• Nigeria's economy expanded by 3.9% in the first half of 2025.
• This growth was driven by improvements in the oil sector combined with resilient non-oil activity.
• Cautious optimism is supported by recent currency stability and signs that high inflation may be easing.

Nigeria's economy, Africa's largest by population, is exhibiting renewed dynamism. Real GDP growth accelerated to 3.9% in the first half of 2025, according to the National Bureau of Statistics (NBS), a marked improvement from the 2-3% estimated in the first quarter. This expansion is supported by a dual recovery: oil output reached a four-year high of 1.68 million barrels per day in the second quarter, reflecting successful efforts to curb theft, while the non-oil sector continues to show resilience.

Although Nigeria remains structurally reliant on oil for 80% of its exports, the sector's contribution to GDP was only 6% in the second quarter, highlighting the persistent, if slow, pivot toward other economic drivers. In nominal terms, the economy was valued at approximately 94 trillion nairas (USD 64.5 billion) in Q1 2025.

The economy's primary headwind, severe inflation, is showing tentative signs of moderation, though it remains a significant burden on purchasing power. While price increases hovered at 18.2% as for september 2025 according to the central bank (albeit food inflation still cited at 24%), projections suggest a potential slowdown by late 2025.

This outlook is supported by recent data showing a slight easing in food costs. Crucially, monetary policy reforms, particularly the 2023 unification of exchange rates, have begun to yield results. These measures helped stabilize the import market, and the currency has demonstrated relative stability, trading around 1,457 nairas per dollar as of October 28, 2025. This newfound stability is a key factor in the central bank's forecast for inflation to drop below 20% by year-end.

This macroeconomic rebalancing is occurring alongside deep-seated structural challenges. The economy's composition remains heavily weighted towards services (50% of nominal GDP in Q1) and agriculture (21% in Q2). Agriculture, which employs 40% of the workforce, has proven resilient despite security and climate concerns, though it receives only 5% of bank credit.

Industry (10% of GDP) remains stagnant, with manufacturing capacity utilisation at 50%, held back by unreliable electricity and logistical gaps. These structural inefficiencies contribute to high rates of unemployment (22.6%) and poverty (over 60%), underscoring the challenge of translating headline growth into widespread prosperity. The government's rising debt stock, at 144 trillion nairas (USD 99 billion) in early 2025, further complicates the fiscal space for necessary social and capital spending.

Looking ahead, the official forecast for 4-5% real growth by the end of 2025 appears achievable, contingent on continued stability in the oil-producing delta and improvements in agricultural output. The central bank's tight monetary policy, while successful in trimming budget shortfalls, has slowed private sector credit, impacting the small firms that drive non-oil GDP.

The key policy challenge is to pivot from stabilization to growth, channeling investment into infrastructure, digital services, and education. If Nigeria can leverage its growing financial inclusion via mobile payments and implement a cohesive plan for targeted investment, it stands a strong chance of converting its current recovery into sustainable, broad-based growth, finally unlocking the potential of its large, young population.

Idriss Linge