Nigeria, Africa's largest oil producer, has long faced currency shortages that have choked its economy. However, recent efforts by President Bola Tinubu's administration to overhaul the foreign exchange market and attract investment have resulted in a rebound of the local naira currency.
The country has suffered from decades of mismanagement, with its oil wealth largely benefiting a politically connected elite. Corruption is endemic, and armed groups and Islamist militants have destabilized parts of the country. About 40% of Nigeria's over 200 million people live in extreme poverty, and the spike in living costs is exacerbating their conditions.
The devaluation of the naira stoked inflation, and the central bank responded by sharply increasing interest rates, risking further stifling of business activity. The previous central bank management had also played an unorthodox role, providing loans to small businesses and introducing multiple exchange rates, which led to the rise of a thriving parallel currency market.
While the recent measures appear to be yielding some positive results, with the naira rebounding, the country still faces significant challenges. Businesses continue to grapple with perpetual policy uncertainty, power cuts, and limited access to hard currency. The government also used 96% of its revenue in 2022 to service its debt, leaving little for other spending.
Overall, the rebound in Nigeria's currency is a welcome development, but the country's long-standing structural issues, such as corruption, insecurity, and fiscal challenges, will require sustained and comprehensive reforms to address.