posed challenges, with the naira experiencing a 70% devaluation. This led the CBN to mandate banks to bolster their capital by March 2026, requiring international banks to increase their capital base to ₦500 billion, national banks to ₦200 billion, and regional banks to ₦50 billion. This move aims to stabilize the banking sector and encourage consolidation among weaker banks.

Cybersecurity threats have intensified with increased digitization. Banks have reported a rise in phishing attacks, API breaches, and fraud, particularly among mobile banking platforms. Regulatory bodies are tightening data protection requirements to mitigate these risks.

Financial inclusion efforts have yielded positive results, with the unbanked population reducing by 10% over the past two years. Over 50 million Nigerians now access formal banking services, thanks to initiatives like agent banking and digital wallets reaching underserved populations in rural areas.

Looking ahead, the Nigerian banking industry is poised for continued growth, driven by digital innovation, regulatory reforms, and increased foreign investments. However, addressing challenges such as inflation, currency volatility, and cybersecurity threats will be crucial to sustaining this momentum and ensuring the sector’s resilience.

Speaking at the Central Bank of Nigeria (CBN) seminar for the Finance Correspondents & Business Editors Association of Nigeria, titled “Banking Recapitalisation Towards a Trillion Dollar Economy,” held at Ibeto Hotel, Abuja, the Group Managing Director of United Bank for Africa Group, Oliver Alawuba, emphasized the critical role of profitable banks in driving economic growth.

He asked, “How can we work together? How can the banking industry, journalists, correspondents, and visitors collaborate effectively?”

He acknowledged the complexities the industry faces but stressed the importance of unity and understanding. “We are doing a lot as an industry and as a vital part of the economy. Often, the narrative we hear is that banks are making excessive profits. But the truth is, our profits are not as high as perceived,” Alawuba explained.

He continued, “A profitable bank is essential to building a strong economy. Without profitability, banks cannot accumulate the reserves necessary to support economic development and withstand shocks. Profitability is not a sign of greed but a foundation for sustainability.”

Drawing comparisons, Alawuba pointed out, “If you compare our profits to those of banks in South Africa, you will see that one single South African bank earns more than the entire Nigerian banking sector combined. Similarly, when you look at the top banks across Africa, Nigerian banks still have a long way to go to be truly competitive and strong.”

He concluded by reaffirming the need for strong and profitable banks to fulfill their critical role in the economy. “We need your partnership on this journey — to tell the real story of banking in Nigeria and support the building of resilient financial institutions.”

As the late banking pioneer John Pierpont Morgan once said, “The first step towards getting somewhere is to decide you’re not going to stay where you are.” For Nigerian banks, profitability is that decisive step towards a thriving economy.

Summary of banks’ key performances for the period ended December 2024

United Bank for Africa (UBA): UBA maintained its top position with the largest asset base, increasing from ₦20.6 trillion in 2023 to ₦30 trillion in 2024. Pre-tax profit rose from ₦757.68 billion to ₦803.72 billion, while net profit increased from ₦607.7 billion to ₦766.6 billion.

Zenith Bank: Zenith experienced a substantial rise in profit before tax, increasing from ₦795.96 billion in 2023 to ₦1.32 trillion in 2024. Its net profit surpassed the trillion-naira threshold, climbing from ₦676.9 billion to ₦1.03 trillion, with total assets growing from ₦20.4 trillion to ₦29.96 trillion.

Guaranty Trust Holding Company (GTCO): GTCO showcased impressive performance with pre-tax profit more than doubling from ₦609.3 billion in 2023 to ₦1.27 trillion in 2024. Its net profit grew from ₦539.66 billion to ₦1.02 trillion, and total assets increased from ₦9.7 trillion to ₦14.8 trillion.

First Bank Holdings (First Holdco): This holding company reported a more than twofold increase in pre-tax profit from ₦356.15 billion in 2023 to ₦862.39 billion in 2024. Net profit soared from ₦308.4 billion to ₦736.7 billion, with total assets rising from ₦16.9 trillion to ₦26.5 trillion.

Stanbic IBTC Holdings: Known for its significant foreign ownership, Stanbic reported that profit before tax climbed from ₦172.91 billion in 2023 to ₦303.8 billion in 2024. Likewise, net profit grew from ₦140.62 billion to ₦225.3 billion, and total assets expanded from ₦5.15 trillion to ₦6.91 trillion.

Historical performance data also reveals similar upward trends:

Fidelity Bank: In the year ending December 2014, Fidelity Bank’s profit after tax saw a significant increase of 78.73%, reaching ₦13.8 billion compared to ₦7.72 billion in 2013. Profit before tax similarly rose by 72.33% to ₦15 billion.

Access Bank: During the same period, Access Bank boosted its revenue generation, with gross earnings increasing by 18.5% to ₦245 billion. Profit before tax grew by 21%, moving from ₦43 billion in 2013 to ₦52 billion in 2014.

These results illustrate a broader trend of increasing profitability and expanding balance sheets among Nigeria’s major banks, reinforcing confidence in the sector’s future stability and growth.

Market maintains an upswing mode

The Nigerian capital market has shown remarkable resilience and growth in the past two years, emerging stronger despite the ongoing macroeconomic challenges such as inflation, currency volatility, and foreign exchange constraints. This impressive performance highlights the market’s maturation, bolstered investor confidence, and the effectiveness of key regulatory reforms aimed at revitalizing the financial sector. Notably, strategic interventions by the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), and other financial regulators have been instrumental in ensuring market stability and attracting investment inflows from both local and foreign participants.

In 2023, the Nigerian Exchange (NGX) experienced a robust recovery, with the All-Share Index (ASI) soaring by 45.44%, closing the year at 74,773.77 points, up from 51,251.06 points in 2022. This marked one of the most impressive single-year growths in recent history. The total market capitalization also saw significant expansion, rising from ₦27.92 trillion in 2022 to ₦40.92 trillion by December 2023. The trading volume in equities grew by 54.3%, totaling ₦3.58 trillion, with domestic investors accounting for 88.5% of all transactions, reflecting a growing local interest and confidence in the capital market.

This upward trend continued into 2024, with the ASI surging by an additional 37.65% to reach an all-time high of 102,926.40 points. This marked the fifth consecutive year of positive returns for the NGX, with market capitalization increasing by an astounding ₦21.85 trillion, closing at ₦62.76 trillion. Such growth was driven by strong earnings, new equity listings, and heightened investor participation, leading to a collective gain of approximately ₦22 trillion for investors throughout the year.

Several critical factors have been responsible for this unprecedented growth. Reforms in the banking sector, particularly the CBN’s directive on recapitalization, prompted a wave of public offers and mergers, injecting fresh capital and enhancing investor confidence. In addition, foreign exchange liberalization policies improved liquidity and transparency in the FX market, promoting foreign portfolio investments.

Nigeria attracted over $6 billion in capital inflows in the first half of 2024, more than doubling the amount from the previous year. Notable strategic listings, such as those of Aradel Holdings and Transcorp Power, further broadened investment options and deepened market depth.

Sectoral performance in 2024 showcased the overall bullish sentiment, with the Oil & Gas sector leading the charge, experiencing a remarkable 159.8% increase due to strong performances from companies like Oando and Seplat. The Insurance sector closely followed, achieving a 112.7% surge, supported by improved underwriting results from firms like Veritas Kapital and Wapic. The Consumer Goods sector also fared well, posting gains of 54.4%, buoyed by increased demand and efficiencies from companies like Unilever and UACN, while the Industrial Goods and Banking sectors appreciated by 31.5% and 21.3%, respectively, thanks to infrastructure growth and increased capital-raising activities.

The Nigerian capital market appears promising. With enhanced macroeconomic coordination, ongoing regulatory reforms, and a gradual return of foreign investors, market fundamentals remain strong. However, challenges such as inflationary pressures, geopolitical uncertainties, and currency risks warrant close monitoring. To maintain the current momentum, stakeholders must prioritize transparency, deepen market products, and strengthen investor education. Overall, the past two years have established a solid foundation for what could be a prosperous new era in Nigeria’s capital market.