Nigeria’s economic growth could significantly slow down in 2025, with projections suggesting a possible dip to 0.8% growth, a rate last seen in 2021, according to a new report by Rand Merchant Bank (RMB). The report outlines several scenarios, with the most optimistic being a 3.8% GDP growth if crude oil prices remain around $72 per barrel. However, there are concerns that a potential drop in oil prices to as low as $40 per barrel could severely impact the economy, leading to a major slump in output and a fiscal balance ratio spike.
The study further emphasizes that the global oil market is facing heightened uncertainty due to geopolitical tensions and the unpredictability of global policies, especially the “America First” ideology under former U.S. President Donald Trump. While the likelihood of crude oil prices crashing to $40 per barrel is considered remote, RMB warns that if such a situation were to occur, Nigeria would face significant negative financial implications, particularly as the cost of producing a barrel exceeds the $40 price point.
In a more moderate scenario, where crude oil prices average around $60 per barrel, RMB anticipates Nigeria’s GDP growth could slow to 2.4%. Despite these challenges, Nigeria has experienced a relatively robust growth trajectory since early 2023, with quarterly growth rates steadily increasing. Last year’s growth reached 3.4%, surpassing initial expectations, and projections by the International Monetary Fund (IMF) estimate a more modest 3.2% growth for 2025.
Inflation is expected to ease in the year ahead, driven by the stabilization of the naira and petrol prices following the market reforms implemented by President Bola Tinubu’s administration. The removal of subsidies and the liberalization of the foreign exchange market in 2023 led to sharp inflationary spikes, but these impacts are expected to moderate. RMB forecasts that inflation may slow, with the Federal Government targeting a 15% inflation rate for the year.
The outlook for Nigeria’s currency, the naira, remains cautious. The naira depreciated significantly in 2024, losing over 42% of its value, but is expected to stabilize this year. While mild depreciation is projected for the naira and other African currencies, the RMB anticipates that a stronger U.S. dollar may have reached its peak, which could provide some relief to African economies, including Nigeria. The country’s recent foreign exchange reforms have contributed to improved portfolio inflows, despite the naira’s volatility.
Source: THE GUARDIAN