Chatham House Says Nigeria’s Economy is at Its Most Competitive in 25 Years Because of Pres. Tinubu’s Reforms

Chatham House Says Nigeria’s Economy is at Its Most Competitive in 25 Years Because of Pres. Tinubu’s Reforms

Chatham House, a UK-based policy think tank, has described Nigeria’s economy as the most competitive it has been in 25 years, crediting President Bola Tinubu’s reforms, particularly the naira’s devaluation from N460/$ to around N1,500/$.

In an article titled Nigeria’s Economy Needs the Naira to Stay Competitive, Chatham House’s David Lubin argued that sustaining a competitive naira is crucial for long-term economic growth. While acknowledging the hardships of Tinubu’s tenure—including a collapsed naira, quadrupled fuel prices, and an 80% rise in food costs—the think tank maintains that his policies offer Nigeria its best hope for sustainable growth in decades.

Central to these reforms is the significant devaluation of the naira, which has positioned Nigeria as more competitive than it has been in years.

The article noted that a weaker currency has helped improve Nigeria’s balance of payments, boost foreign reserves above $40 billion, and attract capital back into the country. It also supported the government’s budget by increasing revenue from oil royalties, taxes, and import duties, narrowing the fiscal deficit from 6.4% of GDP in early 2023 to 4.4% in early 2024.

However, inflation remains a major challenge, peaking at 35% in 2024 before dropping to 24.5% in January. While a stronger naira might ease inflation, Chatham House warned that it could erase recent competitiveness gains and deter much-needed Foreign Direct Investment (FDI), which remains alarmingly low at under $2 billion annually.

The think tank advocated for two key strategies: improving the monetary transmission mechanism by raising deposit interest rates and increasing government revenue, which currently stands at just 10% of GDP—far below global standards.

Chatham House concluded that Nigeria must resist the temptation to strengthen the naira excessively, as a competitive exchange rate is essential for attracting long-term investment and fostering a more robust, diverse economy.