Nigeria’s economy is experiencing a robust growth trajectory in 2025, with projections indicating a real GDP increase to 3.5% from 3.3% in 2024, according to a World Bank report released in March 2025. Despite this positive outlook, driven by increased oil production and policy reforms, the nation continues to grapple with high inflation, which remains a significant hurdle for consumers and businesses, underscoring the complex dynamics of Africa’s largest economy.
The World Bank attributes Nigeria’s economic expansion to several factors, including the operational success of the Dangote Petroleum Refinery and the revitalization of state-owned refineries in Port Harcourt and Warri. These developments have reduced Nigeria’s reliance on imported fuel, enabling the country to emerge as a potential net exporter of refined petroleum products. The refinery’s output, exceeding domestic demand, has bolstered export revenues, contributing to foreign exchange reserves that surpassed $40 billion in early 2025. Additionally, reforms under President Bola Tinubu’s administration, such as the naira-for-crude policy and tax restructuring, have enhanced financial sector stability and attracted speculative capital inflows.
However, inflation, which dropped to 24.48% in January 2025 from 34.8% in December 2024, continues to strain household budgets. The World Bank notes that structural issues, including food inflation driven by insecurity, flooding, and high transportation costs, keep price pressures elevated. Food inflation, hovering around 40%, is exacerbated by Nigeria’s import dependence for grains and the naira’s volatility, despite recent stabilization at around ₦1,537 to the dollar. The Central Bank of Nigeria’s (CBN) contractionary monetary policy, with interest rates at a record 27.5%, aims to curb inflation but has increased borrowing costs, limiting consumer spending and business expansion.
The report highlights the naira’s improved competitiveness following its 2024 depreciation, which has strengthened Nigeria’s current account surplus and supported export growth. The CBN’s Electronic Foreign Exchange Matching System, introduced in late 2024, has enhanced transparency in forex markets, reducing speculation. However, the World Bank cautions that sustaining these gains requires avoiding artificial naira strengthening, which could erode export competitiveness and deter foreign direct investment, currently at a low $2 billion annually. The government’s 2025 budget of ₦54.2 trillion, approved in February, prioritizes infrastructure and social investments, but effective execution remains critical.
Despite the growth, inflationary pressures and high interest rates pose risks to equitable development. The urban poor, hit hardest by rising food and energy costs, face declining purchasing power, while small businesses struggle with elevated production costs. The World Bank projects inflation to average 31.81% in 2025 under a base-case scenario, with potential declines if domestic refining and agricultural productivity improve. Tinubu’s reforms, including a new minimum wage and student loan scheme, aim to mitigate these challenges, but public dissatisfaction persists, as evidenced by protests in 2024.
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