The World Bank has projected that Nigeria’s economy will grow by 3.6% in 2025, building on an estimated 3.4% expansion in 2024, as reforms begin to show signs of stabilising the macroeconomic environment.
The latest forecast, contained in the Spring 2025 edition of Africa’s Pulse, is more upbeat than the International Monetary Fund (IMF), which revised Nigeria’s 2025 growth downward to 3.0%.
The World Bank’s projection is premised on improved performance in non-oil sectors, particularly services such as financial services, telecommunications, and information technology, as well as easing inflationary pressures and improved business sentiment.
It expects growth to strengthen to 3.8% by 2027, assuming sustained reform implementation.
The report read, “Economic growth is expected to remain moderate in Nigeria. It is expected to increase from 3.4 per cent in 2024 to 3.6 per cent in 2025, and slightly increase to 3.8 per cent in 2026–27.
“The gradual recovery of the Nigerian economy along the forecast horizon is driven primarily by the service sector—specifically, finance, information and communications technology services, and transportation—and, to a lesser extent, a rebound in oil production that converges to its OPEC+ quota.”
Meanwhile, the IMF, in its April 2025 World Economic Outlook, offered a more cautious outlook, projecting 2.7% growth in 2026, citing weaker oil receipts and structural constraints.
World Bank sees inflation decline, IMF warns of Spike
Nigeria’s inflation trajectory remains a key point of divergence between the World Bank and the IMF.
- According to the World Bank, inflation is projected to ease to 22.1% in 2025, down from 26.6% in 2024, with further moderation to 15.9% by 2027.
- These projections are based on World Bank recalculations following the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) in January 2025.
- However, the IMF maintains a more pessimistic view, forecasting average inflation at 26.5% in 2025, rising sharply to 37.0% in 2026. It attributes this to structural inefficiencies, high exchange rate pass-through, and lingering cost pressures, despite reforms aimed at stabilising the economy.
- Inflation had eased temporarily in early 2025 following the rebasing exercise.
According to the NBS, headline inflation fell from 34.80% in December 2024 to 24.48% in January, before inching back up to 24.23% in March, reflecting persistent cost-of-living pressures, especially food inflation.
Naira among the weakest African currencies in 2024
The World Bank report highlighted the Naira as one of the weakest African currencies in 2024, having depreciated by over 40%, alongside the South Sudanese pound and Ethiopian birr. The depreciation was a result of exchange rate reforms that sought to unify and liberalise Nigeria’s multiple FX windows.
In response, the government pushed for a market-determined exchange rate regime, which has since helped improve FX liquidity and reduce naira volatility. The Bank credits these reforms for creating a more predictable macroeconomic environment, which is expected to support growth and dampen inflationary momentum over time.
On the external front, the World Bank expects Nigeria’s current account surplus to rise slightly from 9.2% of GDP in 2024 to 9.4% by 2026, driven by reduced imports, increased remittances, and improved oil export earnings. This contrasts sharply with the IMF’s forecast, which sees the surplus narrowing to 6.9% in 2025 and 5.2% in 2026, reflecting potential downside risks from global oil prices and external demand.
JP Morgan has warned that oil prices falling below Nigeria’s fiscal breakeven of $60 per barrel could reverse the current surplus into a deficit. Meanwhile, Fitch Ratings remains moderately optimistic, projecting a current account surplus averaging 3.3% of GDP over 2025–2026, supported by domestic refinery projects and energy sector reforms.
According to CBN data, Nigeria recorded a Balance of Payments surplus of $6.83 billion in 2024, its first in three years, supported by a goods trade surplus of $13.17 billion.
Eurobond market return highlights Nigeria’s rising borrowing costs
In December 2024, Nigeria returned to international debt markets, raising $2.2 billion through a Eurobond issuance—its first since 2022. The bond carried a 10.0% yield, significantly higher than the 8.54% average seen in the 2018 issuance, reflecting increased market risk and investor demand for higher returns amid global rate tightening.
The World Bank noted that higher bond yields are a region-wide trend, with countries like Cameroon also issuing debt at double-digit rates. Nigeria’s return to the Eurobond market signals renewed investor interest, but also underlines the rising cost of external borrowing amid fiscal pressures.
Reforms applauded, but risks remain
Both the World Bank and the IMF acknowledge Nigeria’s bold macroeconomic reforms, including the removal of fuel subsidies, the cessation of central bank deficit financing, and the unification of exchange rates.
- These steps have been praised for their long-term potential to restore fiscal sustainability and investor confidence.
- However, the IMF remains cautious, stressing that inflation remains entrenched and income per capita is stagnating.
- The Fund projects real per capita income to grow by just 0.6% in 2025, highlighting that while headline growth may recover, the impact on everyday Nigerians could remain limited.
