Before May 2023
Inflation was already elevated
Headline inflation reached 22.41% year-on-year in May, before the full price effects of the new policy mix could appear.
Nigeria · 2023 policy episode
One economy.
Two major shocks.
Nigeria removed the petrol subsidy and changed the operation of its foreign-exchange market within weeks. This interactive brief asks what happens when two reforms move through prices, public finances and households at the same time.
16 daysseparated the May 29 subsidy announcement from the June 14 foreign-exchange circular.
Policy LabNigeria’s Dual Reform Shock
The policy sequence
The timing matters. Closely spaced interventions complicate any attempt to isolate the effect of one reform from the other.
29 May 2023
“Subsidy is gone”
The inauguration-day announcement immediately altered expectations and was followed by higher petrol prices.
14 June 2023
FX windows were consolidated
The central bank announced operational changes centered on market-determined rates in the investors’ and exporters’ window.
Second half of 2023
Price pressures intensified
Headline inflation rose from 22.79% in June to 28.92% in December, alongside other domestic and global pressures.
Policy-mix scenario lab
Change the policy environment to see a transparent, illustrative transmission model. It is a thinking tool—not a forecast.
Set the conditions
Each control runs from weak or gradual to strong or rapid.
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GradualImmediate
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LimitedLarge
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LowHigh
Illustrative pressure indices
Relative intensity on a 0–100 scale; these are not estimated percentage changes.
High pass-through, limited cushioning
When both price shocks are large and support is limited, the model flags strong near-term pressure on household budgets.
Model logic: fuel and FX adjustments raise price pressure; subsidy removal raises potential fiscal relief; targeted support reduces welfare strain but may use part of the available fiscal space.
Four transmission channels
The reforms can reinforce one another through overlapping routes. That interaction is the core empirical puzzle.
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Transport and logistics
Higher petrol costs can travel through passenger fares, freight charges and the final price of goods.
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Imported inputs
A weaker currency can raise naira prices for machinery, medicine, fuel components and intermediate goods.
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Expectations
Announcements may change prices and contracts before official monthly indicators register the full shock.
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Public finance
Lower subsidy costs can create fiscal space, but realised gains depend on oil revenue, FX valuation and spending choices.
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Household welfare
Food, mobility and energy costs matter most for households with little room to substitute or absorb shocks.
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Policy interaction
The combined effect may differ from simply adding two isolated effects, especially when exchange-rate movements amplify energy costs.
What the first data showed
Inflation accelerated through the remainder of 2023. The pattern is descriptive; it does not, by itself, identify how much each reform caused.
Headline inflation, year-on-yearNigeria · selected months of 2023
22.41%May
22.79%Jun
24.08%Jul
25.80%Aug
26.72%Sep
27.33%Oct
28.20%Nov
28.92%Dec
What is observable
The timing of policy changes and subsequent movement in monthly inflation.
The timing of policy changes and subsequent movement in monthly inflation.
What still requires identification
The separate, interacting and anticipated effects of each policy, net of other shocks.
The separate, interacting and anticipated effects of each policy, net of other shocks.
A credible research design
The project can move beyond before-and-after comparison by explicitly modelling anticipation, interaction and dynamic responses.
Separate announcement from implementation
Use event dates and higher-frequency series to test whether expectations shifted before measured policy implementation.
Estimate local projections
Trace responses over successive horizons without forcing every variable into one rigid dynamic structure.
Model the reforms jointly
Include the subsidy shock, FX shock and their interaction to test whether simultaneous reform produced amplification.
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The central question
Did Nigeria’s simultaneous subsidy and foreign-exchange reforms generate a combined inflation response greater than the sum of their separate effects—and how quickly did that response reach households?
Evidence base