IN 2017, I wrote about how Nigeria—desperately in need of investors—could leverage economic cooperation with Japan, a country grappling with stagnation, to unlock investment opportunities in our beloved yet beleaguered nation. At the time, our leaders seemed not to recognise the nuggets of wisdom in that piece, which I had written as a form of advice. Unsurprisingly, nothing tangible came out of that trip.
Today, eight years after that essay, President Bola Ahmed Tinubu, driven perhaps by his instinct to make Nigeria more viable—a testament to his reform-mindedness—appears ready to harness the benefits of a more cordial and mutually beneficial relationship between Nigeria and Japan.
Japan, widely known as the “Land of the Rising Sun,” is the world’s fourth-largest economy and a true industrial powerhouse. It is the home of Toyota, the most famous automobile manufacturer globally, alongside a host of other world-class products that dominate international markets.
President Tinubu, currently in Japan for the Ninth Tokyo International Conference on African Development (TICAD 9), now has the opportunity to implement some of the recommendations I published on November 22, 2017.
That essay came two years after the late President Muhammadu Buhari assumed office in 2015, when Nigeria’s economy had sunk into a severe recession. At the time, Japan’s Prime Minister was Shinzo Abe, whose reform measures were collectively known as “Abenomics.” My piece, therefore, was titled: “Abenomics: Matching Resources in Japan with Opportunities in Nigeria.”
The core of my argument was simple: Japan, burdened by stagflation (a condition where prices rise while growth stagnates), could be paired with Nigeria, a nation brimming with untapped economic potential. Such a partnership—Japan bringing capital and expertise, Nigeria offering resources and markets—would, I argued, be a “marriage made in heaven.”
Unfortunately, my expectations were dashed. Buhari’s administration, fixated on its rigid zero-tolerance policies, ignored the opportunity. Some of us had warned that this policy approach would plunge the economy into recession, and, regrettably, we were proven right.
It is, therefore, heartening that eight years later, Nigeria has a second chance—this time under President Tinubu—to forge government-to-government (G2G) and business-to-business (B2B) partnerships with Japan.
Today, neither Shinzo Abe nor Muhammadu Buhari occupies the leadership of their respective nations. Instead, the opportunity falls to Prime Minister Shigeru Ishiba of Japan and President Bola Tinubu of Nigeria. Both leaders now have the chance, through combined efforts, to bring to life the vision of a robust Japan-Nigeria business and economic partnership.
The timing could not be more auspicious. The global trade order is being reshaped by U.S. President Donald Trump’s sweeping tariff reforms. For instance, Japan currently manufactures Toyota vehicles in South Africa. Yet under Trump’s tariff regime, South Africa faces a 30% reciprocal tariff, compared to Nigeria’s 15% tariff—half the rate imposed on South Africa. This makes Nigeria a far more attractive production and export hub.
To take advantage of this lower tariff environment, Japan may need to shift production from high-tariff South Africa to low-tariff Nigeria. That move alone could allow Toyota vehicles produced in Nigeria to reach U.S. and global markets at far more competitive rates.
And that is only the beginning. Beyond automobiles, opportunities abound in other sectors where Japan excels.
The article I wrote eight years ago remains as relevant today as when it was first published. With the world’s socioeconomic realities rapidly evolving, Nigeria must seize this moment. If handled strategically, Tinubu’s outreach to Japan could position Nigeria as a central hub for global trade and investment—an opportunity we cannot afford to squander again.
Here we go:
IF the Central Bank of Nigeria Conducted a Stress Test Today
If the Central Bank of Nigeria (CBN) were to conduct a stress test on Nigerian banks today, most would likely fail. Banks are the lifeblood of business and a mirror of the economy—an economy that is now effectively belly-up.
A combination of factors has brought us here: the slump in crude oil prices; vandalism of oil facilities that has crippled production and exports; the abrupt introduction of the Treasury Single Account (TSA) in one sweeping move instead of a phased rollout; the removal of fuel subsidies without cushioning palliatives like SURE-P for the masses; and the floating of the naira, which devalued the currency from ₦199/$1 in June to about ₦400/$1 on the open market. Together, these shocks doubled the size of bank balance sheets without corresponding credit disbursement. The result: banks now have little or no funds to lend, generating minimal income for their survival and offering scant support for GDP growth, which recent data show is contracting at about -0.2% per quarter.
With the economy shrinking by -2% year-on-year while the population grows at 2%, the picture is grim. For growth to occur, GDP must outpace population growth. In Nigeria’s case, the reverse is happening—population is rising as GDP is falling. This dangerous mismatch makes recovery without drastic intervention unlikely.
In this light, the injection of surplus Japanese yen into Nigeria’s fragile economy—through foreign direct investment (FDI) in infrastructure—could serve as a lifeline, perhaps even the antidote to recession. Our banks are already struggling to stay within the CBN’s regulatory thresholds, and such inflows could provide the much-needed oxygen.
The financial crunch, however, blindsided advocates of naira devaluation. They had argued that both foreign and domestic investors holding dollars would rush to invest once the naira was devalued, eager for quick gains. But in a country riddled with policy inconsistencies and lacking a coherent long-term strategy, such optimism was bound to prove illusory.
The pundits also failed to anticipate the knock-on effects of draining bank treasuries through the TSA or the uncertainty surrounding government policy in the Niger Delta. That ambiguity paved the way for the rise of the Avengers militant group, whose sabotage of oil and gas facilities slashed Nigeria’s crude oil output by as much as one million barrels per day.
It is worth recalling that President Muhammadu Buhari resisted devaluation for nearly a year, perhaps guided by instincts shaped by his earlier experience as head of state between December 1983 and August 1985. In his view, the arguments for devaluation were unconvincing, especially since Nigeria exports only crude oil—a commodity with internationally fixed prices and, at the time, a global glut. He eventually relented on June 20, only for his fears to materialise: the naira quickly spiralled beyond ₦400/$1.
To escape this monetary cul-de-sac, the CBN raised lending rates by two percentage points—from 12% to 14%—at its last Monetary Policy Committee (MPC) meeting, hoping to attract foreign portfolio investors. Such investors are naturally drawn to high yields, and indeed, Nigerian bonds and treasury bills are now trading at around 20%—a mouth-watering return compared with Japan, where bonds are issued at zero interest, and in some cases, the government pays buyers to take them. But those incentives are reserved for Europe and other stable economies.
This disparity explains why European banks can offer loans at 4%, while African banks—particularly Nigerian ones—charge as high as 26% or more. But at such punitive rates, what kind of business can survive? How can an entrepreneur pay 26% interest, plus 10% overhead (salaries, etc.), and 4% for utilities, pushing total costs to nearly 40%? I stand to be corrected, but I have yet to see a legitimate business that yields such returns—except, perhaps, shady government contracts.
In my view, this outrageous cost of funds is a recipe for bad loans, business failures, and the premature death of enterprises. Indeed, not long ago the CBN and the Nigeria Deposit Insurance Corporation (NDIC) disclosed that non-performing loans in the banking sector were approaching ₦2.4 trillion—about 10% of the ₦24.3 trillion believed to have been disbursed to both public and private sectors.
The grim situation outlined above is understandably giving regulators sleepless nights, as it poses a serious threat to the stability of the financial services sector.
Without dwelling further on the ‘Shylock’ interest rates charged by banks—a story for another day—let me turn to why Nigeria must actively seek Japanese partnership at this time, and how the country can tap into the surplus funds of the world’s third-largest economy. By leveraging the paradigm shift in Abenomics, Nigeria can channel those funds into productive growth.
To illustrate this, picture Japan and Nigeria as two farmers on opposite sides of the world. On one side, the farmer enjoys favourable weather and bountiful harvests, producing more than his people can consume. Yet he lacks sufficient land to expand and is seeking new fields. On the other side, the farmer possesses vast, fertile land but lacks the tools and resources to cultivate it, leaving his family hungry.
The prosperous farmer with surplus is Japan; the struggling farmer with untapped potential is Nigeria. The task of bringing them together—so that each can benefit from the other’s strengths—is at the heart of my Japan-Nigeria partnership proposal.
Nigeria and Japan: A Strategic Partnership Waiting to Happen