After a challenging 2024, Nigeria’s economy is gradually regaining its footing, with early signs of recovery emerging across key macroeconomic indicators in the first half of 2025 (H1-25). According to new economic assessments, improved business sentiment, easing inflation, and a relatively stable foreign exchange market have supported renewed momentum in economic activity.
The Composite Purchasing Managers’ Index (PMI), a key gauge of private sector activity, remained above the 50-point mark throughout H1-25—an indication of economic expansion. Analysts attribute this improvement to moderating cost pressures, a steadier naira, and recovering business confidence.
Inflation trends have also shifted favorably. Although still elevated, price growth has slowed in recent months, supported by reduced exchange rate pass-through and relatively stable energy costs. The rebasing of the Consumer Price Index (CPI) in January led to a technical drop in the reported inflation rate, further reinforcing the perception of a more stable macroeconomic environment.
On the currency front, the naira performed better than anticipated, trading within a relatively tight range despite persistent global headwinds. The currency’s resilience helped bolster investor sentiment and provided critical support for policy effectiveness.
Outlook: Cautious Optimism for H2-25
Heading into the second half of the year (H2-25), economic analysts are maintaining a cautiously optimistic outlook. Gross Domestic Product (GDP) growth is expected to remain firm as the economy adjusts to recent structural reforms.
With inflation likely to continue its downward trend, attention is turning to the Central Bank of Nigeria’s Monetary Policy Committee (MPC), which may begin to explore a gradual shift towards monetary easing. However, analysts caution that global uncertainties—including tighter financial conditions, geopolitical tensions, and trade disruptions—may limit the scope of any rate cuts.
Further complicating the outlook is Nigeria’s external debt position. The country faces significant foreign debt service obligations in H2-25, which could constrain the Central Bank’s ability to sustain the high level of foreign exchange interventions seen earlier in the year. If external pressures persist, the naira could gradually weaken toward NGN1,700/USD.
Oil Revenue Concerns and Fiscal Risks
On the fiscal side, subdued oil prices and underwhelming production levels are emerging as key risk factors. Analysts warn that these twin challenges could lead to a notable shortfall in oil revenue, potentially widening the fiscal deficit beyond the revised projection of NGN16.49 trillion—up from an earlier estimate of NGN12.33 trillion.
Markets Respond Positively
Despite these risks, Nigeria’s capital markets posted strong performance in H1-25. The equities market delivered impressive gains, buoyed by resilient corporate earnings, declining inflation, and strong domestic institutional participation. Analysts expect a selective upside in H2-25, driven by anticipated monetary easing and improving foreign exchange conditions.
Although a full resurgence of foreign portfolio inflows is unlikely in the near term, improving macroeconomic conditions may encourage cautious re-entry by foreign investors into high-quality, liquid stocks. A base-case scenario projects a 20.6% return on the NGX All-Share Index for the full year.
The fixed income market also saw a sharp drop in yields during H1-25, reflecting market expectations of a shift in monetary policy following the inflation decline. As the easing cycle progresses, yields on Treasury bills are expected to settle around 20.5%, while Federal Government bond yields could close the year at approximately 17.0%.
With inflation easing, FX markets holding steady, and investor sentiment improving, Nigeria’s economic outlook for the remainder of 2025 is cautiously optimistic. However, persistent global volatility and domestic fiscal vulnerabilities underscore the need for prudent policymaking and continued reforms to sustain momentum.
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