Nigeria’s economy has shown signs of cautious recovery and resilience in the first half of 2025, despite structural vulnerabilities, inflationary pressures, and security challenges continuing to influence the nation’s growth trajectory. This report is based on the August 2025 mid-year economic update by PwC Strategy& and incorporates data from the National Bureau of Statistics, the Central Bank of Nigeria, the Nigerian Economic Summit Group, and other reputable sources to provide an overview of Nigeria’s macroeconomic and fiscal performance.
According to the mid-year economic outlook report by Strategy&, the consulting arm of PwC, Nigeria’s nominal Gross Domestic Product (GDP) expanded to an estimated N372.8 trillion in early 2025, following the rebasing of the GDP base year to 2019, which reflects an improved representation of economic activity. Nonetheless, the report highlights that the nominal expansion masks persistent real-sector constraints and fiscal challenges that demand urgent policy attention.
Nigeria recorded a GDP growth rate of 3.13 per cent in the first quarter of 2025, up from 2.27 per cent in the same period of 2024. Key growth drivers included the Finance and Insurance sector, which grew by 15.03 per cent, buoyed by a robust banking sub-sector, higher interest earnings, and expanded digital financial transactions.
The ICT sector expanded by 7.40 per cent, supported by increased broadband penetration and national policies that facilitated digital adoption. The Construction sector grew by 6.21 per cent, reflecting significant government infrastructure investments alongside growing private housing and transport projects. Real estate also experienced growth of 4.61 per cent, attributed to rising urban rental demand, leasing income, and the expansion of office, retail, and logistics spaces.
Despite these gains, the analysis highlights structural weaknesses in Nigeria’s industrial base. The share of industry in GDP declined from 18.11 per cent in 2010-based GDP calculations to 16.03 per cent upon rebasing in 2019.
Traditional pillars such as oil and gas production and manufacturing remain below pre-pandemic levels due to operational disruptions, energy insecurity, foreign exchange constraints, and infrastructure bottlenecks. Manufacturing output suffered from delayed recovery efforts and high input costs, while construction activity slowed amid fiscal pressures and inflation.
Inflationary pressures persisted in the first half of 2025, albeit with a modest easing. The headline inflation rate fell slightly to 21.88 per cent in July 2025 from 22.22 per cent in June, a trend driven by base effects and improved foreign exchange stability following the Central Bank of Nigeria’s (CBN) forex market interventions. However, short-term inflation rose month-on-month to 1.99 per cent in July, indicating ongoing price pressures, especially in the food and transportation sectors.
The CBN maintained a tight monetary policy stance and kept the Monetary Policy Rate (MPR) steady at 27.5 per cent as of July 2025. The bank’s rigorous liquidity management and capital adequacy efforts aim to strike a balance between inflation control and maintaining credit availability to the productive sectors.
To support exchange rate stability and liquidity, the CBN injected $4.1 billion into the foreign exchange market in H1 2025—a massive increase of 215 per cent compared to the previous year’s $1.3 billion injection.
Official exchange rates appreciated by 1.79 per cent in July 2025 to ₦1,530.8/$, closing the gap with parallel market rates and fostering investor confidence. Additionally, new fintech-driven remittance channels, such as the Non-Resident Nigerian Ordinary Account (NRNOA) and Non-Resident Nigerian Investment Account (NRNIA), were launched to enhance diaspora inflows, further stabilising the foreign exchange market.
While Nigeria’s GDP rebasing improved fiscal ratios on paper—debt-to-GDP falling to 39.4 per cent in Q1 2025 from 52.13 per cent in Q1 2024—the realities of fiscal vulnerabilities persist. Total public debt rose 22.8 per cent year-over-year to ₦149.4 trillion, driven by fresh borrowing, higher interest costs, and depreciation of the naira against external debt valued in foreign currency. External debt constituted 47.3 per cent of the total public debt, rising by 26 per cent to ₦70.6 trillion, while domestic debt increased by 20 per cent to ₦78.8 trillion.
More concerning is the debt service-to-revenue ratio, which remained stubbornly high at 77.5 per cent in 2024 (compared to 76.8 per cent in 2023), severely limiting fiscal space for additional borrowing and public investment. The revenues-to-GDP ratio also remains disappointingly low at just 2.6 per cent, a level far below global averages, imperilling the government’s capacity to finance development and service obligations sustainably.
Recognising these challenges, Nigeria enacted four major tax reform laws in June 2025, with implementation slated for January 2026. These reforms unify tax administration under the Nigeria Revenue Service, harmonise multiple taxes into a streamlined code, and aim to broaden the non-oil revenue base by improving compliance and reducing business costs.
Noteworthy provisions include a minimum effective tax rate of 15 per cent for large companies, increased capital gains tax rates, enhanced investor tax credits, and modernised VAT administration, encouraging transparency and revenue growth.
Nigeria’s capital imports surged by 67.1 per cent year-on-year to $5.64 billion in Q1 2025 from $3.38 billion a year earlier.
However, the lion’s share, 92 per cent, of these inflows came from short-term portfolio investment (FPI), which grew by 150.8 per cent to $5.2 billion, driven largely by high yields on government securities, such as Treasury Bills and OMO bonds. In contrast, Foreign Direct Investment (FDI) increased marginally by only six per cent to $126.3 million, raising concerns about the quality and sustainability of foreign investment.
The Nigerian Stock Exchange (NGX) reflected this positive momentum with its All-Share Index (ASI) increasing by 43.1 per cent to 139,863 in July 2025, buoyed by strong performances in the consumer goods sector (+71.9%), banking sector (+49.3%), and insurance sector (+23.5%).
Market capitalisation correspondingly expanded by 34.2 per cent to ₦89.4 trillion. Ongoing banking sector recapitalisations, yield moderation in fixed income, and macroeconomic stabilisation efforts are expected to sustain the capital market’s progress in the second half of 2025.
Aggregate real household spending contracted slightly by 0.4 per cent to ₦24.8 trillion in 2024, despite nominal spending rising by 33 per cent to ₦237 trillion. This dichotomy reflects the persistent erosion of purchasing power amid inflationary pressures, particularly on essential goods and services such as housing, education, health, and transportation.
Cost-of-living pressures have intensified, driven by a 190 per cent increase in electricity tariffs for the highest band customers from 2023 to 2025, sharp hikes in transportation fares—airfares increased by 74 per cent, intercity bus fares by 98 per cent—and rising prices of food and utilities.
CBN surveys reveal that over 80 per cent of both households and businesses expect elevated inflation to persist over the next 3 to 6 months, fueled by high energy costs, exchange rate volatility, and supply chain constraints. Nonetheless, increasing confidence in monetary policy reforms has seen a slight rise in the proportion anticipating a deceleration of inflation by year-end.
Security challenges remain a profound concern. Reported killings increased by 70 per cent to 2,266 in H1 2025 compared to the same period in 2024, while kidnappings rose by 6 per cent to 1,538. Rising insurgency, banditry, farmer-herder conflicts, and abduction networks disrupt economic activities and pose significant risks to social cohesion and investor confidence. The report stresses the need for coordinated security reforms, community engagement, and socioeconomic support to stabilise affected regions.
Looking forward, Nigeria’s GDP is projected to grow modestly by 3.4 per cent in 2025, driven by increased crude oil production and continued strength in the Finance, ICT, Construction, and Real Estate sectors. Inflation is expected to moderate to 21.46 per cent, aided by monetary tightening and improved forex stability. The Central Bank of Nigeria is likely to maintain a cautious stance with elevated interest rates while continuing reforms to deepen financial markets and enhance liquidity.
The report underscores six strategic imperatives for government and businesses: strengthen fiscal sustainability through debt management and tax reforms; maintain disciplined monetary policy balancing inflation control and credit access; accelerate productivity-led growth via MSME support and infrastructure investments; deepen structural reforms to attract sustainable investments; expand social protection and human capital development; and proactively manage domestic and global risks, including geopolitical uncertainties and technological disruptions in AI and green finance.
