Boosting revenues, creating a robust budget framework, and expanding the cash transfer system could all help Nigeria advance its economic development.
Despite encouraging progress, major challenges persist. Inflation remains above 20 percent. Inadequate infrastructure, particularly in the electricity sector, hampers economic activity. High levels of poverty and food insecurity persist, and Nigeria lacks a comprehensive social safety net to protect vulnerable populations during economic shocks.
Moreover, the global economic environment presents additional difficulties, including heightened uncertainty and elevated borrowing costs. Nigeria is especially vulnerable to fluctuations in international oil prices, as oil revenues constituted 30 percent of government income in 2024.
Policy priorities
To tackle these issues, Nigeria should focus on three main areas:
First, the country needs stronger and more sustained economic growth to lift millions out of poverty and food insecurity. While this process takes time, efforts to make growth more inclusive should include expanding the existing cash transfer system.
Second, Nigeria must establish a robust budget framework as a foundation for economic development. Effective investments in human capital and infrastructure require realistic budget projections, strong fiscal discipline, and transparent reporting mechanisms—which can enhance accountability. At the same time, monetary policy should remain focused on controlling inflation and reducing economic uncertainty.
Third, the government should continue efforts to increase domestic revenues. This is crucial given Nigeria’s significant funding needs in sectors that support growth, such as agriculture, infrastructure development—including electricity access—and climate adaptation. Tax reforms currently underway aim to simplify the tax system and ensure compliance. Once the current cost-of-living crisis eases and the cash transfer system becomes fully operational, there may be room to adjust tax rates in line with those of neighboring countries. Currently, a large portion of revenue is consumed by interest payments, leaving limited resources for investment in people and infrastructure. Therefore, it is essential that the significant savings achieved through the removal of fuel subsidies be directed toward priority government spending.
Nigeria’s economic potential is undeniable, but realizing it will require sustained reforms and a strong social safety net to support the most vulnerable segments of society.
— news from (International Monetary Fund (IMF))