Research trip to Nigeria

At the beginning of 2025, a member of the Emerging Markets Fixed Income team visited Abuja, the capital of Nigeria, to gain a better understanding of the changes taking place in the country. We participated in several meetings with the local administration, international financial institutions and various local partners to discuss how new policy measures are playing out. Since the general elections that were held in 2023, the drive for political, economic and social reform has been strong and effective.

Nigeria is the most populous country in Africa and has one of the largest economies, which is heavily dependent on natural resources. The country has historically suffered from economic instability due to its heavy reliance on oil and gas exports. Fluctuations in oil prices often lead to reduced government revenues and eventually to painful adjustments due to diminished foreign exchange reserves. Inflation and currency instability have often resulted from periods of economic instability, which have generally made public finance management challenging.

Since the current government took office in early 2024, there seems to be growing confidence that it could deliver a more sustainable change in economic policy. Some of these changes, which were previously considered unattainable, have already been enacted. A major milestone was the reform of subsidies, which has helped to significantly reduce the fiscal deficit. However, it is still unclear how the reform will ultimately impact on revenue growth. The budgetary policies that have already led to higher revenues are not sufficient without a continued course of action to ensure rational resource allocation. Challenges relating to food security, poverty and access to basic services persist, and significant efforts are still needed to address them.

The unification of foreign exchange market structures has significantly improved transparency and credibility, although regulatory inefficiencies remain. The ongoing liberalization has led to a strong depreciation of the Nigerian currency, which has played an important role in supporting the current account. In conclusion, the team believes the right ingredients are in place to create lasting change in Nigeria, and they are optimistic that the positive developments will continue. Further positive actions should support the government’s credibility in the eyes of the foreign investor community. The country is expected to attract foreign investment at a faster pace going forward, supporting the positive development of the economy and the society.