The Nigerian economy has been projected to grow by 3.5% year-on-year (Y/Y) in 2025, an improvement from an estimated 3.2% year-on-year in 2024.
This is according to the most recent NESG-Stanbic IBTC Business Confidence Monitor report, written by Dr. Olusegun Omisakin, Muyiwa Oni, and Dr. Shakirudeen Taiwo.
The report attributes this positive outlook to a relatively lower headline inflation rate expected in the second half of 2024 (H2:24).
The easing inflationary pressure, coupled with the waning effects of the government’s flagship policies on foreign exchange (FX) liberalization and the removal of fuel subsidies, is expected to stimulate economic activity.
The authors wrote:
“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.”
Inflation Trends and Policy Outlook
The report forecasts that headline inflation will remain sticky in the first nine months of 2025 (9M:25) but could decline to below 30.0% by September 2025 as high petrol costs are phased out of year-on-year comparisons. This outlook is contingent on the absence of significant shocks to global or local petrol prices.
- Average inflation in 2025 is expected to hover around 30.5%, with a notable decline to 27.1% by December 2025. Factors influencing this projection include improvements in foreign exchange stability (USD/NGN), reduced fiscal deficits, and a steady food supply chain.
The report notes “Additionally, the high exchange rate of the local currency 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.”
- The anticipated moderation in inflation could prompt the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) to adopt a more accommodative stance towards the end of 2025. The potential easing of monetary policy is expected to further support economic growth by enhancing credit access and lowering borrowing costs for businesses.
Policy Adjustments and Economic Recovery
The report emphasizes that the ongoing effects of FX liberalization and fuel subsidy removal—while initially disruptive—are setting the stage for a more sustainable economic recovery.
These reforms aim to address longstanding inefficiencies in Nigeria’s fiscal and monetary systems, promoting greater investor confidence and improving the country’s economic fundamentals.
