Nigeria’s Gross Domestic Product (GDP) is projected to record marginal GDP growth in Q1 2025, buoyed by the recovery of sectors previously hit by exchange rate volatility, steady performance in the non-oil sector, and sustained momentum from the ongoing banking sector recapitalization.
However, persistent structural weaknesses, including insecurity, inflationary pressures, and underperformance in the oil and agricultural sectors, continue to weigh on the overall economic outlook.
Industry experts project GDP growth within the range of 3.2% to 3.5%, as the impact of structural reforms gradually becomes evident in key macroeconomic indicators.
Expert Insights
MD of Arthur Steven Asset Management Ltd, Mr. Tunde Amolegbe, noted,
“You will likely see relatively robust growth driven primarily by the non-oil sector. Stabilizing energy prices and the FX rate are supportive of the transport and consumer goods sectors, while banks are consolidating post-recapitalization. The oil sector remains the laggard due to reduced production and weak global prices.”
Vice Chairman, Highcap Securities, Mr. David Adonri, added,
“GDP may have grown marginally in Q1 2025 due to increased domestic petroleum production and income adjustments from inflation. Some enterprises also began recovering from the naira floating shocks. However, insecurity continues to weigh heavily on rural agriculture and manufacturing.”
MD, Rostrum Investment & Securities Ltd, Mr. Olaitan S. Sunday, contextualized the trend using 2024 GDP data:
“Q1 2024: 2.98%, Q2: 2.51%, Q3: 2.54%, Q4: 3.46%. The rebound in Q4 2024 shows reform traction, especially in finance and ICT. That momentum continues in Q1 2025. Recapitalization is now in its second phase and lifting financial services. Telecoms are also growing steadily. But inflation, FX volatility, and insecurity remain headwinds.” In his words, “Taking these dynamics into account, a GDP growth range of 3.2% to 3.5% in Q1 2025 appears realistic, anchored once again by financial services, ICT, and trade”.
Key drivers of growth
- FX stabilization supports sector recovery
After months of grappling with sharp naira depreciation and inconsistent FX supply in mid-2023, the exchange rate has shown signs of stabilizing. This has eased some pressure on manufacturers and consumer-facing businesses that rely heavily on imports. Enterprises that were previously wounded by FX shocks have begun to rebound in early 2025, helping to underpin aggregate output.
- Bank recapitalization creates market ripples
The financial services sector continues to gain momentum, buoyed by the ongoing bank recapitalization exercise initiated by the Central Bank of Nigeria. As several Top-tier banks have successfully closed their initial capital raises, driving increased capital market activity and investor confidence. Financial services, already a strong performer in Q4 2024, are expected to anchor Q1 growth.
- Resilient non-oil sector activity
The non-oil sector remains the cornerstone of Nigeria’s economic resilience. Telecommunications continue to benefit from revised tariffs and deeper internet penetration. Demand for fintech solutions, digital infrastructure, and enterprise technology remains strong, particularly in urban centres. ICT, finance, and trade are expected to anchor Q1 growth, reflecting a shift toward service-driven GDP. This sectoral dynamism is providing critical support to GDP growth, even as traditional sectors lag behind.
Mixed headwinds and downside risks
Despite these positive signals, several downside risks persist.
Inflationary pressure: Persistent inflation continues to constrain household consumption and limit disposable income growth.
Insecurity in rural areas: Rural insecurity remains a major drag on agriculture, with widespread attacks on farming communities disrupting food production and logistics. This not only affects food supply but also diminishes the agriculture sector’s contribution to GDP.
Oil sector performance: The oil sector continues to struggle due to production challenges and reduced investment. Global oil price volatility adds another layer of uncertainty.
Nairametrics take
While Q1 2025 shows signs of resilience, the overall picture is one of cautious optimism. The GDP uptick will likely be marginal, driven by pockets of strength in finance, ICT, and trade, counterbalanced by weaknesses in oil, agriculture, and consumer demand.
If the momentum from FX stabilization and recapitalization outweighs inflationary drag and sectoral bottlenecks, growth could track slightly above the Q4 2024 figure of 3.46%.
However, should macro risks deepen especially in agriculture and manufacturing—the economy could post a marginal decline or flat growth.
This phase of Nigeria’s economic cycle is less about high growth numbers and more about rebalancing. As the economy gradually shifts from extractive dependence to service-led expansion, the focus will remain on the quality and sustainability of growth.
