Economic Outline

Economic Indicators

Nigeria is Africa’s leading economy - in close competition with South Africa - but is highly dependent on oil and is therefore very vulnerable to fluctuations in crude oil prices and production. Between 2015 and 2022, Nigeria's growth slowed and real GDP per capita declined due to policy missteps, rising fiscal deficits, and external and domestic shocks. Distortive monetary and exchange rate policies eroded confidence, while costly subsidies and lower oil output worsened deficits. The economy was further hit by COVID-19, global price shocks, demonetisation in early 2023, and severe floods in 2022 and 2024. Growth slowed further from 3.3% in 2022 to 2.9% in 2023, mainly due to weak crude oil output (World Bank). Nevertheless, the growth rate for 2024 accelerated to 3.4%, driven by strong performance in financial and telecommunications services (data NBS). The World Bank projects GDP growth to reach 3.7% by 2026, alongside 2.1% population growth, underscoring the need for much higher per capita growth to improve living standards.

Since the May 2023 administration change, Nigeria has implemented bold reforms to restore macroeconomic stability. Key measures include removing the gasoline subsidy, unifying the exchange rate, tightening monetary policy, refocusing on price stability, and ending deficit monetisation. The Federal Government’s fiscal deficit narrowed from 5.3% of GDP in 2023 to an estimated 4.3% in 2024, driven by higher non-oil revenues following forex subsidy removal and reforms improving revenue transparency from state entities, supported by restrained spending. Fitch projects Nigeria’s budget deficit to widen to an average of 4.2% of GDP in 2025–2026, despite rising revenues. Spending will be pushed up by wage increases, social and security costs, debt servicing, and pre-election expenses. Revenue gains are expected from non-oil tax reforms, though political and implementation risks may slow progress. Public and publicly guaranteed debt was projected to increase from 49% of GDP in 2023 to 51% in 2024, mainly due to exchange rate unification impacting external debt valuation. Despite this rise, debt levels remain sustainable but vulnerable to shocks. Moreover, the debt has a relatively long average maturity of 10.9 years, with over half denominated in local currency. While new measures are aiding Nigeria's economic recovery, high inflation persists (estimated at 31.7% in 2024 by the World Bank), making it crucial for authorities to maintain tight monetary policy, exchange rate flexibility, and fiscal discipline. Despite the September petrol price hike, disinflation is expected in the coming years, with an average rate of 18.1% in 2026, driven by monetary tightening. To date, the main obstacles to development in Nigeria are the inappropriate energy supply, deficient transport infrastructures, inefficient judiciary system, widespread corruption, together with high inflation. The gap between the official value of the naira and its value on the black market is substantial and the banking system is fragilized by the deteriorating quality of assets.

Despite the country's dynamism, the real challenge for Nigeria is the risk of a demographic explosion: according to the United Nations, the population of Nigeria could reach 730 million inhabitants in 2100. Concerns regarding this potential boom are exacerbated by the fact that half of the inhabitants live below the poverty line; pandemics are rampant (HIV, tuberculosis), infant mortality is high and the country struggles with significant levels of inequalities. According to the World Bank, unemployment stood at 3% in 2024; however, a high proportion of the active workforce is under-employed or employed in the informal sector. The overall GDP per capita was estimated at USD 6,542 in 2024 by the IMF, but the poverty rate is expected to increase to 56% of the population by 2026 as labour incomes are not keeping pace with inflation.

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