Many households may still be struggling, but by the time President Bola Ahmed Tinubu marks three years in office on June 12, 2026, investors may have reason to celebrate.
The administration’s bold reforms, from scrapping fuel subsidies to liberalizing the foreign-exchange market, have reshaped Nigeria’s economic landscape, revived investor interest and boosted government finances.
But the same policies have driven up inflation, squeezed incomes and exacerbated a cost-of-living crisis that continues to test public patience.
The result is an economy stuck between improving market fundamentals and persistent social strain.
But the government says it inherited an economy distorted by subsidies, multiple exchange rates, dwindling fiscal revenues and declining investor confidence.
But the question for companies and investors is whether the economic pain so far is laying the groundwork for sustainable growth, or just postponing deeper structural challenges.
The gamble of reform
Few presidents have moved so quickly on reform as Tinubu in his early weeks in office.
His declaration that “fuel subsidy is gone” brought an end to a policy that had lasted decades and had grown to be one of the biggest drains on public finances. This was followed by foreign exchange reforms that effectively dismantled the country’s multiple exchange rate system, allowing the naira to trade more freely.
The administration said both policies were needed to correct long-standing distortions, discouraging investment and encouraging arbitrage.
For years, the government had been spending trillions of naira yearly on subsidizing petrol consumption. The subsidy regime sucked up resources which could have been used for infrastructure, healthcare and education. Likewise, the multiple exchange rate system provided opportunities for rent seeking, while it also dissuaded foreign investors who had difficulties to access foreign currency.
The administration hoped to remove these distortions and thereby restore market confidence and encourage a more efficient allocation of resources throughout the economy.
The reforms rapidly garnered the backing of multilateral institutions and international investors. Nigeria began to reappear on the radar of portfolio investors who largely stayed away from the country during years of foreign exchange restrictions and capital controls.
But the reforms also unleashed powerful inflationary pressures that rippled through the economy.
Cost of living crisis and inflation
If there is any one index that best captures the public mood after three years of Tinubu’s presidency, it is inflation.
The cost of transportation saw a steep rise after the removal of fuel subsidies. The depreciation of the naira has also seen a significant rise in the cost of imported goods and industrial inputs. Together, these developments have pushed up consumer prices and reduced household purchasing power.
Food inflation has been particularly severe, reflecting insecurity in agricultural regions, logistical challenges and weakness in the currency. Soaring prices of staple foods have become for many Nigerians the most visible outcome of economic reforms.
The effect has been a sharp decline in real earnings. Salaries in the public and private sector have found it difficult to keep up with increasing prices. This has led to households curtailing discretionary expenditure and changing consumption patterns.
Demand has slowed for retail businesses, consumer goods manufacturers and service providers with consumers prioritising their expenditure on essentials.
In response, the government has introduced targeted interventions such as cash-transfer programmes, wage adjustments and support measures for vulnerable groups. But the extent of inflation has frequently surpassed those efforts.
Growth is back, but unevenly
Despite inflationary headwinds, Nigeria’s economy has managed to grow.
According to the recently published Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS), the country’s real GDP grew by 3.89 per cent year-on-year (y/y) in Q1 2026, lower than 4.07 per cent y/y in Q4 2025.
Growth has been driven by improvements in services, telecommunications, financial services and parts of the oil sector. Despite macroeconomic headwinds, banking, fintech, digital services and technology related industries have shown resilience.
The services sector has gradually become the engine of growth reflecting structural changes in the Nigerian economy. The growing demand for digital services has helped financial technology firms, digital payment platforms and telecommunications operators.
Higher oil output and measures to curb crude theft, meanwhile, have also helped support government revenues and foreign exchange earnings to some extent.
But the expansion is lopsided. Last week, Daily Sun reported that MoneyAfrica said the growth rate in Nigeria is still not enough for the development needs of the country. The firm says growth of around 4 per cent is not enough to generate the level of employment and income gains needed to boost household welfare after years of inflation, naira depreciation and economic adjustment.
The firm said Nigeria would need sustained double-digit economic growth to meaningfully restore consumer purchasing power and deliver broad-based improvements in living standards.
Manufacturing companies continue to face significant pressures from high energy costs, currency fluctuations and high borrowing costs. Small and medium-sized enterprises, which employ large shares, have struggled to absorb rising operating costs.
One of Nigeria’s biggest employers in the past, agriculture is still hampered by insecurity, climate disruptions and inadequate infrastructure.
So economic growth has not resulted in general improvements in living standards. Population growth continues to outpace economic growth, restricting gains in per capita income. For many analysts, this is still one of the biggest challenges for the administration: turning macroeconomic stabilisation into inclusive growth.
The challenge for policymakers is to trade off short-term pain against long-term payoffs. Price pressures remain one of the biggest risks to the economic recovery, although inflation has eased somewhat from its peaks.
Public finances and fiscal consolidation
One of the most visible accomplishments of the Tinubu administration has been the improvement in fiscal revenues.
The removal of fuel subsidies greatly eased fiscal pressures and released resources that had been absorbed by recurrent expenditures. The currency depreciation has also boosted government receipts through higher naira-denominated oil revenues.
Reforms in tax administration have focused on expansion of the revenue base and reduction of leakages. The administration has made fiscal discipline a cornerstone of its economic platform, and its officials have argued that healthy public finances are a prerequisite for sustained growth.
These have increased fiscal flexibility and alleviated some of the immediate pressure on government borrowing.
Nigeria still faces substantial debt service obligations. The debt stock of Nigeria rose to N159.28 trillion as at the fourth quarter (Q4) of 2025, the Debt Management Office (DMO) has said. The rising debt load was due to a consistent accumulation of debt amid persistent fiscal deficits and weak revenue performance.
A significant portion of government revenues is still being used to service existing debt, limiting the fiscal space for capital investments.
Furthermore, federal revenues are a key source of revenue for state governments, highlighting the importance of broad structural reforms to improve subnational fiscal sustainability.
Revenue mobilisation could be strengthened further if the administration’s proposed tax reforms are fully implemented.
But they also encounter political pushback from stakeholders concerned about the effects on businesses and consumers.
The liberalization of Nigeria’s foreign currency market is arguably the reform that investors have been watching the most.
Prior to the revisions, there was a significant difference between the official and parallel market currency rates, and firms sometimes had difficulty obtaining dollars. Exchange-rate restrictions were often mentioned by foreign investors as a significant barrier to investment.
Some of these distortions have decreased with the shift to a more market-driven exchange-rate system. Higher yields and increased foreign exchange pricing clarity have drawn international portfolio investors back to Nigeria’s debt markets over time. Periods of improvement in external reserves have been bolstered by capital inflows and confidence-boosting policy initiatives.
The reforms have allayed some worries about foreign currency availability and earnings repatriation for multinational firms doing business in Nigeria.
Exchange-rate volatility is still a problem, though. Since the start of the reforms, the naira has significantly depreciated, raising import prices and posing challenges for companies with foreign-currency obligations.
Over the past three years, exchange-rate losses have emerged as a key component of financial performance for numerous businesses.
The administration contends that moving toward a more sustainable market-based system will inevitably result in short-term volatility. Although trust is still dependent on consistent policy implementation, investors largely agree with this viewpoint.
Banking industry: An exceptionally profitable period
The banking industry is one that has benefited early from Tinubu’s reforms.
Over the past three years, Nigeria’s top banks have posted record profits, primarily due to increased transaction volumes, higher interest rates, and benefits from foreign exchange revaluation.
Institutions with foreign-currency assets saw significant benefits as a result of the naira’s dramatic decline. Concurrently, the industry’s interest income increased due to the Central Bank of Nigeria’s vigorous monetary tightening cycle.
As more people and organizations rely on electronic payments, banks have also profited from rising quantities of digital transactions.
Major lenders’ market positions have been improved and investor confidence has been bolstered by the sector’s resiliency. Despite difficult macroeconomic conditions, companies including Zenith Bank Plc, Guaranty Trust Holding Company Plc, Access Holdings Plc, and United Bank for Africa Plc have achieved strong earnings growth.
The increased profitability of the industry has usually been welcomed by shareholders, and foreign investors are increasingly considering Nigerian banks to be among the most appealing sectors of the nation’s capital market.
However, there are still concerns hidden beyond the headline figures.
Recapitalization: Getting ready for a larger economy
The apex bank’s decision to launch a fresh banking recapitalization program has been a significant move under Tinubu’s leadership.
The strategy acknowledges that Nigeria’s economy needs bigger, more robust financial institutions that can sustain future expansion, even in the face of present difficulties.
Timelines for raising more money through rights issues, private placements, and public offers have been provided to banks.
It is anticipated that the recapitalization process will increase the sector’s ability to fund major corporate deals, industrial expansion, and infrastructure projects.
The program is both a test and an opportunity for investors. Better capital buffers and increased competition could lead to the emergence of stronger banks. However, mergers and acquisitions may put institutions under pressure to consolidate if they are unable to raise enough money.
Over the next few years, the process is probably going to change Nigeria’s banking environment, possibly resulting in fewer but bigger institutions.
Risks to asset quality and financial strains
Nigerian banks are nevertheless vulnerable to macroeconomic threats notwithstanding their high profitability.
Borrowers in a number of sectors are under more strain due to high inflation, high interest rates, and volatile foreign exchange.
Manufacturers, companies that rely on imports, and smaller firms still struggle with liquidity. Concerns over loan repayment capabilities have increased due to rising finance prices.
Analysts continue to keep an eye on industries that are especially susceptible to economic hardship, even if non-performing loan levels are still generally acceptable at the industry level.
Despite increases in output, the oil and gas industry, which has historically been a major source of risk for the banking sector, is nonetheless tightly monitored.
As inflation continues to put pressure on household incomes, consumer lending also faces difficulties. In the upcoming years, banks will need to strike a crucial balance between increasing lending and preserving asset quality.
The evolving role of the CBN
Under Tinubu, the relationship between monetary and fiscal policy has also changed as the top bank has adopted a more conventional framework of policies centered on market confidence, exchange-rate stability, and inflation control.
In an effort to control inflation and stabilize expectations, interest rates have increased dramatically. The approach has boosted monetary credibility and drawn in foreign investment, but it has also raised borrowing costs for households and businesses. However, the MPC decided to maintain rates and other parameters at its most recent meeting.
At the same time, the central bank has worked to bolster regulation, increase transparency, and rebuild trust in the financial system.
These actions signify a significant move toward policy predictability for investors. Higher lending rates, meanwhile, have put further operational strain on enterprises.
Whether inflation slows down enough to permit progressive easing without jeopardizing financial stability will ultimately determine how effective monetary policy is.
The path ahead
Nigeria’s economy is at a turning point three years into Tinubu’s presidency.
The administration has made significant strides in correcting fundamental distortions that have built up over many years. Foreign currency market reforms have progressed, investor confidence has grown, fiscal revenues have increased, and the banking industry is still lucrative and well-capitalized.
However, there has been a substantial societal cost associated with these advantages. Households continue to be severely impacted by inflation, poverty rates are still high, and businesses are functioning in one of the most difficult circumstances in recent memory. Large portions of the populace have not yet fully benefited from reform.
The outlook for the banking industry is still cautiously optimistic. Nigerian banks could be positioned for long-term success through recapitalization, digital innovation, and enhanced regulatory monitoring. Global uncertainty, economic fragility, and asset-quality risks, however, nonetheless call for caution.
In conclusion
The final assessment of Tinubu’s economic plan may depend less on whether the reforms were required and more on whether they can raise living standards in a noticeable way before the public loses patience.
After three years, the administration has mostly been successful in shifting the course of economic policy. Demonstrating that stabilization can lead to prosperity is the next issue.
The narrative is becoming more and more one of opportunity for investors. For many Nigerians, however, the question of whether the sacrifices required by reform would ultimately result in a more accessible, productive, and inclusive economy is still easier to answer.
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