By Tayo Ayodele

As Nigeria heads towards the 2027 elections, the political marketplace is already filling with familiar promises. Some politicians want fuel subsidies restored. Others are talking about fixing or pegging the naira. Many are promising a living wage of N500,000 or more a month.

The promises sound attractive because Nigerians are hurting. Inflation has eroded purchasing power, the cost of food and energy remains high, and household incomes have struggled to keep pace. But there is a more uncomfortable question that politicians are avoiding:

How will Nigeria pay for these promises without recreating the same fiscal, monetary and external imbalances that produced the crisis in the first place?

That is the macroeconomic question that should define the 2027 election. Nigeria does not lack economic policies. It lacks a durable economic framework.

The oil curse we refuse to confront

The roots of Nigeria’s current economic instability trace back to the economy’s transformation after the oil boom of the 1970s.

From independence until around 1970, Nigeria’s major macroeconomic indicators were relatively stable. Inflation was low and the exchange rate was broadly predictable.

The oil boom changed that equilibrium.

Crude oil revenues surged. Government spending expanded. Oil earnings were rapidly converted into naira, increasing liquidity and fuelling inflation. By 1975, inflation had climbed to about 34 per cent, while the naira appreciated sharply.

That appreciation was not necessarily a sign of economic strength. It was part of a classic commodity-driven distortion.

A stronger currency made imports cheaper while making non-oil exports less competitive. Domestic production became less attractive relative to imported goods.

Nigeria was gradually developing the characteristics of Dutch disease: oil generated foreign exchange, the currency strengthened, imports expanded, and productive sectors outside oil struggled to compete.

When oil revenues weakened, the underlying economic weakness became impossible to hide.

By 1981, external pressures had intensified and the economy entered a period of severe adjustment. Inflation became increasingly volatile, reaching about 55 per cent in 1985-86 and exceeding 70 per cent in 1995.

The problem was not simply that oil prices went up and down.

The deeper problem was that Nigeria built a national economic model around a revenue source whose price and volume it could not control.

That problem remains.

Subsidies are not an economic strategy

This is why the debate about restoring fuel subsidies must be approached with caution.

Subsidies can provide short-term relief. But a subsidy financed by an unpredictable government revenue base is not a sustainable social policy.

Nigeria’s experience should make this obvious.

When oil prices or production rise, the government can afford more subsidies. When oil revenues fall, the fiscal burden becomes harder to carry. The result is a cycle of expansion, borrowing, arrears, adjustment and renewed pressure on households.

The same logic applies to promises of very high wages.

A N500,000 monthly living wage may be desirable for workers. But wages cannot sustainably rise faster than productivity, government revenue and the capacity of businesses to pay.

Otherwise, the adjustment simply moves elsewhere.

Businesses raise prices. Government borrowing increases. Employers reduce hiring. Inflation accelerates. The nominal wage rises, but its real purchasing power falls.

A wage policy without a productivity strategy is only an inflation policy in disguise.

Stop trying to defend the wrong exchange rate

The naira presents another political temptation.

Calls for a fixed or artificially strong currency are likely to become louder as the election approaches. But exchange-rate stability cannot be achieved sustainably by decree.

The fundamental question is not whether the naira should be strong or weak.

It is whether the exchange rate reflects the underlying strength of the economy.

Nigeria needs a market-reflective and orderly exchange-rate regime that allows the currency to appreciate or depreciate as economic fundamentals change.

More importantly, the country must reduce its dependence on oil for foreign exchange.

A reasonable medium-term target should be to reduce oil’s contribution to foreign-exchange earnings to below 50 per cent and eventually below one-third.

That requires a deliberate export strategy.

Agriculture, manufacturing, petrochemicals, services, digital exports and other competitive sectors must become meaningful sources of foreign exchange.

Nigeria cannot permanently stabilise the naira by rationing dollars. It must produce more dollars.

Reserves are insurance, not decoration

Foreign-exchange reserves should also be treated as a strategic buffer rather than simply a headline number.

A country whose dominant foreign-exchange source is crude oil needs substantial reserves because oil prices, production volumes and global demand can change rapidly.

Building reserves during periods of stronger oil receipts would give Nigeria room to absorb external shocks without immediately forcing a disruptive currency adjustment.

But reserves alone will not solve the problem.

The ultimate protection against foreign-exchange shortages is a diversified economy that consistently earns foreign exchange from multiple sources.

The best FX reserve is an economy capable of generating dollars.

Nigeria also needs a tax revolution

The other side of the problem is fiscal.

For decades, Nigeria has expected oil to do too much of the work of financing government.

That arrangement has become increasingly untenable.

Nigeria needs a predictable domestic revenue system capable of financing government even when oil revenues fall.

A medium-term target of tax revenue equivalent to about 20 per cent of GDP would provide a stronger foundation for public finances.

Achieving that objective, however, should not mean indiscriminate taxation.

The priority should be to widen the tax base, reduce leakages, improve compliance and formalise economic activity while protecting low-income households.

A VAT rate in the range of 15 per cent to 17.5 per cent and a marginal personal income-tax rate of around 35 per cent could form part of such a framework, provided the structure includes adequate exemptions and protections for poorer households.

For example, people earning below roughly N3 million to N3.6 million annually could remain outside the personal income-tax net.

But tax increases must be matched by something equally important:

citizens must see value for money.

A government cannot demand higher taxes indefinitely while public services remain poor, infrastructure deteriorates and confidence in public spending remains weak.

Fiscal reform must therefore be accompanied by expenditure discipline, transparency and measurable improvements in public services.

The real reform is diversification

Nigeria’s economic conversation often treats diversification as a slogan.

It should instead be treated as a balance-sheet imperative.

The country needs to reduce the share of oil in government revenue and foreign-exchange earnings while increasing the contribution of productive sectors.

That means moving capital towards sectors that create jobs, generate exports and raise productivity.

It also means changing the role of government.

Rather than trying to control prices, defend artificial exchange rates or distribute oil windfalls, government should focus on creating the conditions under which businesses can invest and compete.

Reliable electricity, efficient ports, functioning rail and road networks, predictable taxation, access to finance, security and regulatory certainty would do more for long-term household incomes than most election-season promises.

Welfare needs a sustainable foundation

None of this means government should abandon social protection.

Quite the opposite.

A stable macroeconomic environment gives government more room to support vulnerable citizens.

When inflation is under control, social transfers retain their value. When government revenue is predictable, welfare programmes can be funded consistently. When businesses can plan, investment and employment can expand.

The objective should therefore be to move from expensive universal subsidies to targeted and sustainable social protection.

That is the difference between cushioning poverty and institutionalising it.

The 2027 election should be about the economic model

Nigeria’s politicians have an opportunity to make the 2027 election a genuine contest over economic ideas.

They should tell Nigerians how they intend to finance their promises.

How much will they spend?

Where will the money come from?

What will happen to inflation?

How will the policies affect the naira?

How will they increase productivity?

How will Nigeria earn more foreign exchange?

What will happen when oil prices fall?

These questions matter more than the size of the promises.

The country cannot continue treating every economic crisis as an isolated problem. Inflation, exchange-rate instability, weak revenue, unemployment, high import dependence and declining purchasing power are interconnected symptoms of a structural problem.

And that structural problem is Nigeria’s continuing dependence on oil.

The choice before Nigeria

Nigeria can either use the next political cycle to build a credible macroeconomic framework or repeat the old pattern.

The old pattern is familiar: oil prices rise, government spending expands, the currency strengthens, imports surge, subsidies increase, domestic production weakens and the government assumes the boom will last forever.

Then oil revenues fall.

The currency comes under pressure. Inflation rises. Reserves decline. Borrowing increases. Subsidies become unaffordable. Households bear the adjustment.

And the cycle begins again.

That is the trap Nigeria must escape.

The country does not need politicians who promise to make every painful adjustment disappear.

It needs leaders prepared to explain why the pain exists, who should bear it, how vulnerable citizens will be protected and how the economy will be fundamentally restructured.

Populism may win votes.But it cannot cure Dutch disease.

Nigeria’s real economic imperative for 2027 is not another subsidy, another exchange-rate peg or another unfunded wage promise. It is the construction of a stable, diversified and productive economy that can survive without depending on the next oil boom.

That is the reform that would truly change Nigeria’s economic fortunes.

© Tayo Ayodele