• CBN raises team to monitor Israel-Iran war
• LCCI seeks policy protection to hedge energy costs

Economic reforms by President Bola Tinubu’s administration have strengthened the country’s fiscal position and external reserves but raised the cost of living.
  
This is contained in a report, ‘Highlights of the Study on the Impact of Ongoing Macroeconomic Reforms in Nigeria’ released in Abuja yesterday by Agora Policy.
  
In his welcome address, Board Chair of Agora Policy, Ms Ojobo Atuluku, said serious reforms were ongoing across the economic sector and, invariably, change is constant, explaining: “Economic policy must never be a one-off event; it should be a constant conversation between those who design reforms, those who implement them and those who are impacted by them.”
  
The reforms, which centred on petrol subsidy removal, exchange rate liberalisation and electricity tariff adjustments, largely altered Nigeria’s economic structure, boosting government revenues and external buffers, but worryingly triggering steep price rises across key sectors.
  
Data in the study show that petrol prices have surged dramatically since the government ended the many decades of the petrol subsidy regime in May 2023.
  
The report noted that the average pump price rose from about N161 per litre between 2016 and May 2023 to roughly N1,331 per litre this month, which reflects the impact of market-driven pricing and the depreciation of the naira as the Israel-Iran war escalates.
  
It added that the FX market also underwent significant shifts after the unification of rates.
  
Also, electricity tariffs increased substantially following regulatory adjustments designed to reduce government subsidies in the power sector.
  
The report said that despite the immediate inflationary pressures triggered by the reforms, policy changes equally produced measurable improvements in Nigeria’s macroeconomic indicators.
  
It noted that external reserves also strengthened considerably, rising from $35.09 billion in May 2023 to $50.45 billion by February 2026, which reflects improved forex inflows and tighter fiscal management.
  
There is evidence that government revenues increased significantly following the removal of fuel subsidy and improved tax inflows.

The direct effect of this step shows in the allocations distributed to the three tiers of government.
  
“The Federation Account Allocation Committee (FAAC) disbursement climbed from N16.28 trillion in 2023 to N35.81 trillion by 2025, more than double within two years, as subsidy savings and improved oil receipts boosted government finances. The improvement in fiscal inflows has also eased pressure on public finances,” it said.
  
On debt servicing, which raises sustainability questions, the report said debt payment still consumes the bulk of federal revenue, though it declined from 83 per cent of revenue in 2023 to about 63 per cent in 2024, indicating some relief in the government’s debt-service burden.
  
Economic analysts describe a 63 per cent reduction in national earnings as laudable, but still high for an economy that has been struggling for many decades.
  
However, they are quick to note that while the reforms strengthened fiscal sustainability and improved macroeconomic indicators, they also intensified cost-of-living pressures for millions of Nigerians.
  
They noted that the surge in fuel and electricity prices pushed up transportation, food and production costs across the economy, weakening household purchasing power, worsening poverty levels and may result in higher inflation.
  
The analysts insisted that the challenge for policymakers would be sustaining the gains from the reforms while mitigating their social consequences through targeted social protection programmes and economic stabilisation measures.
  
Meanwhile, the Central Bank of Nigeria (CBN) said the country “is well prepared” for the possible economic fallout of the raging Israel-Iran war.
  
The Deputy Governor, Economic Policy, CBN, Dr Muhammad Abdullahi, said the apex bank raised a team to monitor the war in the Middle East.
  
“CBN is much better prepared today than we have been in the last 10 years. Within the Central Bank, we have early warning signals. There is a team that is focusing on that every single day. If the Israel-Iran conflict had happened three years ago, when we had $800 million in the reserves, it would have been an economic collapse. Today, it has happened that we have over $50 billion of reserves. We have $34 billion of reserves that are fully ours, organically built.”
  
In her intervention, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Chinyere Almona, advocated policy support for the private sector to cushion the effect of high energy costs as shown in the last few weeks.
  
She observed that while the policy changes may place Nigeria on a more sustainable fiscal path in the long run, their success will depend largely on how effectively the government manages inflation, stimulates economic growth and protects vulnerable households from the shocks.