Nigeria on track for economic growth resurgence in 2025, say analysts 

• 2025 will bring about FX stability- Ebo
• FDC predicts Nigeria’s currency will begin to claw its way back from 2025

Onome Amuge

With 2025 upon us, Nigeria finds itself confronting an economic juncture riddled with obstacles such as soaring inflation, a volatile currency, inadequate infrastructure, and an array of policy somersaults.

As 2024 drew to a close, many Nigerians found themselves battered by the harsh economic realities of the year. This is as the country’s inflation rate continued its relentless climb, culminating in a near 30-year high of 34.6 per cent in the closing moments of the year. This figure, a significant increase from 33.9 per cent in the previous month and 29.90 per cent at the start of 2024 adds to the list of economic struggles faced by businesses and individuals alike.

As inflationary pressures continued to mount in 2024, the Central Bank of Nigeria (CBN) took yet another hawkish stance in its last meeting of the year, raising the Monetary Policy Rate (MPR) to 27.5 per cent from 27.25 per cent in an attempt to curb the surging prices. However, the rising cost of goods and services proved resistant to these measures, remaining stubbornly high throughout the year.

However, while the CBN’s actions had little effect on inflation, the foreign exchange markets witnessed a notable achievement as the Nigerian Naira was unified. However, efforts to strengthen the currency against the backdrop of inflationary pressures and a weak economy proved elusive.

Despite the overall economic hardships that plagued Nigeria in 2024, there was a bright spot in the third quarter, with the country’s economy registering a 3.46 per cent year-on-year growth, higher than in the preceding two quarters. While this growth was encouraging, it did not erase the fact that the services sector continued to be the primary driver of the economy, with other sectors producing mixed results, as highlighted by analysts.

However, amidst these hurdles, opportunities abound for investors, according to economic analysts who recently analysed the key factor shaping the 2025 investment outlook in Nigeria.

Ayodeji Ebo, managing director and Chief Business Officer of Optimus by Afrinvest, identified foreign exchange (FX) policy as a crucial macroeconomic factor that would shape the investment landscape in Nigeria in 2025.

According to Ebo, ensuring adequate liquidity and stability in the FX market would be pivotal to attracting and sustaining investment in the country.

He noted that the unpredictability of FX policy, coupled with the relative scarcity of hard currency, had been a major deterrent for both local and foreign investors in recent times.

Ebo highlighted that many publicly traded companies, particularly within the manufacturing and telecommunications sectors, suffered significant foreign exchange losses in 2024 due to the mismatch between the high demand for foreign currencies and the scarcity in the market. This ultimately resulted in adverse impacts on their costs, and ultimately, their bottom line.

Despite these challenges, Ebo expressed optimism that 2025 will bring about FX stability, which he expects will reverse the negative impact of FX losses on the affected companies. This stability, he believes, will pave the way for these companies to perform well in 2025, presenting lucrative investment opportunities to savvy investors.

In his analysis, the Optimus by Afrinvest MD projected that 2025 would bring about an improvement in policy stability, which he believes would have a positive impact on investors’ confidence and, subsequently, the broader economy.

Ebo, an experienced business and investment strategist noted that the frequent changes in policies in 2024 sent negative signals to investors and that the country should focus on maintaining a consistent and predictable policy environment. He also emphasised that if Nigeria’s FX policy remains stable, there will be a more favourable investment climate that will attract Foreign Portfolio Investors (FPIs), thereby driving up asset prices in the short to medium term.

Ebo further dwelled on the need for investors to consider factors beyond the current government when making investment decisions, particularly in light of the limitations of the proposed budget and its potential impact on the overall economy.

He noted that the government’s budget performance in 2024 had left a significant gap in capital expenditure. This shortfall, he warned, could hinder the investment climate if not addressed.

Ebo reflected on the lessons learned in 2024 amidst various macroeconomic headwinds, including high inflation and rising interest rates globally, while also considering the apparent resilience of risk assets such as equities and cryptocurrencies.

He observed that while central banks globally had tightened their monetary policies to curb inflation, several key stock indices in the US, like the Dow Jones and the S&P 500, had hit new highs, while risk assets like Bitcoin had also performed strongly.

Ebo confirmed that there was an increasing trend of investors adopting digital trading platforms, especially among younger investors, due to the ease of use, transparency, and convenience of trading on apps. He cited the growth in sign-ups on the Optimus app and investor app as evidence of this trend.

He also noted that younger investors are becoming more tech-savvy, and knowledgeable about technical analysis, and are increasingly applying their knowledge of cryptocurrency and FX trading to the stock market.

“So, we think that that will continue to improve. We feel the regulators also are providing that support and encouragement to us. What I think we need to add on top of that next year (2025) is providing data and investor education.

“When you look at the percentage, less than one per cent of the economy invests in the stock market. So there’s still a lot of opportunities in that space. But to understand the stock you are investing in Nigerian markets, you pay a lot to even assess that data. There’s a lot that needs to be done for us in terms of data provision to attract more people. But I can say that very clearly that it’s been very positive. The adoption has been very encouraging,” he added.

Ebo noted that volatility presents both risks and opportunities, and investors must remain vigilant and strategically adapt to the changing market conditions. He further advised investors to carefully time their entry and exit strategies to maximise gains, particularly when dealing with short-term investments. He also suggested that investors should consider maintaining a balanced portfolio, with both long-term and short-term investments, to mitigate risks and take advantage of potential opportunities.

Ebo stressed the importance of maintaining a long-term investment strategy, even during volatile market conditions. He highlighted the benefits of averaging down on long-term investments, allowing investors to buy more stocks at lower prices, potentially increasing their overall gains when the market recovers.

For short-term investments, Ebo stressed the need for investors to take profits when their investments reach significant gains. He noted that smart investors are constantly seeking out new opportunities and are not afraid to sell when the time is right.

Analysts at Financial Derivatives Company (FDC) Limited have also projected an optimistic outlook for Nigeria’s economy in 2025, forecasting a recovery in the value of the Naira and a robust growth rate in GDP.

After a turbulent year in 2024, FDC predicts that Nigeria’s currency will begin to claw its way back, reaching N1,550 against the US dollar by the end of 2025.

FDC predicts that as economic indicators begin to improve, the Naira, which currently trades at approximately N1,650 per dollar, will gain strength.

The firm also noted that, despite the currency’s current undervaluation, as reflected in the Purchasing Power Parity (PPP) value of N1,532 per dollar, the Naira could bounce back as economic conditions improve.

However, FDC warned that this expected Naira rebound could be counterbalanced by a potential decrease in non-oil foreign exchange inflows, such as remittances and Foreign Portfolio Investments (FPI).

FDC’s projections are based on several key economic assumptions that have been identified as critical to the recovery of Nigeria’s economy. These assumptions include a crude oil price of USD 70 per barrel, daily oil production of 1.4 million barrels (mbpd), gradual implementation of policy reforms, and modest inflows of foreign direct investment.

Despite acknowledging that 2025 may present its own set of challenges, Bismarck Rewane, head of the FDC Think Tank, and his team remain confident that the country’s economy will improve relative to 2024.

According to FDC analysts, disinflation, which is the slowing down of the rate of price increases, is projected to start in the second quarter of 2025. This, coupled with expected reductions in interest rates and improvements in exchange rate stability, is anticipated to boost business and consumer confidence in Nigeria.

Muda Yusuf, the chief executive of the Center for the Promotion of Private Enterprises (CPPE), also lent his voice to the chorus of economic optimism. In his assessment of Nigeria’s economic prospects for 2025, he said that he expects the economy to perform better than it did in 2024.

“One of the biggest problems we have in the current year has been foreign exchange. But over the last few months, we have seen some stability and some periodic intervention by the CBN. Hopefully, that will be sustained in the new year because our reserves have also improved. So, the forex outlook, which is very central to the problems that we have is looking a bit positive.

Yusuf pointed out the potential impact of the Dangote Refinery, which is expected to produce refined petroleum products locally and reduce the need for forex-dependent imports of those products. He also highlighted the role of IMTOs and Diaspora remittances in bringing in much-needed foreign currency, as well as the positive impact of the country’s 2 billion Euro bond, which is expected to strengthen its reserves once it is fully received.

The CPPE chief further highlighted the success of a $500 million domestic dollar bond, which was oversubscribed, demonstrating strong investor confidence in Nigeria’s economic prospects. He also noted the positive trend in oil production, which is expected to contribute to the country’s economic stability.

When taken together, Yusuf argued that these factors suggest a more positive outlook for Nigeria’s economy, especially in terms of its foreign exchange reserves. And, given that a strong forex market is often seen as a key indicator of economic health, he concluded that the country’s overall economic picture was looking up as well.

On a cautionary note, he stated: “The issue we need to worry about is how to manage our fiscal space in a way that it will not create macroeconomic issues for us in 2025. I’m talking about how we can manage our spending, reduce our deficit and reduce our debt exposure – that is borrowing either domestically or foreign. These are the potential risks for the macro economy in 2025.”

Despite the positive outlook for certain economic indicators, Yusuf admitted that longstanding challenges, like insecurity and power sector issues, remain pressing concerns.  According to him, these challenges, which have been ongoing for a considerable period, are unlikely to be resolved quickly, meaning the country may continue to experience them in 2025.