IMF projects 3.2% growth for Nigeria, predicts inflation drop to 25% by 2025, 14% by 2029

• The International Monetary Fund has projected that Nigeria’s economy will record 3.2 per cent growth, while inflation will decline to 25 per cent in 2025 and further decline to 14 per cent in 2029
• It says the Sub-Sahara African economy will record declines due to slower growth in Nigeria and climate-induced weather shocks
• The forecast highlights the resilience of the Nigerian economy and GDP amid inflation, fuel price surge and naira depreciation

In its projection for 2025, the International Monetary Fund (IMF) sees Nigeria’s economy growing by 3.2 per cent, while inflation will slow down to 25 per cent and steady at 14 per cent by 2029.

It noted that for Nigeria, the Gross Domestic Product (GDP) growth projection for 2025 is a 0.2 per cent increase from its earlier projection in July, while 2024 GDP growth will remain at 2.9 per cent, which is a decline when compared to its July projection.

In a recent World Economic Outlook (WEO), the IMF said global economic growth in 2025 will not change from 3.2 per cent in 2024, which is a 0.1 per cent decline from its earlier prediction in July.

Sub-Sahara Africa’s economic growth to decline

The IMF said the Sub-Saharan Africa's (SSA) growth rate for 2025 will decline to 4.2 per cent as against its earlier projection in July.

It said the region’s economic slowdown is due to Nigeria’s slower economic growth, climate change-induced weather shock, supply chain constraints and a 26 per cent contraction in Sudan’s economy due to ongoing conflicts in the country.

The IMF said, “In sub-Saharan Africa, GDP growth is similarly projected to increase, from an estimated 3.6 per cent in 2023 to 4.2 per cent in 2025, as the adverse impacts of prior weather shocks abate and supply constraints gradually ease.

“Compared with that in April, the regional forecast is revised downward by 0.2 percentage points for 2024 and upward by 0.1 percentage points for 2025. Besides the ongoing conflict that has led to a 26 per cent contraction of the South Sudanese economy, the revision reflects slower growth in Nigeria, amid weaker-than-expected activity in the first half of the year.”

Nigeria’s economy, GDP resilient amid severe shocks

The Nigerian economy and GDP have withstood severe macroeconomic shocks, especially in the last 16 months.

The economy grew by 2.98 per cent and 3.19 per cent, respectively in the first and second quarters, while the GDP grew by 3.19 per cent in real terms in Q2 of 2024, which is higher than the 2.51 per cent recorded in the same quarter of 2023 and the 2.98 per cent recorded in Q1 2024.

The National Bureau of Statistics (NBS) said the Q2 2024 GDP performance was majorly driven by the services sector, which increased by 3.79 per cent and contributed 58.76 per cent to the total GDP. The non-oil sector contributed hugely to the total GDP recorded in the quarter with 94.30 per cent in real terms.

Inflation, fuel price surge, naira depreciation are factors

The surge in Nigeria’s inflation rate, fuel price hike and the continued depreciation of the naira have all impacted the country’s economy, especially in the last 16 months.

The inflation rate kept soaring and reached a 28-year high of 34.19 per cent in June 2024, a significant leap from the 22.4 per cent President Bola Tinubu’s administration met in May 2023. The rate, however, decelerated to 33.40 per cent in July after 19 months of upward trend, marking two consecutive months of decline in August at 32.15 per cent before increasing to 32.70 per cent in September 2024.

The rising cost of fuel is another factor impacting the economy. Fuel price jumped from an average of N238.11 in May 2023 to over N1,000 in October 2024. The Nigerian National Petroleum Corporation Limited (NNPCL) recently increased for the second time in two months, with prices now approximately N998 in Lagos from N885 and N1,030 in Abuja from N897, the inflation figures are far from abating.

The continued depreciation of the naira has become a common feature in the everyday conversations of Nigerians. The currency has continued to decline in value, especially since the naira was floated in June 2024, allowing for market forces to determine the currency’s value on a willing-buyer-willing-seller model.

The naira has since gone from N769.25/$ it traded on June 30, 2023, at the Investors and Exporters (I&E) window to N1,660.49/$ as of October 17, 2024. On the other hand, at the parallel market, the currency moved from N770/$ in June 2023 to N1,700$1 as of October 14, 2024.

The naira has maintained a downward trend, depreciating by 40 per cent in the first half (H1) of 2024 and judged the worst-performing currency in H1 2024. The depreciation has continued as the currency lost 43 per cent of its value and is one of the worst-performing currencies on the African continent, according to the latest Africa’s Pulse report by the World Bank.

Nigeria’s GDP growth rate from Obasanjo to Tinubu era (1999 to 2024)

Meanwhile, TheRadar reported that Nigeria’s GDP experienced changes with different government administrations due to certain policies adopted by such government

TheRadar highlights the performance of the GDP through different government administrations in Nigeria since the return to democracy from 1999 to 2024.