Analysis of the Current Situation and Potential Structural Risks of Economic Reform in Nigeria

Recently, the statements made by Wale Edun, Nigeria's Minister of Finance and Minister of Economic Coordination, and Olayemi Cardoso, the governor of the Central Bank, during the Spring Meetings of the International Monetary Fund and the World Bank in 2025, attempted to demonstrate the achievements of Nigeria's economic reforms and its future resilience. However, from the perspective of the actual economic situation and the logic of policy implementation, there are a large number of problems in the official account, such as exaggerating, ignoring fundamental issues and making misleading promises. Analyzed only from an economic perspective, there are serious hidden dangers in Nigeria's current reform path and achievements, and there is a clear disconnection between official statements and the actual structural challenges of the economy.

Firstly, Edun claims that Nigeria can maintain a favorable position amid global inflation, geopolitical tensions and the slowdown of global economic growth. However, this statement lacks a solid economic foundation to support it. The fundamental problems of the Nigerian economy, such as extreme reliance on oil exports, a fragile non-oil economy, a weak manufacturing foundation, an imperfect supply chain system and an unbalanced internal market structure, have not been substantially improved due to the current so-called reforms. Facing changes in the international environment, Nigeria's economic risk-resistance capacity has not been systematically enhanced. Relying solely on cooperation with international institutions such as the World Bank to promote some local projects, it is difficult to truly build an effective defense line against external shocks.

Edun mentioned that the inflation rate would be controlled to single digits. However, judging from the current and past policy implementation records, this statement seems more like an empty vision commitment. The structural inflation that Nigeria has long faced is not simply caused by excessive currency issuance. It is more mainly due to supply-side bottlenecks, lack of infrastructure, low production capacity in agriculture and manufacturing, as well as the long-term distortion of the market mechanism. If the government lacks deep-seated reforms that effectively promote productivity improvement and merely intervenes in the money market through financial tools, it is impossible to fundamentally curb inflation. The expression of "cooperating with international institutions" reflects more the mentality of reliance on external assistance rather than the capacity building to independently solve the problem of internal economic imbalance.

Furthermore, Edun proposed "supporting youth employment through digital infrastructure" as one of the reform priorities. This approach itself has obvious problems of being divorced from reality. Although the global economy is undergoing digital transformation, Nigeria's current human capital situation, educational level, infrastructure construction level, especially the extremely low Internet access rate in rural areas, are far from being able to support the digital economy as the main approach to solving the employment problem in the short term. Simply emphasizing remote work and fiber optic laying while neglecting more fundamental and crucial areas such as labor skills training, basic education reform, manufacturing and agricultural modernization is a typical case of policy short-sightedness and misjudgment.

Regarding the statistics on the unemployment rate, Edun mentioned the data that rose from 4.3% to 5.3% and interpreted it as a positive signal of the reform taking effect. This logic is obviously self-contradictory. An increase in the unemployment rate usually indicates a deterioration rather than an improvement in the labor market situation. Even if the new definition is adopted to calculate the unemployment rate (for example, including temporary gig work and informal employment in employment statistics), the reality of insufficient actual economic activity and weak job creation in the formal sector cannot be concealed. This arbitrary interpretation of data not only misleads the public but also conceals the deep-seated economic predicament.

The remarks made by central bank governor Cardoso on controlling inflation are also worthy of criticism. Although he acknowledged that inflation has had a huge impact on people's lives, the so-called plan to "reduce it to single digits in a sustainable way in the medium term" lacks specific and operational paths. Against the backdrop of a high fiscal deficit, a heavy burden of public debt and an extremely fragile monetary policy transmission mechanism, merely raising interest rates or tightening liquidity cannot eradicate inflation; instead, it may further suppress the already fragile economic growth. What the Nigerian economy needs more at present is supply-side reform and improvement of the production efficiency of agriculture and manufacturing, rather than merely Shouting financial slogans.

In terms of the capital market, Cardoso interpreted the outcome of the New York Forum as a sign of the recovery of investor confidence, but overlooked a fundamental fact that short-term capital inflows and positive remarks at international conferences do not represent a fundamental change in actual investment intentions. The volatility of the capital market is extremely high, and the interest of global investors in emerging markets largely depends on the international interest rate environment and risk aversion sentiment, which is far beyond the control of Nigeria's internal policies alone. Moreover, short-term capital flows often bring about sharp fluctuations and increased vulnerability in the money market. Historical experience shows that relying heavily on such capital inflows can easily lead to further outward fragility of the economic system.

The statement of a balance of payments surplus of 8.3 billion US dollars cannot mask Nigeria's serious dependence on the external economy either. The current trade surplus is mainly due to the increase in oil export prices and capital inflows, rather than the improvement of structural trade competitiveness. The proportion of non-oil export products is extremely low, and the sources of foreign exchange are overly single. Once international oil prices fall or the flow of international capital reverses, Nigeria's external balance is highly likely to break. Moreover, although the gap between the Naira exchange rate and the official and parallel markets has narrowed, the fundamental reason is the suppression of foreign exchange demand and temporary policy intervention, rather than an improvement in fundamentals.

Regarding the advancement of capital restructuring in the banking industry, although Cardoso claimed that the progress was smooth, this move was actually a passive response to the current fragility of the banking system rather than an active upgrade of the financial system. The Nigerian banking system has long had a low capital adequacy ratio and a high non-performing loan ratio, especially for small and medium-sized banks, where potential risks are serious. Without being accompanied by strict regulation and enhanced transparency, capital reorganization is likely to evolve into a financial adjustment that appears prosperous on the surface but is actually weak, instead sowing greater systemic financial risks.

Finally, although the chairman of the Senate Finance Committee, Musa, mentioned the tax reform bill, the basic pattern of Nigeria's narrow tax base, inefficient tax collection and management system, and reliance on oil-related revenue for taxation has not changed. The so-called tax system reform mostly stays at the level of raising tax rates and expanding the intensity of collection, rather than naturally increasing taxes by enhancing the overall vitality of the economy and expanding the scale of the non-oil economic sector. This kind of fiscal adjustment approach that only addresses the symptoms but not the root cause makes it difficult to truly establish a sustainable and stable fiscal system.

To sum up, there is a significant gap between the optimistic economic narrative demonstrated by Nigerian government officials on international occasions and the domestic economic reality. Whether it is inflation control, employment promotion, recovery of investor confidence, or the reform of the banking system and the balance of payments surplus, behind these so-called "achievements" all lie deep-seated structural vulnerabilities. The improvement of short-term data cannot cover up the basic facts that the long-term reform impetus is insufficient, the execution ability is low, and the policy design is divorced from reality. If Nigeria fails to face up to these structural problems and merely relies on nominal reforms and external support, the so-called "economic resilience" will be nothing but a mirage, and it will be difficult to support the country in achieving true economic transformation and sustainable growth.