Nigeria’s 2025 Economic Outlook, Progress and Prospects

Adaeze Obi-Umeofia

The World Bank forecasts Nigeria’s economy will grow by 3.5 per cent in 2025 and 3.7 per cent in 2026, up from an estimated 3.3 per cent in 2024.

 The Central Bank of Nigeria (CBN) predicts a slightly higher Gross Domestic Product (GDP) growth of 4.17 per cent.

This growth is expected to boost production, job creation, and help reduce inflation by increasing the supply of goods and services.

Compared to other African nations, Nigeria’s growth remains strong, with Egypt projected at four per cent and South Africa at 1.7 per cent. Globally, the economy is expected to grow by 2.8 per cent in 2025, putting Nigeria in an optimistic position.

Inflation:

Nigeria’s inflation dropped to 24.48 per cent in January 2025, down from 34.80 per cent in December 2024. The CBN expects further declines due to government reforms and strategic economic activities.

One of the key reasons for this expected decline is increased oil production, particularly due to the operationalisation of the Dangote Refinery, which began full-scale refining in late 2024 (Reuters, December

2024).

 Higher domestic refining capacity reduces dependence on imported refined fuel which is going to stabilise fuel prices and reduce inflationary pressures.

A stronger naira due to increased foreign reserves from oil exports may also reduce inflation (CBN, February

2025).

However, even with recent and predicted declines, inflation may still remain a significant concern for consumers.

Government Expenditure:

In February 2025, Nigeria’s President Bola Tinubu approved an increased budget of 54.2 trillion naira, up from

49 trillion naira (Federal Ministry of Finance, February 2025). This additional government spending aims to

improve critical infrastructure (roads, energy, and healthcare) which is hampering productivity, boost social

welfare programs and stimulate job creation in key sectors. Now, if we look at economic history, government

spending has played a crucial role in economic growth. According to the World Bank, increased infrastructure

investment contributes significantly to GDP expansion. However, it remains to be seen how efficiently these

funds will be allocated and whether fiscal discipline will be maintained.

Interest Rates:

Nigeria’s interest rate is currently at a record high of 27.50 per cent (CBN, February 2025). High interest rates make loans and credit cards expensive, reducing consumer spending and business expansion. Interest rates are directly linked to inflation. When inflation is high, the central bank raises interest rates to curb excessive spending. As inflation declines in 2025, the CBN has indicated the possibility of interest rate cuts in the latter half of the year (CBN Monetary Policy Report, February 2025). If this happens, borrowing costs for businesses and consumers will decrease, stimulating economic activity.

Other Economic Conditions.

1. Lower Tax Burdens: The government’s 2025 tax reforms aim to reduce corporate and individual tax burdens.

2. Sectoral Reforms: Economic reforms are improving productivity, particularly in oil and gas, agriculture, and manufacturing (Ministry of Industry, Trade, and Investment, January 2025).

3. Currency Volatility: The naira has shown some stability but remains vulnerable to external shocks.

4. Low Purchasing Power: Despite wage increases, the cost of living remains high.

Overall, Nigeria’s economy remains heavily dependent on oil and gas, with the expansion of production and refining capacity. The Dangote Refinery aims to reduce fuel import reliance, while the government is diversifying into renewable energy and agriculture. Despite modest GDP growth and reduced inflation projections for 2025, Nigeria still faces significant economic challenges.

Job creation, infrastructure development, and inflation reduction will shape the economy’s future. However, long-term stability will depend on sustained reforms, investments, and sound policies. With increased government spending, monitoring fund allocation is crucial, as Nigeria’s future and economic success relies also on effective policy execution and fiscal discipline. Therefore, staying informed, developing relevant skills, and adopting strong financial planning will be key to navigating these changes.

…… Adaeze is an accounting and finance expert with Techno Oil Limited, and an ex-PwC Senior Consultant.