Experts have projected that Nigeria’s economy will witness some growth in 2025.
Speaking at the Nigeria Economic Outlook 2025 organized by FirstBank on Wednesday, Olusegun Alebiosu, CEO of FirstBank Group, highlighted that despite the difficulties experienced in 2024, there are indicators of potential growth in 2025.
He noted that improving government revenues and fiscal positions, such as a better revenue-to-debt service ratio at 68% and an increase in foreign reserve balances to over $40 billion, suggest that the country’s optimism may not be misplaced.
“Signs have begun to emerge that the reforms pursued by the Government are starting to yield the desired results. For example, the improving Government revenues and fiscal position (as suggested by the better revenue-to-debt service ratio at 68% and the growth in foreign reserve balances to over $40 billion) are indicators that our optimism as a people may not be in vain after all.”
Alebiosu also pointed to the stability in the foreign exchange market following the introduction of the electronic foreign exchange matching system in December 2024, the emergence of competition in the downstream sector leading to falling prices of premium motor spirit (PMS), and the reactivation of the Port Harcourt and Warri refineries as signs of positive change. He added that the projected GDP growth rate of 3.68% for 2025 by some experts is a likely outcome.
Growth Expected in the Energy Sector
Ugodre Obi-Chukwu, CEO of Nairametrics, noted that the energy sector saw high adoption rates last year, and with more adoptions expected in 2025, numerous business opportunities will arise.
He emphasized that the partial removal of electricity subsidies has made Nigerians more conscious of their electricity consumption, prioritizing energy efficiency. This shift is expected to drive the adoption of renewable energy products, particularly solar power, for both domestic and industrial uses.
“What you’re seeing now is people adopting more conscious means of conserving energy, even though we have energy issues in Nigeria, prices are also still higher. So we’re going to see an increase in the adoption of renewable energy products, especially solar power, whether it is the smaller ones for domestic use or the larger ones for industrial uses.”
Obi-Chukwu projected that energy transition will escalate in 2025, driven by global investment flows prioritizing sustainability. He highlighted that even telecommunications companies are now powering some of their base stations with renewable energy, indicating a broader trend towards energy transition due to climate change and economic reforms.
Strategic vs. Reactive Thinking
Bismarck Rewane, CEO of Financial Derivatives Company, predicted that 2025 will distinguish between strategic and reactive thinkers. He expects Nigeria’s economy to grow gradually, noting that the country is closer to equilibrium, meaning the impact of changes will be less severe than in 2024.
Following the stability of the currency in December 2024, Rewane believes the naira will appreciate moderately at the end of the first quarter of 2025.
However, he noted that the government’s target of bringing down inflation to 15% is just a tall dream.
“The 15% inflation target is very bullish and aspirational, and everybody is free to have aspiration. The reality is that we think inflation will reduce to between 25% and 27% in 2025”.
Economic challenges caused by fuel subsidy removal
Nigerians are grappling with significant economic challenges following the removal of fuel subsidies by President Bola Tinubu in 2023.
- The subsidy removal led to a nearly 500% increase in petrol prices within a year, causing a surge in food prices and pushing inflation to 34.6% by November 2024.
- The new administration’s liberalization of the foreign exchange market resulted in over a 100% depreciation of the domestic currency between October 2023 and October 2024. In response to rising inflation, the Central Bank of Nigeria (CBN) reduced the money supply and increased the interest rate from 15.5% in October 2023 to 27.50% in November 2024.
- These economic realities have led to job losses, with some international companies exiting the country and local businesses shutting down.
Despite these challenges, the International Monetary Fund (IMF) projects that Nigeria’s economy will grow by 3.2% in 2025, with inflation expected to drop to 25%.
What you should know
After a decline in the inflation rate between June and August 2024, inflation has been rising since then. It increased from 32.15% in August, to 34.6% in November 2024.
However, despite the inherent uncertainties in economic forecasting, Nigeria’s respectable growth rates of 3.6% in 2021, 3.3% in 2022, and 2.9% in 2023 suggest continued growth in 2025.
Growth in the country has been driven by the services sector, which expanded by 3.8% in the second quarter of 2024. Industry was the second biggest driver at 3.5%.
