By Chinwendu Obienyi
Nigeria currently stands at an economic crossroad and this is due to the recent downgrade of the country’s Gross Domestic Product (GDP) numbers by the International Monetary Fund (IMF).
The global organisation in its biannual World Economic Outlook (WEO) report titled “A Critical Juncture amid Policy Shifts”, lowered the 2025 growth forecasts for the Global, Advanced Economies (AEs), and Emerging Markets & Developing Economies (EMDEs) by 5 basis points (bps) apiece to 2.8 per cent, 1.4 per cent, and 3.7 per cent respectively.
Similarly, the IMF trimmed Nigeria’s growth forecast for 2025 and 2026 to 3.0 per cent and 2.7 per cent respectively, from 3.2 per cent and 3.0 per cent previously.
Although the full April 2025 WEO report will be published on May 15, 2025 for properly contextualisation of the IMF’s assessment of the country’s risk status, the road ahead appears fraught with fiscal instability, deep-rooted structural issues, and an increasingly uncertain global environment.
Yet, amidst the gloom, a chorus of economists, analysts, and financial institutions believe that Nigeria can still chart a new course—if the right policy mix is urgently deployed.
Taking a look at the IMF’s outlook, it is important to understand that there are variables that may have necessitated the downgrade since the turn of the year. Firstly, the monthly crude oil production data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), reveal that Nigeria’s crude oil output (ex. condensate) which peaked at a three-year high of 1.54mbpd in January 2025 has steadily declined to 1.40mbpd at the end of March as against the budgeted baseline of 2.06mbpd for 2025.
This has raised fears of possible reminiscence of the 2024 crude production performance. Likewise, crude oil prices have contracted from an average of $79.99/barrel in January to $69.49/barrel in April – a far cry from the $75.00/barrel benchmark set in the budget – due to a supply glut occasioned by the external policies of the U.S. Combined, these misalignments have heightened the risk that the FG’s projected oil revenue of N19.6 trillion could derail by no less than 40.0 per cent in 2025.
Secondly, the recent surge in Nigeria’s debt profile has the potential to derail growth momentum, especially if the proceeds are largely deployed to non-CAPEX activities. In nine months of 2024, Nigeria spent N8.9 trillion on debt servicing (budgeted pro-rata: N6.2 trillion), driven by the surge in debt profile from N97.3 trillion at the end of 2023 to N144.7 trillion in 2024.
The debt servicing amount represents 58.3 per cent of total revenue in the period, hence, limiting the resources available to drive recurrent and CAPEX investment. This underscores why the debt profile grew 48.7 per cent in one year to N144.7 trillion while real GDP growth was capped at 3.4 per cent.
Similarly, compared to the preceding two years, the Naira has been relatively stable in 2025, shedding just 4.0 per cent against the dollar to trade at N1,602.30/$ as of 23 April 2025. Although it appreciated by 0.2 per cent on Friday to close at N1,699.55/$1, the relative stability has been largely supported by the Central Bank of Nigeria (CBN)’s frequent interventions to bridge liquidity shortfall.
However, the capacity to sustain the intervention by the apex bank is missing some of the required firepower, given the weak inflows from two of the major FX accretion sources – crude oil sales and portfolio investment flows (which was down 51.9 per cent quarter-on-quarter in Q3 2024 to $1.3 billion). Owing to this, FX reserves have fallen from $40.9 billion at the start of 2025 to $37.8 billion due to a mismatch between drawdown and inflow size.
Experts react
Although the IMF commended Nigeria’s bold economic reforms, it maintained that this is yet to translate to benefits to all Nigerians as poverty and food insecurity remain high.
On the back of this, several analysts who spoke to Daily Sun, whilst acknowledging the growing external risks cited by the IMF, called on the government as well as authorities to adopt a holistic reform agenda rooted in fiscal discipline, efficient public spending and regulatory clarity.
Founder, Cowry Asset Management, Johnson Chukwu, concurs that Nigeria’s challenges are significant but not insurmountable. He advocated for long-term structural reforms to correct systemic inefficiencies and reposition the economy for inclusive growth.
“Nigeria must address deeper structural weaknesses in productivity, revenue generation, and human capital development. We must diversify away from its oil dependence, improve its tax collection framework, and aggressively invest in sectors like manufacturing, agriculture, and digital services”, Chukwu said.
He also echoes the IMF’s call for a more predictable and rules-based trade environment, which he believes will stabilize currency markets and attract foreign direct investment.
“This is not a time for half-measures,” he cautioned. “We need to marry international cooperation with bold domestic reforms to ensure economic resilience.”
While structural reforms are undoubtedly essential, Chief Economist and Partner, SPM Professional, Paul Alaje argued that Nigeria also needs immediate tactical policy shifts to stem the current tide.
Alaje said, “The country is rapidly running out of time to adjust its monetary and fiscal levers. With the IMF forecasting continued inflationary pressure and a shrinking GDP, we must act decisively now because Nigeria needs to rethink its approach to interest rates (MPR), exchange rate policies, and public expenditure.”
He also called for increased transparency and efficiency in public spending, suggesting that revenue from the recent removal of fuel subsidies should be better managed to support infrastructure development and social safety nets.
For their part, analysts at Afrinvest, while offering a more hopeful, if conditional, outlook, contends that Nigeria’s economic decline is not inevitable.
Pointing to Argentina—a fellow emerging economy that has faced its own share of crises—as a case study in rapid recovery through disciplined economic management, they said, “Argentina’s GDP rose from $645.4 billion in 2023 to $683.5 billion in 2025 under the austere, reform-driven approach of President Javier Milei. If Nigeria’s executive leadership can adopt a similarly frugal and reform-minded strategy, we believe the country’s fortunes can be reversed.”
As a show of confidence in Nigeria’s latent potential, the firm maintains a base-case projection of 3.3 per cent GDP growth in 2025, diverging sharply from the IMF’s bleaker outlook.
Conclusion
What emerges from these varying perspectives is a broad consensus: Nigeria cannot afford to wait. A blend of structural reforms and tactical adjustments—executed with urgency and integrity—is the only viable path to reversing economic decline.
The IMF’s downgrade may serve as a wake-up call—but it does not have to be a death knell. If policymakers act decisively, Nigeria still has the opportunity to turn the tide and reclaim its position as Africa’s largest and most dynamic economy.