By Abidemi Adebamiwa
Nigeria’s economy did not become K-shaped by accident. It is the product of policy choices whose consequences are now visible not only in public frustration but in hard economic realities. Since mid-2023, reforms under President Bola Ahmed Tinubu have reshaped prices, incomes, and opportunities in ways that clearly separate winners from losers.
Inflation tells the first part of the story. After peaking above 30 percent in 2024, headline inflation has moderated but remains elevated, standing at around 16 percent by late 2025, according to official data. Food inflation continues to bite disproportionately, reflecting structural weaknesses in supply, logistics, and purchasing power. For households that spend most of their income on food, this is not a technical macroeconomic adjustment but a persistent cost-of-living squeeze. Wages have not kept pace, meaning real incomes remain under pressure across both the formal and informal sectors.
Fuel subsidy removal delivered the most immediate shock. Petrol prices moved from about ₦185 per litre to levels that now average roughly ₦850 per litre nationwide. Transport costs surged accordingly, doubling or tripling in many cities and feeding directly into food prices, rent, school fees, and healthcare costs. Those with savings, private vehicles, generators, or institutional backing adjusted. Those without absorbed the full force of the shock.
Exchange-rate reform created the second arm of the K. After unification, the naira weakened sharply and, despite some volatility, has hovered around ₦1,450 to the U.S. dollar. Import-dependent manufacturers and small businesses saw input costs rise sharply, wiping out margins and forcing closures or downsizing. By contrast, firms with dollar revenues, exporters, and financial institutions with foreign-exchange exposure benefited from the adjustment. Several major banks reported strong profits even as households struggled to afford basic necessities.
Monetary tightening reinforced the divide. As the Central Bank raised the Monetary Policy Rate to 26.75 percent, borrowing costs became prohibitive for productive sectors. Small and medium-scale enterprises were priced out of credit. Farmers and young entrepreneurs could not scale. Meanwhile, financial institutions earned more from government securities. Capital was protected. Labour was exposed.
The social impact is stark. Almost two-thirds of Nigerians are classified as multidimensionally poor, facing overlapping deprivations in food, housing, health, education, sanitation, and basic services. This goes beyond income alone. Even households above the extreme poverty line increasingly struggle to secure reliable nutrition, stable energy, affordable transport, or quality healthcare. In a K-shaped economy, hardship spreads not only through unemployment, but through the steady erosion of dignity and basic living standards.
What is emerging resembles the quiet return of a Malthusian dynamic. Thomas Malthus warned that when population growth outpaces an economy’s capacity to provide food, jobs, and basic sustenance, societies revert to scarcity and social stress. Nigeria’s population continues to grow rapidly, yet job creation, food production, real wages, and public services are failing to keep pace. When policy shocks raise prices faster than incomes and weaken productive capacity, adjustment begins to resemble modern Malthusian pressure, where survival replaces advancement.
Supporters of the reforms point to rising government revenues and improved fiscal signals. Those numbers exist. But GDP growth of about 3–4 percent, in a country with faster population growth and lingering inflation, does not translate into improved welfare. Nigeria may be adjusting on paper, but society remains under strain in practice.
A K-shaped economy is not just unfair. It is unstable. Flattening the K now requires deliberate action: wage adjustments tied to inflation realities; targeted transport and energy relief; affordable credit for SMEs and agriculture; temporary protection for domestic producers during foreign-exchange transition; and, critically, a serious effort to stop Nigeria’s chronic financial leakages. Until public revenues stop draining through opaque procurement, weak remittance, unchecked waivers, and poor enforcement, adjustment will continue to punish the many while protecting the few.
Growth that leaves most people behind is not reform. It is deferred crisis.
0 Comments