*Photo: President Bola Tinubu*
Introduction
Nigeria, often hailed as the economic powerhouse of Africa, currently finds itself in a profound state of paradox. A casual glance at the financial headlines reveals a thriving corporate ecosystem, with major telecommunications, manufacturing, and banking firms reporting record-breaking profits. Yet, this narrative of corporate success is starkly contrasted by the daily struggles of the average Nigerian. The twin economic policies of fuel subsidy removal and the unification of the foreign exchange rate, while lauded by some as necessary long-term reforms, have unleashed a torrent of inflationary pressures that have decimated the purchasing power of people with low incomes. This article digs into the heart of this Nigerian paradox, analysing the economic dynamics that allow the rich to prosper. At the same time, people experiencing poverty suffer, exploring why the social “bubble” has yet to burst, and proposing actionable, multi-tiered solutions for an equitable path forward.
The Economic Divide: A Tale of Two Nigerias
To understand Nigeria’s current plight, one must first appreciate the chasm between two distinct economic realities. On one side, there is the formal, dollar-denominated, and asset-based economy of the elite. On the other hand, there is the cash-based, informal, and increasingly desperate reality of the masses. The recent economic policies have been the primary architects of this widening divide.
The removal of the petrol subsidy in 2023 was a seminal moment for the nation and a bold and courageous statement from the incoming government. While the previous subsidy system was undeniably corrupt and fiscally unsustainable, disproportionately benefiting smugglers and the wealthy who owned multiple vehicles, its abrupt removal had a devastating impact on the poor. As the World Bank and various studies have confirmed, this single policy action immediately hiked the cost of transportation and, by extension, the price of virtually all goods and services.
For the average Nigerian, particularly those in the low-income bracket who spend a majority of their earnings on food and transportation, this translates into a steep decline in real income and a corresponding drop in their standard of living.
Similarly, the unification of the foreign exchange rate, intended to create transparency and attract foreign investment, has had a punishing effect on people with low incomes. The official exchange rate was allowed to float, converging towards the previously more expensive parallel market rate. While this policy eliminated a significant source of arbitrage for a privileged few, its immediate effect was a massive devaluation of the naira. Nigeria’s economy, being heavily dependent on imports for everything from machinery to raw materials for local production and even basic foodstuffs, saw a cascading effect. The cost of imported goods, as well as locally manufactured products that rely on imported inputs, skyrocketed. People experiencing poverty, who are least able to absorb these price shocks, found their meagre daily wages purchasing far less than before, directly feeding the inflationary spiral. Data from Trading Economics indicated an annual inflation rate of 22.22% in July 2025, with food inflation, the most significant component of the consumer price index, remaining particularly elevated.
Contrast this with the financial reality of the Nigerian elite; the wealthy are largely insulated from these shocks. Their assets are predominantly held in real estate, stocks, and, for a significant portion, in foreign currencies. As the naira devalues, the value of their foreign currency holdings in naira terms increases exponentially. Their real estate portfolios, often located in prime urban areas, serve as a robust hedge against inflation; as the cost of building materials and labour rises, so too does the value of their properties. The stock market, as we shall see, has also become a sanctuary for capital. The devaluation of the naira and high inflation, which are devastating for the poor, often translate into higher naira-denominated revenues and profits for the big corporations whose shares the rich hold. This creates a self-reinforcing cycle of wealth creation at the top, completely disconnected from the economic despair at the bottom. The rich are not just surviving; they are, in many cases, thriving on the very economic turbulence that is impoverishing the rest of the population.
The Puzzle of Resilience: Why the Bubble Hasn’t Burst
Despite the immense hardship, the social and political bubble in Nigeria has remained intact. There have been protests, but nothing on the scale of a mass uprising that would fundamentally challenge the state. This is a crucial question that requires a multi-faceted answer, drawing on socioeconomic and political factors.
The first and most significant factor is the Nigerian people’s remarkable capacity for resilience and adaptation. The informal economy, which employs a vast majority of the population, is built on a foundation of grit and ingenuity. When the cost of one item rises, people find alternatives, even if it’s difficult. When inflation erodes savings, they find new ways to hustle. This constant state of ‘making do’ acts as a pressure valve, preventing the kind of instantaneous, explosive collapse that might be expected elsewhere. Family and community support systems also play a vital, if unquantified, role. Nigerians rely on a dense network of relatives and friends for financial and emotional support, which mitigates the impact of individual hardship and prevents widespread destitution.
Furthermore, the government has, albeit belatedly, implemented palliative measures. The World Bank has highlighted the government’s efforts, such as the cash transfer program aimed at providing financial support to vulnerable households. While the implementation of these programs has been criticized for being slow, plagued by logistical issues, and not reaching all who need it, they have provided a degree of relief to some of the most vulnerable, acting as a small but meaningful buffer against total collapse.
Politically, a lack of a unified, national protest movement is a key reason for the relative calm. The Nigerian labour movement, which historically has been a powerful voice for the working class, has faced challenges in mobilizing large-scale, sustained action. Additionally, the fragmented nature of Nigerian society, often divided along ethnic and religious lines, makes it difficult to forge a cohesive national movement to protest purely economic policies.
The political energy that might otherwise be directed at the government’s economic policies is often absorbed by these more localized or identity-based concerns.
The regressive nature of the old subsidy regime also provides a subtle explanation. As noted in several studies, the fuel subsidy did not primarily benefit people with low incomes but rather a small group of marketers and high-income individuals who consumed more fuel. The removal of the subsidy, while creating immediate pain for the masses, did not fundamentally alter the economic foundation of the elite, thus preventing a sudden, coordinated opposition from them. The new policies, while painful, have shifted the source of wealth from government subsidies to private sector profitability, leaving the power structure largely intact. The rich still have their avenues for wealth creation, and the poor are left to bear the brunt of the adjustment.
The Corporate Oasis: How Select Companies Thrive in a Crisis
The list of companies, such as MTN Nigeria, Dangote Cement, BUA, Zenith Bank, and others, serves as a perfect illustration of this economic divergence. A deep dive into their financial performance reveals several strategic and systemic factors that allow them to flourish while the broader economy struggles.
Firstly, their sheer scale and market dominance provide an unassailable advantage. Companies like MTN Nigeria and Dangote Cement operate in near-monopolistic or oligopolistic environments. They have the power to pass on increased costs to consumers with minimal fear of losing market share. As the price of diesel, for instance, rises due to subsidy removal, Dangote Cement can adjust the price of its product to maintain profit margins.
Similarly, telecommunication companies have raised tariffs to compensate for operational costs and the devaluation of their Naira earnings. This ability to maintain pricing power in an inflationary environment is a luxury unavailable to small and medium-sized enterprises (SMEs) and the informal sector, who often absorb losses or go out of business.
Secondly, their business models are often diversified or export-oriented, making them less vulnerable to domestic currency fluctuations. For example, Dangote Cement’s pan-African operations, which generated significant revenue in other currencies, provided a hedge against the naira’s devaluation. My search results from Dangote Cement’s 2024 audited report confirm this, noting that the Pan-African region’s revenue increased significantly, partly due to the “translation effect following the devaluation of the naira.” This means that as the naira weakens, their foreign earnings become more valuable in local currency terms, boosting their reported profits. Similarly, oil and gas firms like Seplat Energy, which sell their products in dollars, see their naira-denominated revenues swell as the exchange rate widens.
Thirdly, the banking sector thrives on the macroeconomic environment created by the new policies. The Central Bank of Nigeria (CBN), in a bid to curb inflation, has pursued a tight monetary policy, raising interest rates. For banks like Zenith Bank, GTCO, and UBA, this hawkish stance is a boon. Higher interest rates allow them to charge more for loans, increasing their net interest income. Zenith Bank’s 2024 results, for instance, showed a significant year-on-year growth in gross earnings, driven by a surge in interest income. They can leverage their robust customer deposit base and high-yield government securities to generate massive profits. While this policy is designed to fight inflation, its immediate effect is to make credit more expensive for small businesses and individuals, further stifling economic activity at the grassroots level.
Finally, the elite’s access to foreign exchange and their ability to strategically navigate the market give them a significant edge. While small businesses struggle to secure funding for raw material imports, the large corporations have established channels and the financial muscle to secure their foreign exchange needs. This allows them to continue their operations, while their smaller competitors, who cannot, are forced to shut down. The unification of the exchange rate, while initially painful, has arguably made it easier for these large players to plan and operate, as it has reduced some of the previous market distortions and “round tripping.”
Fiscal Federalism and the Blame Game: Interrogating the State and Local Governments
I observed that states and local governments are pointing fingers at the Federal Government, which is a valid and crucial point. The data I have gathered supports the premise that states have received significantly more funds, yet visible development remains elusive.
According to the Nigeria Extractive Industries Transparency Initiative (NEITI), Federation Account Allocation Committee (FAAC) disbursements to the Federal, State, and Local Governments soared by 43% in 2024, with state governments recording the most significant percentage increase of 62%. This massive infusion of cash was a direct result of the subsidy removal and exchange rate alignment, which boosted the naira value of mineral revenues. The data shows that the total FAAC allocations increased from N9.18 trillion in 2022 to N15.26 trillion in 2024, a testament to the fiscal windfall.
Despite this, the impact on the ground remains minimal, and states often continue to blame the Federal Government for economic hardship.
Several factors explain this disconnect:
1. The State-LGA Financial Hijack: The 1999 Constitution provides for a “State Joint Local Government Account” (SJLGA), where funds meant for LGAs are pooled. This constitutional provision has been widely abused by state governors, who often use this account to exercise tight control over local government finances. Even with the ruling from the Supreme Court on LG autonomy, rather than allowing LGAs to receive their allocations directly to fund grassroots projects, governors often disburse funds as they see fit, or not at all, effectively crippling the third tier of government. My search online results highlight that state allocations to LGAs are often the least significant source of revenue for local governments. This centralization of power and resources at the state level prevents local governments from fulfilling their primary responsibilities of delivering basic services like primary healthcare, sanitation, and local infrastructure, which are vital for people experiencing poverty.
2. Opaque Governance and Corruption: A significant portion of the increased allocations is likely being siphoned off due to corruption and a general lack of transparency at the state level. While the Federal Government’s financial activities are often scrutinized by national agencies and media, state and local government spending is much harder to track. The absence of robust accountability mechanisms at these levels allows for the misapplication or outright theft of public funds. The blame game becomes a convenient political tool, allowing state officials to deflect criticism and attention away from their fiscal shortcomings.
3. The Burden of Debt: My search results also reveal that many states are burdened with significant debt servicing obligations. Lagos State, for instance, had a debt deduction of N164.7 billion in 2024, representing over 20% of total deductions from all states. Other states, even those in the lower FAAC allocation rankings, are facing similar, if less dramatic, debt burdens. While these debts are often inherited or a result of past fiscal mismanagement, they consume a substantial portion of the new allocations, leaving very little for capital projects or palliatives for people with low incomes. This is a critical point that is often overlooked in the public discourse.
4. The Political Dynamics of the Center-Periphery Relationship: There is a deeply ingrained political culture of rivalry and suspicion between the federal and state governments. Governors often see it as politically expedient to criticize the centre, regardless of the facts. It is easier to blame distant federal policies for local hardship than to explain to constituents why their increased state allocations have not translated into tangible improvements in their daily lives. This political posturing perpetuates a cycle of blame that distracts from the real issues of governance and accountability at the sub-national levels.
V. Charting a New Course: A Call for Multi-Tiered Solutions
Alleviating the suffering of the poor in Nigeria requires a holistic approach that goes beyond temporary fixes and addresses the systemic issues at all levels of government. For a thorough analysis, here are some solutions, broken down into immediate, medium-term, and long-term actions, based on a comprehensive analysis of the economic and political environment.
Immediate Solutions (Short-term Relief)
The immediate priority must be to restore the purchasing power of people with low incomes and provide a safety net against the current inflationary storm.
1. Expand and Expedite Social Safety Net Programs: The Federal Government’s cash transfer programs, supported by institutions like the World Bank, are a good start, but must be expanded and streamlined. The government should use a transparent, biometric-based system to ensure that the funds reach the intended beneficiaries without being diverted. The World Bank has called explicitly for accelerating the delivery of these programs and expanding their reach to cover more households. The current pace is too slow to provide meaningful relief. The States must be involved in the implementation, as they know the location of the vulnerable.
2. Implement Targeted Food Subsidies and Distribution: Instead of a blanket fuel subsidy, the government can introduce targeted food subsidies on essential staples like rice, maize, and beans. This can be done through a controlled distribution network or a voucher system to prevent corruption. This would directly tackle the food inflation that is disproportionately affecting people experiencing poverty and is a significant driver of their suffering.
3. Invest in Mass Transit Infrastructure: A significant portion of the savings from the fuel subsidy removal should be channelled into building and maintaining a modern, efficient, and affordable mass transit system at both the federal and state levels. This would permanently reduce the cost of transportation for the average citizen and mitigate the inflationary impact of future fuel price fluctuations. The government could also enhance the partnership with private operators to roll out Compressed Natural Gas (CNG) powered buses, which are cheaper to run and more environmentally friendly.
4. Use Both Kinetic and Non-Kinetic Means to Improve Security: The sporadic banditry, kidnapping across the country, and the herders-farmers clashes are affecting the production of food at source–farming, and transporting them is not safe due to incessant kidnappings on the highways across the country. Therefore, a thorough assessment is collaboratively required by the security agencies to proffer solutions to the insecurity based on data and information from each area of conflict. We must stop using the same solution to resolve insecurities across the nation. Different approaches are advisable based on each case.
B. Medium-Term Solutions (Strengthening Sub-National Governance)
The problem of resource misapplication at the state and local levels must be addressed head-on.
1. Mandate Fiscal Transparency and Accountability: The Federal Government and anti-corruption agencies must enforce strict transparency rules on how states and local governments spend their allocations. Public dashboards showing real-time allocation and expenditure, coupled with a robust audit system, would hold governors and LGA chairpersons accountable. The public, who are the ultimate beneficiaries and taxpayers, must be given the tools to monitor how their resources are being used.
2. Devolve Power and Fiscal Autonomy to LGAs: The State Joint Local Government Account must be reformed or abolished entirely based on the recent judgment of the Supreme Court. Local governments should receive their allocations directly from the Federation Account, as intended by the constitution, to enable them to perform their statutory functions. This would empower local leaders to address grassroots needs directly and, crucially, allow citizens to hold them accountable. This structural change is critical for ensuring that the benefits of increased federal allocations are felt at the local level.
3. Promote Internal Revenue Generation (IGR) at All Levels: States and local governments must move beyond their dependence on federal allocations. A concerted effort to enhance their internally generated revenue, through improved tax administration and investment in local economic activities, would create a more sustainable and less politically contentious fiscal system. This would also reduce the temptation for state governments to divert federal funds intended for other tiers. I think the new Tax Reform laws should be of assistance in this regard and others once implementation starts in January 2026.
C. Long-Term Solutions (Structural Reforms)
For Nigeria to build a truly equitable and sustainable economy, deeper structural issues must be tackled.
1. Diversify the Economy: Nigeria’s over-reliance on oil revenue is at the core of its economic vulnerability. The government must double down on efforts to diversify the economy into non-oil sectors like agriculture, technology, and manufacturing. This would reduce the country’s exposure to volatile global oil prices and create a more resilient economic base. For the economy to be truly revived, power must be made available for a holistic industrialisation, given the proposed 1trillion economy in 2030.
2. Strengthen Institutions and Fight Corruption: At every level, from federal to local, a robust institutional framework is needed to fight corruption. This includes strengthening the judiciary, law enforcement, and anti-graft agencies to ensure that those who mismanage or steal public funds are held accountable. The culture of impunity must be replaced with one of accountability and integrity. I like to add that most MDAs, both at the federal and State levels, must embrace digital transformation, which will make services to the public seamless and transparent. That is the way to go in this algorithm era.
3. Enhance Public Participation in Governance: A sustained effort to engage citizens in governance is essential, and only digital transformation can rescue us here. Hence, the government should create platforms for public consultation on budget formulation and expenditure. When citizens are part of the process, they are more likely to support policies and hold officials accountable, which is a cornerstone of good governance and a path to a more prosperous and equitable society.
Conclusion
The current economic situation in Nigeria is a sobering study in contrasts. The prosperity of a select few, driven by financial assets and strategic business models, stands in stark opposition to the daily suffering of the vast majority, who are bearing the full weight of necessary but poorly managed economic reforms. The bubble hasn’t burst because of the immense resilience of the Nigerian people and a political environment that, while volatile, lacks the conditions for a large-scale, unified revolt.
However, this stability is fragile and should not be mistaken for contentment. The blame game between the federal, state, and local governments is a dangerous diversion, obscuring the reality of a fiscal windfall that has not translated into public good. The path forward is clear, though challenging. It requires a courageous and transparent government at all levels to implement targeted palliatives, reform the existing fiscal federalism to empower local governments, and, in the long term, build a diversified, institutionally strong, and accountable economy that serves all its citizens, not just a privileged few. Only then can Nigeria truly navigate its paradox and build a future of shared prosperity.
*****Prof. Sarumi is the Chief Strategic Officer, LMS DT Consulting, Faculty, Prowess University, US, and ICLED Business School, and writes from Lagos, Nigeria. He is also a consultant in TVET and indigenous education systems, affiliated with the Global Adaptive Apprenticeship Model (GAAM) research consortium.
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