Atiku warns Tinubu against squandering oil windfall,

Nigeria's oil windfall presents both opportunity and peril. Former Vice President Atiku Abubakar has escalated criticism of President Tinubu's economic management, warning that Nigeria risks a severe fiscal crisis if the government persists in depleting external reserves to artificially stabilize the Naira against the US dollar.

The debate centers on reserve management strategy during a period of elevated global oil prices. Nigeria's crude output has recovered incrementally from pandemic lows, and recent Brent prices hovering near $80–85/barrel have bolstered government revenue. Yet Atiku's argument—channeled through his communications office—suggests that current interventionist policies are unsustainable and mask deeper structural vulnerabilities in the economy.

## Why Are Nigeria's External Reserves Under Pressure?

External reserves serve as Nigeria's financial buffer against external shocks and currency volatility. The Central Bank of Nigeria (CBN) has historically intervened in forex markets to stabilize the Naira, particularly after the 2016 oil price collapse and the 2020 pandemic shock. Under Tinubu's administration, the CBN pursued aggressive naira defense through reserve deployment while simultaneously raising interest rates to 27.25% (as of late 2024) to attract foreign capital inflows. This dual approach—burning reserves while hiking rates—reflects competing policy objectives: currency stability versus inflation control.

Atiku contends that artificially propping up the Naira through reserve depletion is economically reckless because it delays necessary structural adjustments and creates moral hazard. The Naira has depreciated from ₦411/$1 (January 2023) to approximately ₦1,650/$1 (late 2024), signaling underlying demand-supply imbalances that reserve drawdowns merely mask rather than resolve.

## What Are the Fiscal Consequences for Investors?

If Nigeria exhausts reserves without addressing the root causes of currency pressure—namely, import-dependent consumption, weak non-oil exports, and capital flight—the government could face a balance-of-payments crisis. Such a scenario would force abrupt naira devaluation, spike inflation, and compress purchasing power. For investors, this translates to currency risk, margin compression, and potential debt-servicing stress on government obligations.

The IMF has echoed similar concerns, recommending that Nigeria allow greater exchange rate flexibility to encourage export competitiveness and reduce import dependency. Tinubu's administration has made reforms—removing fuel subsidies, floating the currency (partially), and implementing austerity—but Atiku argues the pace is insufficient and reserve burning provides a dangerous escape valve that delays full adjustment.

## How Should Nigeria Deploy Its Oil Windfall?

Rather than currency intervention, Atiku's implicit position aligns with development economics orthodoxy: direct windfall revenues toward productive investment—infrastructure, manufacturing, energy transition—that generates future export capacity and foreign exchange. This requires institutional discipline and long-term vision, not short-term currency propping.

The broader market implication is clear: if reserve depletion accelerates without complementary structural reform, Nigerian asset prices—equities, bonds, real estate—face renewed pressure. Conversely, credible commitment to the IMF adjustment program and non-oil diversification could unlock investor confidence and capital repatriation.

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