Christopher Okpoko
According to the World Bank’s Global Economic Prospects report published last week, the global economy is facing another substantial headwind after a succession of adverse shocks in recent years (2020-2024). This is due to increased trade tensions and heightened policy uncertainty. This is contributing to a deterioration in prospects across most of the world’s economies.
For Emerging Markets and Developing Economies (EMDEs), the ability to narrow per capita income gaps with richer countries, boost job creation, and reduce extreme poverty remains insufficient. Downside risks to the outlook predominate, including an escalation of trade barriers, persistent policy uncertainty, rising geopolitical tensions, and an increased incidence of extreme climate events. Conversely, policy uncertainty and trade tensions may ease if major economies succeed in reaching lasting agreements that address ongoing trade disputes.
The challenging global context faced by EMDEs is compounded by the fact that foreign direct investment inflows into these economies have fallen to less than half of their peak level in 2008 and are likely to remain subdued. Global cooperation is key to restoring a more stable and transparent global trade environment and scaling up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Across EMDEs, domestic policy action is also critical to contain inflation risks, strengthen fiscal resilience through improved revenue mobilization, and reprioritize spending.
To unlock job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. In particular, countries in Fragile and Conflict Situations (FCS) face daunting development challenges that will require tailored domestic policy reforms, underpinned by well-coordinated multilateral support.
Global growth is slowing due to a substantial rise in trade barriers and the pervasive effects of an uncertain global policy environment. Growth is expected to weaken to 2.3 percent in 2025, with deceleration in most economies relative to last year. This would mark the slowest rate of global growth since 2008, aside from outright global recessions.
As the world continues to navigate the complex landscape of post-pandemic recovery, Nigeria stands at a critical juncture in its economic journey. Although, the World Bank forecasts Nigeria’s real GDP growth for 2025 at 3.6%, as we approach the end of the first half of 2025, a review of the performance of the economy in the first half of the year to analyze the key factors that may influence Nigeria’s economic outlook for the second half of 2025 is imperative for Africa’s most populous nation and one of its largest economies. (Sources: NBS, CBN, CEIC – CEIC Data, OPEC, IMF)
Author’s forecast
The Nigerian economy in the first half of 2025 has been a subject of keen interest, marked by a blend of challenges and opportunities. As one of Africa’s largest economies, Nigeria plays a pivotal role in the continent’s economic outlook. One of the most notable aspects of Nigeria’s economy in early 2025 is its response to inflationary pressures. The annual inflation rate saw a troubling rise, stemming from both global economic factors and internal dynamics. In the first quarter, inflation peaked at 24.23%, influenced by rising food prices and currency depreciation. The depreciating naira, exacerbated by fluctuations in the oil market and external debts, contributed to increased costs for goods and services, creating a significant burden for citizens.
In response, the Central Bank of Nigeria (CBN) adopted tighter monetary policies. This included increasing the benchmark interest rates to curb inflation, which was met with mixed reactions from various sectors. While some businesses expressed concerns over higher borrowing costs, the tightening measures aimed to stabilize the currency and rein in inflation. Analysts argue that such policies, while effective in the long term, could dampen short-term economic growth, particularly in the manufacturing and agricultural sectors which are crucial for job creation.
On a more positive note, Nigeria’s oil sector showed signs of recovery following a tumultuous few years. Global oil prices experienced a resurgence, driven by recovering demand and geopolitical tensions in other major producing countries. This revitalization increased revenue for the Nigerian government, which depends heavily on oil exports. The first half of 2025 showed a rise in oil production levels, uplifting the country’s Gross Domestic Product (GDP) to about 3.6 percent. Despite the positive news, the government faced criticism regarding the management of these revenues, with calls for greater transparency and accountability in spending.
Additionally, the non-oil sector illustrated resilience through diversification strategies. Agriculture, technology, and service industries expanded significantly, contributing to a more balanced economic structure. Particularly, the agricultural sector benefited from several government initiatives focused on enhancing food security and reducing import dependency. Investments in agri-tech solutions and sustainable farming practices have begun to yield results, positioning Nigeria as an emerging agricultural powerhouse.
Moreover, the fintech sector continued its upward trajectory, attracting substantial foreign investment. Startups in payments, lending, and blockchain technology have proliferated, leading to innovations that improve financial inclusion nationwide. Regulatory bodies have also begun to create frameworks that encourage healthy competition while safeguarding consumer interests. These advancements reflect a shift towards a more digitally-driven economy, which could provide significant growth potential if sustained.
However, the socio-political environment remains a challenge. Security issues, particularly in the northern regions of the country, persist, posing risks to economic stability and investor confidence.
Kidnapping and violence have disrupted agricultural activities, ensuring that food production remains inconsistent. The government has launched various military and community-based initiatives to combat these challenges, yet their effectiveness is still under scrutiny.
In summary, the first half of 2025 has been a period of mixed fortunes for Nigeria’s economy. While inflation and security concerns continue to pose risks, the recovery of the oil sector and the growth of non-oil industries present opportunities for sustainable development. The government’s ability to manage revenue effectively, respond to inflationary pressures, and address security issues will be crucial in determining the trajectory of Nigeria’s economy in the latter half of the year.
As the nation navigates this complex economic terrain, the focus must remain on fostering resilience, diversifying the economy, and implementing inclusive policies that benefit all citizens.
Therefore, the outlook for the second half of 2025 is a blend of challenges and prospects. The realization of the forecast 3.6% GDP growth will depend on government policies, external influences, industry performance, and socio-economic challenges.
Government Policies and Regulatory Framework
The Nigerian government plays a vital role in shaping the economic landscape, and its policies will significantly impact the forecast for the second half of 2025. Following a series of reforms initiated in recent years aimed at enhancing transparency and reducing corruption, policymakers are expected to continue implementing measures that promote foreign investment, encourage entrepreneurship, and stimulate local production.
One of the most notable initiatives is the Economic Recovery and Growth Plan (ERGP), which has focused on diversifying the economy. As global oil prices fluctuate, Nigeria’s reliance on crude oil revenue poses a risk. In response, the government has been boosting support for agriculture, technology, solid minerals, and manufacturing. By the second half of 2025, these sectors are anticipated to show significant growth, contributing to overall economic resilience.
Furthermore, regulatory frameworks around foreign direct investment (FDI) are being updated to attract more international players. The establishment of Special Economic Zones (SEZs) in various regions is designed to facilitate trade, stimulate local economies, and create jobs. By incentivizing businesses to set up operations in Nigeria, the government aims to enhance export capacity while providing robust employment opportunities for its burgeoning population.
External Economic Influences
Global economic trends will undoubtedly exert influence over Nigeria’s economic outlook in the latter half of 2025. Factors such as fluctuating oil prices, geopolitical tensions, and global supply chain disruptions can profoundly affect Nigeria’s economic stability.
As an OPEC member, Nigeria’s fiscal health is closely tied to oil prices. Projections indicate that while oil prices may stabilize after their volatile fluctuations in previous years, any significant drop could strain government revenues, leading to budgetary constraints and reduced public investment. On the other hand, a rise in oil prices could bolster revenues, allowing the government to invest further in infrastructure and social programs.
Geopolitical dynamics, including relations with major trading partners like China, the United States, and countries in Europe, will also shape Nigeria’s economic interactions. Trade agreements or tensions could either facilitate market access for Nigerian goods or create barriers, influencing overall export performance.
Industry Performance: Key Sectors
In the second half of 2025, certain key sectors are poised to drive Nigeria’s economic growth. Agriculture, technology, and renewable energy appear to be leading candidates for fostering resilience and sustainability.
- Agriculture: As a cornerstone of Nigeria’s economy, the agricultural sector is projected to make significant strides. Efforts towards improving food security through initiatives such as the Anchor Borrowers’ Programme and the National Agricultural Technology Innovation Policy are likely to enhance productivity. Investments in irrigation, mechanization, and research will further bolster output, reducing import dependency and increasing the agriculture sector’s contribution to GDP.
- Technology: The technology sector has witnessed remarkable growth in Nigeria, often termed the “Silicon Valley of Africa.” Startups in fintech, e-commerce, and digital services are expected to thrive, fueled by increased internet penetration and mobile accessibility. By the second half of 2025, the tech ecosystem is likely to attract substantial venture capital, facilitating innovation and creating jobs. Continued investments in digital infrastructure will be essential for supporting this growth trajectory.
- Renewable Energy: With growing concerns about climate change, there is a pressing need for sustainable energy solutions in Nigeria. The government has made strides towards increasing the share of renewable energy in its energy mix. Wind and solar energy projects are gaining momentum, and as these initiatives come to fruition, they could transform the power landscape, reduce energy costs, and promote environmentally friendly practices.
- Manufacturing: Revitalizing the manufacturing sector is crucial for reducing unemployment and enhancing self-sufficiency. Policies focusing on local production, particularly in textiles, food processing, and pharmaceuticals, are expected to gain traction. By leveraging local resources and labor, Nigeria can produce competitive goods while minimizing importation costs.
Socio-Economic Challenges
While there are promising indicators for Nigeria’s economic outlook in the second half of 2025, several socio-economic challenges remain. High unemployment rates, youth disenfranchisement, and inadequate infrastructure could hinder progress if not addressed effectively.
Unemployment, particularly among the youth, is a persistent issue confronting Nigeria. Despite economic growth, job creation has not kept pace with the influx of young individuals entering the job market. The government must implement targeted skill development programs and foster partnerships with the private sector to facilitate job creation in emerging industries.
Additionally, security issues, including insurgency in the northeast and banditry in the northwest, pose significant threats to economic stability. A secure environment is fundamental for attracting investment and fostering economic activities. By addressing these security challenges head-on, the government can create a conducive environment for businesses to thrive.
Infrastructure remains a pivotal factor in achieving sustainable economic growth. Poor roads, unreliable power supply, and inadequate transportation networks can stifle industrial productivity. Infrastructural investments are crucial for facilitating trade, connecting rural areas to urban markets, and enhancing overall economic efficiency.
Conclusion
In conclusion, Nigeria’s economic outlook for the second half of 2025 appears to be a balance of potential and challenges. The government’s commitment to reform, diversifying the economy, and promoting entrepreneurship will be crucial in navigating the complexities of the global economy.
While high-growth sectors such as agriculture, technology, and renewable energy represent development opportunities, addressing socio-economic challenges like unemployment and infrastructure deficits will be essential for harnessing this potential. By effectively managing both internal and external pressures, Nigeria can position itself as a resilient player on the African continent and beyond, paving the way for sustainable economic growth and improved living standards for its citizens.
