Nigeria grapples with a myriad of economic challenges (Associated Press)

Nigeria has long been the engine of the African continent, with its vast markets, fertile lands, and abundant oil reserves, and has long been the expected economic power on the continent.

However, recent months have witnessed increasing signs of destabilization in Nigeria as it grapples with a myriad of economic challenges, raising concerns both domestically and globally.

Transitional phase

A Bloomberg report says that when President Bola Tinubu took office last May, he inherited an economy that had been suffering for years from recession.

The decision-making process under his predecessor, Muhammadu Buhari, was very slow.

Realizing the urgent need for change, Tinubu quickly implemented reforms, cut subsidies, and appointed head of the central bank who raised interest rates.

But these measures, intended to please international investors, inadvertently unleashed a cost-of-living shock that is now wreaking havoc on the real economy, according to the report.

The Nigerian currency (the naira) has fallen by about 70% against the dollar since Tinubu became president (Getty)

Free fall of the coin

Bloomberg notes that the Nigerian currency (the naira) was in a state of free fall for most of last year, declining by about 70% against the dollar since Tinubu became president.

This decline, coupled with the accumulation of demand for the dollar, has eroded market confidence in the naira.

The recent unprecedented increase in interest rates - approved by the newly appointed Central Bank Governor, Olayemi Cardoso, with the aim of stabilizing the currency - has failed to restore confidence, which has raised concerns on the global scene, according to Bloomberg.

With geopolitical tensions rising elsewhere, a potential crisis in Nigeria may soon require the attention of major powers such as the G7, China and Russia.

Nigerians bear the brunt of economic struggles (French)

Corporate migration

According to Bloomberg, the decline in the value of the naira caused shocks in the business scene, prompting major companies such as “Procter”, “Gamble” and “GSK” to exit the country.

The rest are facing huge losses, with Nestlé's local unit reporting its first loss in 12 years, and MTN (Africa's largest wireless provider) seeing a staggering 90% drop in annual profits due to the devaluation of the naira.

This displacement and economic downturn may exacerbate the challenges facing Nigeria and hinder its path to economic recovery, according to the same source.

Ripple effect of population

The Bloomberg report says that Nigerian citizens are bearing the brunt of the economic problems, especially with the inflation rate rising to its highest levels in 28 years.

The cancellation of subsidies has led to a tripling of fuel prices, at a time when basic commodity prices are skyrocketing, prompting the International Monetary Fund to issue a stern warning, calling on Nigeria to urgently address the issue of food security.

President Tinubu's ability to implement and sustain reforms will be crucial in determining the country's future (Reuters)

The way forward

Bloomberg suggests that, in the face of the looming crisis, President Tinubu must work to find a delicate balance between implementing the necessary reforms and meeting the immediate needs of the population.

While some of its measures attracted investments in foreign portfolios that exceeded $1 billion last February, bringing total revenues for this year to $2.3 billion compared to $3.9 billion for all of 2023, there are concerns that bureaucratic obstacles and controversial fees may hinder progress. According to Bloomberg.

Global risk intelligence firm Verisk Maplecroft ranks Nigeria as one of the African countries most likely to face serious civil unrest next year.

Companies still face a bureaucratic maze of regulations and taxes, and the recent imposition of a crippling tax on the recruitment of foreign workers appears to be moving in the wrong direction.

As Nigeria stands at a crossroads, President Tinubu’s ability to implement and sustain reforms will be crucial in determining the country’s future.

Source: Bloomberg