By Chinwendu Obienyi
After a stormy first half dominated by inflationary spikes, currency volatility and bold but painful policy reforms, a sense of cautious optimism is emerging among economists, policymakers and business leaders, who believe Nigeria is poised for a modest economic rebound accentuated by stabilising macroeconomic indicators.
Early signs of recovery like the stabilising naira, easing inflation, and renewed investor interest suggest that the worst may be over. But deep-rooted structural weaknesses and lingering social strains mean the road ahead is anything but smooth.
Inflation is currently at 22.97 per cent but oil revenues lag behind projections, and fiscal space continues to narrow. As global growth slows and domestic risks linger, the question now is whether Nigeria can sustain momentum or whether its recovery risks losing steam just as reforms begin to bite.
But before looking at the reforms, there is a necessity to see how the economy performed in the first half (H1) of 2025.
Inflation cools amid elevated prices
One of the most encouraging signals came in May when Nigeria’s headline inflation slowed for the third consecutive month, easing to 22.97 per cent year-on-year (y/y) from 24.5 per cent y/y. So far in 2025, inflation has averaged 23.7 per cent, aided by the National Bureau of Statistics’ revised Consumer Price Index (CPI) methodology.
Month-on-month, inflation dropped to 1.58 per cent from a spike of 10.71 per cent earlier in the year. Food inflation fell to 21.14 per cent y/y in May (from 26.1% in January), while core inflation eased marginally to 22.6% y/y from 22.28 per cent. This moderation reflects naira stability and reduced energy and transport cost pressures.
The Central Bank of Nigeria (CBN), under Governor Olayemi Cardoso, credited its tight monetary stance for helping tame inflation. At its last meeting, the Monetary Policy Committee (MPC) voted to hold the benchmark interest rate at 27.5 per cent, citing progress in curbing food inflation and improved security in farming areas.
However, most Nigerians have yet to feel the relief. The IMF’s latest Article IV Consultation echoed this sentiment, stating that while macro indicators are improving, living standards remain under pressure. The Fund called for greater investment in infrastructure, agriculture, and social services to lift the real economy and reduce widespread poverty.
Currency volatility eases, naira stabilises
Nigeria’s foreign exchange (FX) market reforms, especially the unification of rates and improved transparency, appear to be yielding results. As of June 30, the naira appreciated by 4 per cent, closing at N1,526/$1 from N1,586.15/$1 recorded in May 2025.
Although the official-parallel market spread remains narrow (YTD average: 2.6 per cent), a sharp improvement from previous years, without reforms and strategic interventions by the CBN, the naira could have plunged beyond N1,700/$1, analysts warn.
The stability has been underpinned by stronger external reserves, remittance inflows, tighter monetary policy, and renewed coordination between the CBN and Ministry of Finance, which launched targeted policies to attract diaspora dollars and foreign portfolio investment.
According to Cardoso, Nigeria was prepared during the period of heightened uncertainty as it ensured that the naira depreciation was modest. He said, “In my view, this was a reflection of a lot of the measures that we had taken prior to this time to stabilize our economy. I dare say that if those actions had not been taken when they were, the results would have been disastrous for us. So it is a good thing that we started these reforms early, and that we stayed the course to the point where we built buffers which are able to withstand shocks that came in and that really sort of dovetails into the issue of reserves”.
Manufacturers, banks tread on recovery path
After a bruising H1 marked by shrinking margins and FX losses, the country’s manufacturers and banks are beginning to recalibrate for better performance in H2.
Specifically, the Manufacturers Association of Nigeria (MAN) reported in June that capacity utilisation improved slightly to 52 per cent, buoyed by improved access to raw materials and a relative drop in energy costs.
Meanwhile, the banking sector, which saw sharp profit volatility due to foreign exchange losses and higher impairment charges in the first quarter, is beginning to adapt to the new macro regime. Banks like GTCO and Zenith have restructured balance sheets and adjusted lending models to focus on dollar-earning sectors such as oil and gas, agriculture, and export manufacturing.
The recent resumption of targeted intervention funds by the Bank of Industry (BoI) and the Development Bank of Nigeria (DBN) is also expected to improve liquidity and support SMEs in the months ahead.
Fiscal reforms advance amid persistent debt pressure
President Bola Tinubu administration’s reform agenda which is anchored on subsidy removal, FX unification and enhanced revenue generation has met with mixed results. While fuel subsidy savings have reduced fiscal leakages, government spending pressures have increased due to security challenges, wage demands, and infrastructure obligations.
The recently proposed 2025 budget of N54.99 trillion is expected to address critical gaps in defence, power, and food security. However, critics warn that Nigeria’s rising debt service burden, projected to exceed 70 per cent of total revenue in 2025 could crowd out critical capital expenditure. Similarly, Tinubu has requested approval from the National Assembly to secure $21.5 billion and ¥15 billion in external loans.
However, analysts have warned that the proposed borrowing plan could push Nigeria’s public debt beyond sustainable levels and further expose the economy to exchange rate risks. The Minister of Finance, Wale Edun, insists that government borrowing is within sustainable limits and that the administration is committed to implementing cost-saving reforms through digital revenue collection, tax harmonisation, and the expansion of the formal economy.
“We are laying the foundation for inclusive and sustainable growth,” Edun said at a recent investment forum in London. “Yes, there are short-term pains, but Nigeria will emerge stronger.”
Private sector and consumers waiting for relief
Consumer confidence remains fragile. With disposable incomes squeezed by high prices and utility costs, businesses in retail, tech, and real estate continue to report tepid demand. Mobile money operators have seen a slowdown in transaction volumes, and real estate developers are postponing new projects.
However, there are signs that the worst may be over. Fast-moving consumer goods companies like Nestlé and Flour Mills have reported slight upticks in Q2 sales, while new mall projects in Lagos and Abuja are attracting local and foreign interest.
The tech sector, previously rocked by layoffs and funding drought, has shown resilience with fresh capital injections into fintech, healthtech, and logistics startups. Ventures Platform and TLcom Capital both closed new funding rounds in May, with a renewed focus on export-oriented innovation.
Experts’ views
The National Bureau of Statistics (NBS) is expected to release Q1 2025 GDP data in August. Economists have projected a 2.8 per cent year-on-year growth, driven by modest rebounds in agriculture, trade, and oil output. Nigeria’s daily oil production has inched up to 1.45 million barrels per day, helped by improved security and investments in modular refineries.
Still, uncertainty remains. Global oil prices are volatile, global interest rates remain elevated, and domestic political pressures could derail reforms. Already, insecurity in the North-West and South-East continues to strain public confidence.
Citing these developments, Afrinvest in its report titled; H1’25 Macroeconomic Review and H2’25 outlook: Beyond Silver Linings; Statistical Gains, Social Strains, said whilst Nigeria is making progress on several statistical metrics that appeal to international institutions, the most pressing issues for its citizens which is inflation and insecurity remain troubling.
“We think that the authorities need to look beyond statistical silver linings as only statistical gains that translate to reducing social strains enhance citizens welfare”, they said.
Head, Equity Research at Stanbic IBTC, Muyiwa Oni, said, “Given that inflation is expected to remain softer compared to the 2024 average, interest rates are likely to be lower this year and next. We expect a 150–200 basis point rate cut in 2025 and a further 200–250 basis points cut in 2026.”
Oni added that the combination of structural reforms, the removal of protectionist policies, and the subsiding impact of past reform shocks would help support Nigeria’s medium-term growth outlook.
For their part, analysts at Cordros Research said, “With the commencement of H2 2025, we continue to adopt a cautiously optimistic stance. GDP growth is expected to remain robust as economic strains induced by the reforms continue to ease”.
Final words
Nigeria’s economic path in H2 2025 will depend on the government’s ability to deliver on reform promises, manage debt wisely, and translate macro gains into meaningful change for citizens.
The optimism of early 2025 must now be matched by institutional follow-through, political will, and real-economy interventions. For now, households, businesses, and investors continue to watch and wait, hoping the country finally breaks free from a history of missed opportunities and enters a phase of sustained growth and stability.