Some economists have projected 3.5% year-on-year (Y-0-Y) growth for Nigeria’s economy this year, representing a marginal improvement over the 3.2% growth recorded by the economy in 2024.
The projection, which is contained in the latest NESG-Stanbic IBTC Business Confidence Monitor report, highlights a positive outlook for the economy based on the analysts’ forecast of drop in the nation’s inflation rate in the second half of the year.
According to the authors of the report, the easing of inflationary pressures, along with the diminishing impact of key government policies such as foreign exchange (FX) liberalisation and fuel subsidy removal, is anticipated to boost economic activity.
They predicted: “A relatively lower headline inflation in H2:24 should support consumer spending, and business activity should also improve as the impact of the government’s two-flagship policies (FX liberalization and fuel subsidy removal) subside. Overall, we estimate the Nigerian economy to grow by 3.5% y/y in 2025 from an estimated 3.2% y/y in 2024.
“We expect headline inflation to remain sticky in 9M:25 but settle below 30.0% from September 2025 as high petrol cost gets smoothened out of the year-on-year headline inflation, barring any unexpected negative shocks to petrol prices. This expectation, in addition to our prognosis on the USD/NGN pair, fiscal deficits, and food supplies, informs our forecast that the headline inflation may average 30.5% y/y in 2025 and settle at 27.1% by December 2025. In our view, this could induce the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to switch to an accommodative monetary policy stance in late 2025”, the authors added
The report’s findings showed that the headline inflation rate trend, projected to hover around 30.5%, with a notable decline to 27.1% by December 2025 would be contingent on the absence of significant shocks to global or local petrol prices, improvements in FX stability (USD/NGN), reduced fiscal deficits, and a steady food supply chain.
In addition, the authors of the report recalled that the high FX rate of the Naira against global trading currencies escalated import costs, adversely affecting profitability and pricing strategies. Limited access to financing remained a persistent structural obstacle, further hindering business growth throughout December 2024.
They further predicted that the anticipated moderation in inflation rate could prompt the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) to adopt a more dovish stance towards the end of 2025, and that the potential easing of monetary policy is expected to further support economic growth by enhancing credit access and lowering borrowing costs for businesses.
The report stressed that the ongoing effects of FX liberalization and fuel subsidy removal, while initially disruptive, are setting the stage for a more sustainable economic recovery by addressing the lingering inefficiencies in Nigeria’s fiscal and monetary systems, promoting greater investor confidence and improving the country’s economic fundamentals.
