Nigeria’s economy is expected to expand at a slower pace in the third quarter of 2025, with GDP growth projected to dip to 3.9 per cent from the 4.23 per cent recorded in Q2.
The moderation, according to Bismarck Rewane, managing director/CEO of Financial Derivatives Company (FDC), reflects the lagged impact of easing monetary policy, volatile oil prices, and shifting capital flows.
Speaking during the Alpha Morgan Economic Review online, Rewane noted that on average, the economy is expected to expand between 3 per cent and 3.6 per cent in 2025, broadly in line with the International Monetary Fund’s (IMF) forecast of 3.4 per cent.
“The economy is moving in the right direction, but only slowly,” Rewane said, stressing that a gap exists between headline GDP growth and improvements in indicators such as unemployment.
Inflation eases as naira holds firm
According to the National Bureau of Statistics (NBS), the headline inflation has declined for five consecutive months, reaching 20.12 per cent in August, driven partly by stable petrol prices and relative naira strength.
However, he warned that these gains are fragile. Any reversal in exchange rate appreciation or a fresh spike in energy costs could halt the disinflationary trend.
The Central Bank of Nigeria (CBN) recently cut the Monetary Policy Rate (MPR) to 27 per cent, with a further reduction to 26 per cent possible in November if naira stability persists.
“Lower interest rates are expected to boost consumer spending and borrowing, but may also trigger renewed inflationary pressures if demand outpaces supply,’ he said.
On the currency front, the naira has strengthened to about ₦1,515/$ – ₦1,560/$, narrowing the gap between the official and parallel markets. Yet, oil revenues remain the red flag, with any sharp drop in global oil prices likely to reignite volatility.
Fiscal revenues rise, but debt burden grows.
Government revenues have improved significantly, rising to N20.59 trillion between January and August 2025, up 41 per cent from the same period in 2024. Dollarised revenues also paint a more favourable picture, offering states and local governments greater fiscal space.
However, according to the Debt Management Office (DMO), public debt continues to climb, reaching N149 trillion in Q1 2025, up from N121 trillion a year earlier.
While recent rate cuts are expected to save the government about N747 billion annually in interest payments, fiscal pressures remain elevated.
Rewane warns that without stronger oil revenues and non-oil exports, fiscal sustainability could come under renewed strain.
Market Outlook
According to the CEO of FDC, foreign portfolio investment has surged, attracted by high yields and a strengthening naira.
Capital inflows rose to $5.64 billion, though long-term foreign direct investment remains modest. Going forward, he expects inflows to continue in the short term, particularly into equities and government securities, as global investors seek higher returns.
Sectoral growth in Q2 was driven by financial institutions, insurance, telecoms, transport, construction, and oil refining, while contractions were noted in real estate, trade, and manufacturing subsectors such as textiles and motor vehicle assembly.
“The stock market is projected to sustain its rally, though gains are expected to be concentrated in consumer goods, industrials, and telecoms rather than banking stocks.”
Rewane warned that bank earnings may weaken in the coming weeks as foreign exchange gains reverse and dividend support fades.