Macroeconomic stability is not neutral
John Onyeukwu
Macroeconomic stability is not neutral
Nigeria’s reform agenda is restoring order to the economy, but stability redistributes power, costs, and opportunity. A look at who benefits, who adjusts, and what sustainability really demands.
By John Onyeukwu | Policy & Reform Column | Business a.m.| Published January 5, 2025 | https://businessamlive.com/author/john-onyeukwu/ | Pull out attached
Macroeconomic stability is often presented as an unquestionable public good, an objective, technocratic end toward which all rational policy should aim. Inflation moderates, exchange rates stabilise, reserves rise, growth ticks upward. On paper, the story appears linear and benign. Yet macroeconomic stability is anything but neutral. It is a choice architecture, embedded in power relations, legal frameworks, constitutional mandates, and global geo-economic currents. Stability produces winners, imposes adjustment costs, and, if poorly governed, can quietly break the most vulnerable.
The Central Bank of Nigeria’s Macroeconomic Outlook 2026 projects cautious optimism: GDP growth of 4.49 per cent, inflation easing to 12.94 per cent, rising external reserves, improved FX liquidity, and stronger investor confidence. These outcomes reflect deliberate monetary tightening, FX market reforms, fiscal consolidation, banking sector recapitalisation and structural legislation such as the Petroleum Industry Act (2021) and the Nigeria Tax Act (2025). Yet the deeper question is not whether stability is being achieved, as the data suggests it is, but for whom, at what cost, and under whose authority.
Macroeconomic policy is a moral exercise disguised as technical management. When a central bank prioritises price stability through aggressive tightening, as Nigeria did with cumulative MPR hikes to 27.5 per cent, it is making a normative judgment: that inflation control outweighs the short-term pain of credit contraction, job losses, and firm exits. The CBN’s cautious easing stance in late 2025 acknowledges this trade-off but does not eliminate it.
Stability, therefore, is not value-free. It redistributes pain across time and social groups. Large corporates with access to capital markets, foreign-currency earnings, or balance-sheet resilience can absorb high interest rates and FX adjustments. Small businesses, informal enterprises, and wage-dependent households often cannot. The philosophical question remains whether macroeconomic virtue that weakens productive citizenship and livelihoods is stability at all, or merely order without justice.
Macroeconomic stability is inseparable from power, who designs policy, who absorbs its costs, and who captures its gains. The CBN Outlook places strong emphasis on policy coordination, institutional reform, and credibility. But credibility itself is political currency: it reassures markets and external partners while simultaneously shaping domestic expectations. Banking sector recapitalisation, for instance, strengthens systemic resilience and aligns Nigeria with Basel-aligned prudential norms. Yet it also consolidates market power in large institutions and risks further constraining credit to SMEs where lending remains conservative and government securities continue to crowd out private enterprise. As Joseph Stiglitz has long argued, macroeconomic policies are never only about efficiency; they inevitably shape distribution and power.
Similarly, the Nigeria Tax Act 2025 broadens the tax base and improves fiscal sustainability, an essential objective in a debt-constrained state facing rising interest obligations. Yet tax policy is also about visibility and bargaining power: who is captured by the tax net, who complies, who evades, and who can negotiate exemptions or incentives. In an economy marked by persistent informality and uneven public service delivery, consolidation without credible redistribution or service improvement risks deepening distrust between state and citizen (IMF Article IV Nigeria, 2024; OECD Revenue Statistics Africa).
At the political economy level, stability also functions as a signalling device, to investors, multilaterals, and rating agencies. Nigeria’s improved reserves position, FX convergence, and balance-of-payments outlook signal renewed macro discipline. But political legitimacy at home depends on whether these gains translate into affordable food, energy security, jobs, and predictable rules. Without visible welfare and productivity gains, stability risks becoming technocratic success divorced from democratic consent.
The Outlook’s reform-productivity pathway is sound in theory: FX reforms improve price discovery; recapitalisation boosts lending capacity; tax reforms widen fiscal space; and energy reforms ease supply-side constraints. Yet transitions are rarely smooth or evenly borne across sectors and income groups. Disinflation lowers nominal pressure but does not automatically restore real purchasing power, particularly where wage growth lags inflation, productivity gains are uneven and household debt rises (NBS; CBN). For many households and small firms, the lived experience of “stability” remains one of compressed demand and cautious spending, even as macro indicators improve.
Exchange-rate stability reduces volatility but can lock in a higher cost structure for import-dependent sectors, squeezing margins, delaying investment decisions, and slowing job creation. The CBN anticipates resource reallocation from low-productivity informal activity to higher-productivity formal sectors. That shift, however, implies displacement before absorption—firms exit before new ones scale, workers lose jobs before new skills are demanded, and informality can deepen in the interim (CBN, 2026; World Bank Nigeria Economic Update). As Dani Rodrik reminds us, growth transitions are rarely smooth—and pretending their social costs do not exist does nothing to make them go away.
Without deliberate labour-market policies, skills retraining targeted SME credit, and credible social buffers, adjustment costs are borne privately rather than socially. The result is reform success in aggregate but fragility at the micro level, where inequality widens and economic insecurity persists even as headline indicators and investor confidence improve.
From a governance and legal perspective, macroeconomic stability must rest firmly on constitutional legitimacy. The CBN’s mandate, price stability and financial system soundness, and is clear and defensible within Nigeria’s constitutional and statutory framework, including the CBN Act. Yet constitutional democracy demands more than technical compliance with mandate; it requires accountability, transparency, proportionality, and respect for institutional limits. Monetary independence is not immunity from scrutiny, particularly where policy choices carry significant distributive consequences across households, firms, and regions (CBN Act; Constitution of the Federal Republic of Nigeria). As James Madison warned, “If men were angels, no government would be necessary,” a reminder that power—even technocratic power—must be constrained and accountable.
The move toward clearer inflation targets, transitional bands, and enhanced policy communication represents a genuine governance gain. Improved forward guidance reduces uncertainty, anchors expectations, and allows economic actors to plan more rationally (CBN MPC Communiqués). However, the rule of law also requires predictability and consistency across the broader reform ecosystem, taxation, FX regulation, energy pricing, and financial supervision. Sudden regulatory reversals, opaque administrative discretion, or selective enforcement weaken confidence and raise transaction costs (World Bank Governance Indicators). As Douglass North famously observed, “institutions are the rules of the game in a society,” and when those rules are unstable, macroeconomic stability erodes from within, not through market shocks, but through declining institutional credibility and weakened public trust.
Nigeria’s recent stability gains exist within an increasingly volatile and fragmented global order. Trade fragmentation, geopolitical conflict, capital flow reversals, tighter global financial conditions, and renewed commodity price volatility remain material risks to macroeconomic planning. For an economy still deeply integrated into global energy, food, and capital markets, these risks transmit quickly, through exchange rates, inflation, fiscal balances, and investor sentiment. Stronger external reserves, improved oil output, expanding domestic refining capacity, and FX market reforms provide a degree of insulation, but they do not confer immunity from external shocks.
In an era of weaponised finance, sanctions regimes, and politicised supply chains, macroeconomic stability has become a strategic asset rather than a purely technocratic outcome. FX reforms, reserve accumulation, and balance-of-payments management now function as instruments of economic sovereignty and strategic autonomy. The capacity to settle trade, defend the currency, and absorb capital volatility increasingly determines a state’s room for independent policy action.
Yet sovereignty built primarily on oil receipts and reserve buffers remains fragile. True geo-economic resilience requires sustained diversification into manufacturing, services, and knowledge-based industries; deeper AfCFTA-driven regional trade integration; and reduced exposure to imported energy and food price shocks. Without this structural rebalancing, stability remains conditional, durable in calm periods, but vulnerable in a hostile and rapidly shifting global order.
One truth remains unmistakable: macroeconomic stability is not neutral. It is philosophical in its underlying values, political in the way costs and benefits are distributed, economic in its trade-offs, legal in its institutional constraints, and geopolitical in its exposure to forces beyond national control. Nigeria’s 2026 outlook, as articulated by the CBN, offers a credible and technically coherent pathway toward stability, but credibility, by itself, is an incomplete measure of success.
The real test is whether stability matures into shared prosperity; whether adjustment costs are anticipated, sequenced, and deliberately cushioned; and whether governance frameworks prevent necessary discipline from sliding into social indifference. Stability that moderates inflation but weakens livelihoods, erodes trust, or constrains productive capacity ultimately undermines its own sustainability. Macroeconomic order cannot endure where social consent is thin.
Stability must therefore be treated as a means, not an end, serving growth, inclusion, productivity, and dignity, rather than balance sheets and market sentiment alone. The defining question is not whether Nigeria can stabilise its economy. It is whether it can do so without fracturing its social contract, and whether stability becomes a durable foundation for national flourishing rather than a fragile, exclusionary achievement.
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-- James D. Wolfensohn
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