What are your expectations for Nigeria’s economy in 2025? We hope that they are positive because indeed, so far, the signs are looking promising.
In the last quarter of 2024, Nigeria’s GDP grew by 3.84%, the highest in three years. For the full year, GDP expanded by 3.4%, surpassing forecasts. The services sector led growth with 79% contribution, while oil and gas accounted for 13%. Agriculture, however, lagged at just 1.2% due to low productivity and high transport costs.
You may then ask, can Nigeria keep up the momentum?
Our experts say that the outlook is positive, with GDP expected to grow by 3.4%. The Central Bank of Nigeria’s (CBN) Purchasing Managers Index (PMI) improved to 50.2 in January 2025 from 48.5 a year earlier, signaling growth.
Our experts also project that the services sector (especially telecoms and finance) will drive expansion. Banks benefit from high interest rates, while telecoms may see increased tariffs. However, agriculture and transport may continue to struggle due to insecurity and high fuel costs. Other hurdles include high borrowing costs, policy inconsistencies, and unreliable electricity.
You may ask again- did inflation really slow down in 2024? We think- not exactly. As evident, the National Bureau of Statistics (NBS) changed its measurement, showing a shift in consumer spending patterns. As of January 2025, inflation stood at 24.5%, with food inflation at 26.1%. While the reported rate appears lower, real returns remain weak, as inflation still outpaces the 22.1% average yield on 1-year treasury bills.
After a 69.4% depreciation in 2024, the Naira steadied at ₦1,492/USD in early 2025, thanks to CBN reforms such as the Electronic Foreign Exchange Matching System (EFEMS) and the Nigerian Foreign Exchange Code (FX Code), which improved market transparency and investor confidence.
This leads to the next question- will interest rates drop soon?
To combat inflation, it is common knowledge that the CBN raised interest rates in 2024, keeping the Monetary Policy Rate (MPR) at 27.5%. Our experts project that a rate cut may be considered later in 2025 if business lending slows.
Meanwhile, the CBN’s recapitalization plan aims to strengthen the financial sector, requiring banks to meet new capital thresholds:
How will banks meet new capital requirements? The CBN’s recapitalization plan mandates:
- ₦500 billion for international banks
- ₦200 billion for national banks
- ₦50 billion for regional and merchant banks
Larger banks are expected to comply, while smaller ones may face mergers or license downgrades. Despite challenges, recapitalization is set to enhance financial stability and attract foreign investment.
Conclusion
Nigeria’s economy made progress in 2024 despite inflationary pressures and policy challenges. With positive GDP growth, a stabilizing Naira, and banking reforms, there’s cautious optimism for 2025. However, infrastructure gaps, high costs, and limited access to credit remain obstacles. Sustaining growth requires policy consistency, agricultural support, and business-friendly reforms. With the right strategies, Nigeria can build a stronger, more resilient economy in the years ahead. To view the full report from our Research Team, please click here.
