Nigeria, often described as a nation of immense potential, continues to navigate a complex economic landscape.
As we move into the second half of 2025, a recent ‘H2 2025 Outlook’ report from CSL Stockbrokers offers a nuanced perspective, highlighting the nation’s inherent resilience while charting a cautious path towards sustainable prosperity.
This analysis delves beyond mere statistics, seeking to unpack the underlying dynamics that will shape Nigeria’s economic narrative in the coming months.
Economic Growth: A Cautiously Optimistic Path
Nigeria’s growth outlook, while remaining cautiously optimistic, has seen a slight moderation in momentum. CSL Stockbrokers now forecasts real GDP growth of 3.7% in 2025, a slight downward revision from an earlier projection of 3.9%.
This adjustment reflects the persistent structural headwinds facing the economy, notably constrained fiscal space and sluggish household consumption. The rigidity in prices of goods and services continues to temper overall demand.
Nonetheless, the fundamental narrative of gradual recovery remains intact. High-frequency indicators, such as the Central Bank of Nigeria’s (CBN) Purchasing Managers’ Index (PMI), continue to signal economic expansion.
From a production-based perspective, the oil sector is anticipated to provide some support, with crude oil production (inclusive of condensates) projected to average 1.66 million barrels per day (mbpd) in 2025, an increase from 1.56 mbpd in 2024.
Beyond oil, non-oil sectors, particularly agriculture and telecoms, are expected to remain key drivers of growth. The second half of the year should see agricultural output benefit from the main harvest season and ongoing government initiatives aimed at enhancing productivity.
Similarly, sustained expansion in the telecoms and digital services segments, fuelled by robust demand and infrastructure investment, is poised to drive momentum in the services sector. However, we acknowledge that growth in these vital sectors could still be tempered by structural bottlenecks, including insecurity in key food-producing regions, persistent price pressures weighing on consumer demand, and elevated interest rates constraining access to finance.
Navigating Inflationary Pressures: A Delicate Balance
Inflation remains a critical concern, though CSL anticipates a continued disinflationary trend. Following the rebasing of the Consumer Price Index (CPI), inflation is now forecast to average around 22.9% in 2025, a significant adjustment from the initial projection of 29.5%.
This expected downward trajectory is primarily driven by several key factors: a favourable base-year effect, the primary harvest season aiding food inflation, moderating energy prices, and relatively improved exchange rate stability compared to the volatility experienced in 2024, which should help anchor core inflation. We anticipate a stronger disinflationary trend from August, largely on account of base effects from last year’s fuel price hikes.
Despite this optimistic outlook, we recognise that the path to lower inflation is not without emerging upside risks. One of our immediate concerns is the growing threat of widespread flooding across key agricultural belts, particularly in the North. Such floods could damage crops, disrupt harvesting activities, and drive up logistics costs, thereby exerting upward pressure on food prices.
Compounding this are persistent security challenges, especially renewed outbreaks of herder-farmer clashes in Benue State, a major food-producing area.
Furthermore, potential statistical distortions stemming from the CPI rebasing methodology could emerge in the December reading; our estimates suggest that if monthly inflation rates of around 1.5% are sustained through H2, headline inflation could end the year at approximately 35% year-on-year, potentially reaching as high as 39% in a more adverse scenario of 2.0% monthly acceleration. We note that a year-end inflation figure below 30% is only likely if the National Bureau of Statistics (NBS) implements adjustments to the recently rebased inflation series.
Monetary Policy: A Glimmer of Easing on the Horizon
The Monetary Policy Committee (MPC) of the CBN maintained a tight policy stance in the first half of the year, holding the benchmark interest rate steady at 27.5%. This decision was largely influenced by the need to ensure Naira stability, as inflation had yet to show a clear and sustained downward trend.
However, as CSL anticipates inflation to exhibit more consistent signs of moderation in the coming months, we believe a shift in the policy stance may be on the horizon.
We opine that the MPC will likely commence a monetary easing cycle in the fourth quarter, cutting its benchmark policy rate by about 100-150 basis points, provided global economic conditions remain supportive. Should the CBN begin easing rates in line with these expectations in Q4, it would send a strong signal of confidence in the disinflation path and progress toward a more orthodox inflation-targeting regime.
Moreover, such a move could significantly enhance the credibility of the apex bank among international investors, as it would likely be perceived as a measured response to improving macroeconomic fundamentals rather than politically motivated easing.
Nonetheless, risks to this outlook persist, including the resurgence of herder-farmer conflicts threatening food inflation and escalating global trade tensions that could reignite risk aversion and weigh on capital flows to emerging markets like Nigeria.
Fiscal Fortitude: Balancing Ambition and Reality
Nigeria’s fiscal backdrop remains fragile. While the 2025 budget targets the deficit narrowing to around 3.9% of GDP, aided by ambitious oil sector assumptions and tax reforms, CSL believes that the fiscal deficit could turn out significantly wider. Both oil and non-oil revenues are likely to disappoint, coupled with potential slippages on the expenditure side.
We highlight that so far this year, oil production has consistently underperformed relative to the budgeted target of 2.06 mbpd, and crude prices have remained below the official benchmark of $75 per barrel. Adding to the fiscal strain is the revelation that the state-owned oil company is remitting only about half of the savings from fuel subsidy removal to the federal government, significantly limiting revenue upside and fiscal flexibility.
To create fiscal room, authorities are more likely to cut growth-stimulating capital expenditure rather than recurrent spending, especially given the potential for social unrest if public welfare-related expenditures are trimmed as electioneering activities gather pace. This also reinforces our view that the tax reform bills may represent the final major reform push by the current administration. Given these constraints, we expect the government to ramp up its borrowing efforts in H2 2025, which could push total public debt to at least N160.6 trillion (c.50.2% of pre-rebased GDP) by year-end.
External Sector Dynamics: A Balancing Act
Our analysis indicates that the current account surplus is expected to contract sharply to 2.7% of GDP in 2025, down from 9.2% in 2024.
This moderation is primarily attributed to softer crude oil prices weighing on the trade balance, alongside persistent deficits in the services and primary income accounts. Oil prices averaged around 15% lower in H1 2025 compared to the same period in 2024, reinforcing our view that crude oil prices could average between US$60-70 per barrel this year.
Consequently, oil exports are projected to decline by 20.0% year-on-year to US$36.4 billion in 2025. While imports are estimated to compress due to reduced fuel imports as the Dangote Refinery ramps up production, this decline is likely to be slower than the contraction in exports.
The services account, dominated by travel and transportation, is expected to register a wider deficit, reflecting sustained demand for outbound travel. The income account is also anticipated to see increased outflows, spurred by higher payments to foreign portfolio investors following their growing participation in both debt and equity markets since last year, with cumulative YTD foreign participation in the equity market rising to 29% by the end of May.
Profit repatriations by foreign oil companies are also expected to deepen the income deficit. On a positive note, remittances are expected to remain resilient, rising from US$23.8 billion last year to US$25.3 billion in 2025, aiding the current account.
However, we note that a potential US bill to impose a 5% tax on remittances poses a future risk. The primary risk to the current account outlook remains crude oil prices and production; a fall below US$55 per barrel could swing the current account into a deficit of approximately 0.3% of GDP per barrel. Conversely, if oil prices trend higher, averaging around US$70 per barrel, this could add approximately 1 to 2 percentage points to our baseline projection for the current account surplus.
The Path to Sustainable Prosperity
CSL Stockbrokers’ ‘H2 2025 Outlook’ paints a picture of a Nigerian economy characterised by cautious optimism and inherent resilience. While structural headwinds, fiscal fragility, and external vulnerabilities persist, the underlying narrative points towards a gradual recovery.
The anticipated moderation in inflation, potential monetary easing, and continued growth in key non-oil sectors offer glimmers of hope and opportunities that we believe are worth exploring.