Nigeria's Reform Gains Delayed Amid Steady Outlook, Says Rand Merchant Bank

Nigeria’s economy is undergoing a challenging yet deliberate transition, with the benefits of recent reforms expected to materialise only over the medium term, according to the 2025/26 “Where to Invest in Africa” report by Rand Merchant Bank.

According to the report, Nigeria recorded the most significant drop in this year’s investment rankings, falling from ninth to 18th position, as it pointed out that the decline reflected the short term consequences of major policy shifts rather than a weakening of the country’s long term economic foundations.

“The Tinubu administration’s reforms have had predictably sizeable effects on the economy and the lives of Nigerians,” it stated, pointing out that the key issue is “whether this will be the medicine required to revamp the foundations for a more prosperous future”.

The report noted that central to the reset was the decision to float the naira and collapse multiple exchange rates into a single, market-driven system in June 2023. President Bola Tinubu is quoted in the report as describing the former regime as “a noose around the economic jugular of our nation”.

It furthered that the immediate impact was a sharp depreciation of the naira against the dollar, which significantly reduced Nigeria’s gross domestic product when measured in US dollar terms. As a result, GDP fell from about $375 billion in the previous edition of the report to roughly $188 billion in 2024, before the effects of data rebasing were taken into account.

RMB emphasised that this adjustment does not reflect a collapse in real economic activity but rather the mechanical effect of currency reform. It argues that such distortions highlight the importance of assessing Nigeria’s outlook with a long-term perspective.

“Although Nigeria was the biggest decliner in this year’s rankings, there is cause for optimism,” the report said, pointing to the strategic intent behind reforms aimed at reducing oil dependence and unlocking growth in technology and services.

It further noted that the outlook is shaped by a rapidly changing global environment, highlighting a sharp decline in official development assistance. As it is pointed out, major donor countries have cut their aid budgets, and Africa is being forced to shift “from aid to trade and investment.”

The report also identified export diversification as a core requirement for resilience, stating that “no country has ever transitioned from poor to rich through foreign aid” and that sustainable development has historically been driven by trade and investment.

Inflation has also emerged as a significant headwind, driven in part by the removal of fuel subsidies and rising energy costs. While these measures were designed to reallocate resources toward more productive uses, RMB warns that implicit fuel and electricity subsidies could still carry high fiscal costs.

The report also cautioned against relying solely on headline data to judge Nigeria’s economic health. It points to recent revisions by the National Bureau of Statistics, which changed the base year for GDP calculations from 2010 to 2019, revealing that the economy was about 30 per cent larger than previously estimated.

The Consumer Price Index basket was also updated, a move the report says underscores a broader lesson that “data is only as good as its collection and calculation methods” and that economic figures do not always fully capture reality on the ground.