The Nigerian economy is expected to grow by 3.5% in 2025, showing a slight improvement from the projected 3.2% growth in 2024. This forecast, detailed in the latest NESG-Stanbic IBTC Business Confidence Monitor report, presents a positive outlook fueled by a projected decline in headline inflation during the second half of 2024.

The easing of inflationary pressures, coupled with the diminishing impact of key government policies such as foreign exchange liberalisation and the removal of fuel subsidies, is expected to enhance economic activity. According to the report, “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.”

The report also predicts that inflation will remain elevated in the first nine months of 2025 but will fall below 30% by September, assuming there are no major disruptions in petrol prices. The average inflation for 2025 is expected to be 30.5%, with a year-end figure of 27.1%. This decline in inflation could lead the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to adopt a more accommodative monetary policy stance by the end of 2025.

The easing of inflation, improvements in foreign exchange stability, reduced fiscal deficits, and steady food supplies are factors contributing to this positive economic growth projection. However, the report notes challenges such as the high exchange rate of the naira against global currencies, which escalated import costs, and limited access to financing, which continues to hinder business growth.

Despite these challenges, the anticipated moderation in inflation and the positive impact of fiscal and monetary reforms—particularly the FX liberalisation and fuel subsidy removal—are expected to support a more sustainable economic recovery. These reforms aim to address inefficiencies in Nigeria’s fiscal and monetary systems, fostering greater investor confidence and improving the country’s economic fundamentals.