Expanding economy yet to ease Nigeria’s living costs

Nigeria’s economy may be growing at its fastest pace in three years, but for many households, the recovery remains largely statistical.

Data from the National Bureau of Statistics show the economy grew 3.87 percent in 2025, with fourth-quarter output rising 4.07 percent year-over-year — the strongest annual performance since 2022. The minister of Finance and Coordinating Minister of the Economy, Wale Edun, welcomed the data, saying it reinforces confidence among domestic and international investors and signals that Nigeria’s reform programme is gaining traction.

Yet the stronger headline growth has done little to reverse the squeeze on living standards after two years of high inflation and currency volatility — two headwinds that have hammered citizens’ spending power.

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When President Bola Tinubu took over power in 2023, he quickly abolished costly fuel subsidies that consumed some $10 billion in government revenues in 2022 alone.

Tinubu followed up by eliminating a multi-tiered, opaque exchange rate regime, allowing the naira to float and be more market-determined.

Those policies paid off. Runaway capital began to return, leading to stronger external reserves, which stand at about $50 billion — the highest in 13 years. That rubbed off on the naira as it has strengthened by about 6 percent year-to-date.

Inflation, though still elevated, has remained on a downward trend while the gross domestic product has continued to pick up.

But despite the quickening annual growth, more Nigerians are likely to be plunged into poverty this year, deepening hardship for households that have endured the worst cost-of-living crisis in a generation.

No fewer than two million people are estimated to fall below the poverty line in 2026, raising the poverty numbers in Africa’s most populous nation to 141 million, or 62 percent, from an estimated 139 million last year, marking the highest rate ever, according to a report by professional services and advisory firm PwC.

With poverty on the rise, buying food has been a particular struggle, not just for lower-income earners, but also for the urban middle class.

The price of a kilo of rice has nearly quadrupled since May 2023, while wages have barely budged. Even though food inflation has now fallen to a single digit, many still struggle to afford enough to eat.

“To see the impact on the lives of Nigerians, we need to translate the gains of these reforms into sustainable, solid growth and productivity. The economy has to grow sustainably by 8 to 10 percent,” said Adetilewa Adebajo, CEO of CFG Advisory.

Leading job-creating sector lagging

The manufacturing sector, which accounts for around 80 percent of employment opportunities, according to the Manufacturers’ Association of Nigeria, contributed a paltry 1.13 percent to the economy in real terms in the fourth quarter, compared to 1.25 percent in the preceding quarter.

This development comes as investors pulled back from the sector, leading to a 54.11 percent plunge in foreign investment in the first nine months of 2025, despite a sharp rise in overall capital importation.

A slowdown in such a key sector meant a rising jobless rate and, by extension, poverty, a cycle that’s limited the impact of the bold reforms on the ordinary Nigerians.

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“Our growth should be anchored by the manufacturing sector because that’s one of the biggest employers of labour,” said Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprises. “With noticeable growth in the production sector, employment will rise, and that would reduce the lingering cost-of-living crisis.”

Optimism is, nevertheless, on the rise if the government sticks to the reforms. Global lenders project further acceleration in annual growth. The World Bank and the International Monetary Fund have forecast Nigeria’s growth could reach about 4.4 percent in 2026, which would mark the fastest expansion in roughly a decade if achieved.

That outlook hinges on sustained reform momentum, improved oil production, exchange-rate stability, and easing inflation.