Exchange rate volatility threatens Nigeria's fiscal reform gains - CPPE warns

By Seun Ibiyemi

The Centre for the Promotion of Private Enterprise (CPPE) has issued a cautionary note, asserting that persistent exchange rate volatility is actively eroding the real value of Nigeria's recent fiscal reform gains, despite a nominal surge in government revenues.

This assessment comes in the CPPE's latest policy brief, "Nigeria’s Fiscal and Tax Reforms," released on October 12, 2025.

According to the report, major policy decisions specifically the removal of the fuel subsidy and the unification of exchange rates have successfully expanded fiscal revenues in nominal terms.

However, the benefits derived from these policy shifts are being fundamentally undermined by the continuing depreciation of the naira and high domestic inflation.

While the unification of the exchange rate successfully boosted naira-denominated oil earnings and created wider fiscal space, the CPPE stressed that "the real fiscal impact is tempered by exchange rate pressures."

The think tank warned that the sustained weakening of the naira has directly increased the cost of imports, worsened inflationary pressures, and distorted the true value of public finances, complicating budget execution and increasing the cost of debt servicing even as collections from VAT and Company Income Tax (CIT) strengthen.

The CPPE, led by Dr. Muda Yusuf, cautioned that "Assessing fiscal performance without adjusting for exchange rate effects could give a misleading picture of Nigeria’s economic progress." The organization urged policymakers to adopt prudent fiscal management, enhance monetary coordination, and prioritize exchange rate stability to ensure the consolidation of reform outcomes.

To this end, the CPPE called for measures that strengthen the supply side of the foreign exchange market, improve market liquidity, and ensure credible structural reforms that genuinely boost investor confidence.

The sustainability of the current fiscal reforms, the CPPE concluded, will ultimately depend on currency stability, disciplined government spending, and structural adjustments that align fiscal outcomes with real economic performance.