Sanctions, Resilience, and the Paradox of Economic Survival: A tale of two nations, by Dr Abdullahi Buba

Sometimes, a single personal financial experience illuminates macroeconomics far better than pages of abstract data. On January 1, 2020 (11 Dey 1398), I deposited 24 million IRR into an account domiciled at Bank Melli’s Ferdowsi University of Mashhad branch in Iran. At the prevailing exchange rate, that deposit was worth approximately $200. Today, that same amount has plummeted to less than $10 on the open market, where the US dollar recently breached the historic milestone of 2.5 million Rials.

This is more than a startling exchange-rate statistic; it is a vivid demonstration of how sanctions, monetary pressures, and geopolitical shocks can erode the international purchasing power of household savings. Yet, this devastation introduces a compelling economic paradox: How can a nation experience such a severe collapse in the external value of its currency while retaining robust domestic productive capacity and systemic resilience?

The Dynamics of the Iranian Paradox
There is no question that international restrictions have extracted an immense toll on the Iranian economy. The World Bank has extensively documented how decades of sanctions have constrained Iranian exports, inflated transaction costs, blocked technology transfers, and choked foreign direct investment. These external shocks, compounded by domestic structural vulnerabilities such as fiscal deficits, banking sector weaknesses, and ‘energy and water constraint’ have combined to drive runaway inflation and severe currency depreciation.

Yet, under these absolute constraints, the Iranian economy adapted. Blocked from Western financial architecture, Tehran pivoted toward a “resistance economy” model, increasingly relying on localized production, regional trade networks, and alternative payment mechanisms. This structural shift expanded trade corridors across Asia and Africa, utilizing barter systems, bilateral local currencies, and indirect payment channels.

Consequently, economic resilience here does not imply the absence of pain, but rather the capacity of an economy to continue producing and functioning under duress. Iran has maintained substantial domestic capabilities in manufacturing, petrochemicals, steel, automobiles, and pharmaceuticals, anchored by a large domestic market and a highly educated labor force.

However, this resilience must not be romanticized. The human cost is high. Persistent inflation has deeply eroded household purchasing power, and currency volatility frequently disrupts supply chains. For example, despite Iran’s impressive domestic drug manufacturing capabilities, the healthcare sector still faces critical pharmaceutical shortages because local factories remain structurally dependent on imported active ingredients and fragile international logistics. Thus, the Iranian experience is not a narrative of unmitigated success, but a case study in preserving industrial infrastructure under siege.

The Nigerian Contrast
This is where the comparative framework yields its most uncomfortable truths. Nigeria operates under no comparable international sanctions regime. It possesses vast natural wealth, Africa’s largest population, immense agricultural potential, and some of the world’s largest oil reserves. Yet, the nation faces persistent structural vulnerabilities, characterized by low industrial capacity, erratic electricity supply, food insecurity, and highly vulnerable household purchasing power.

This raises a fundamental development question: Why does a heavily sanctioned economy manage to manufacture, refine, substitute imports, and adapt its trade networks, while a relatively unconstrained economy struggles to convert its vast natural and human resources into broad-based prosperity?

The answer shifts the focus from exchange rates to institutions, policy consistency, infrastructure, and the incentive structures facing domestic producers. A weak currency does not automatically denote absolute poverty, just as a higher Purchasing Power Parity (PPP)-adjusted GDP per capita does not guarantee equitable household well-being.

For instance, historical World Bank data places Iran’s PPP-adjusted GDP per capita significantly higher than Nigeria’s. However, aggregate metrics mask how income is distributed and what households actually consume. The real differentiator is productive capacity. A nation that produces its own food, medicines, machinery, and energy possesses a vital macroeconomic shock absorber. When foreign exchange becomes scarce or global shipping corridors are disrupted, deeply integrated domestic production systems provide alternatives that import-dependent models simply lack.

Institutional Continuity vs. Democratic Friction
The comparison yields equally significant insights at the institutional level. When Iranian President Ebrahim Raisi died unexpectedly in May 2024, the state’s centralized constitutional mechanism immediately activated an interim presidency and successfully executed a national election within 50 days. This rapid transition highlighted a rigid form of top-down institutional continuity, ensuring that a sudden leadership vacuum did not trigger systemic instability.

In contrast, Nigeria’s democratic transitions are frequently characterized by protracted legal friction. Following the 2023 presidential election, major opposition challenges prolonged uncertainty until the judicial system finalized the result a pattern typical of Nigeria’s highly litigious electoral history. While Iran’s model prioritizes swift institutional preservation under pressure, Nigeria’s protracted process reflects the friction of a pluralistic legal framework. The critical challenge for Nigeria is not to replicate external models, but to strengthen its own electoral credibility, judicial transparency, and public confidence to achieve stability without sacrificing democratic expression.

Rethinking Economic Sovereignty
The trajectory of that 24 million IRR deposit offers an enduring lesson for developing economies: currency stability is vital, but it is not synonymous with structural development. A nation can boast a strong currency yet possess weak productive capacity; conversely, it can endure a severely depreciated currency while maintaining deep industrial resilience.

Ultimately, true economic sovereignty is not measured by the stability of a banknote or the number of zeros printed on it. It is measured by an economy’s capacity to produce, what its citizens can realistically afford, and how reliably its institutions function when adversity arrives.

For Nigeria, the priority must be transforming its immense potential into tangible domestic manufacturing, robust institutional frameworks, and resilient real incomes.

About the Author:

Dr Abdullahi Buba is a Senior Lecturer in the Department of Economics at Gombe State University, Nigeria. He specialises in development economics, and public policy analysis.

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