Even some optimistic predictions were surprised by Nigeria’s economy’s 4.2 percent year-over-year growth in the second quarter of 2025, which was its greatest in four years. However, experts stressed much work still needs to be done.
Researchers and policy analysts have praised the headline figure, which was provided by the National Bureau of Statistics (NBS), citing it as proof that reforms and increased oil production are taking hold. Behind the applause, though, comes a chorus of warnings about how resilient the rebound is in reality.
Wide-ranging applause
According to renowned economist and government advisor Bismarck Rewane, the outcome shows advancement, but it also reflects shifts in measurement just as much as in actual productivity.
The rebasing of the GDP and the rebuilding of the inflation basket, which have served to reflect contemporary economic reality and control inflation, are largely to blame for this, Rewane said.
His argument emphasizes the possibility that some of the lift is due to statistical updates rather than a general increase in output. To better reflect emerging sectors like fintech and digital services, which can give the impression of faster growth even when underlying activity is more modest, Nigeria’s GDP was recently rebased.
Policy Turning Point Seen by Analysts
According to London-based Capital Economics, which predicted in January that Nigeria’s tightening cycle was about to peak, the most recent data marks a sea change. The firm applauded the Central Bank of Nigeria’s (CBN) recent 50 basis point drop in the Monetary Policy Rate as “validation that the shift toward easing is under way.” The firm had anticipated a rate cut of roughly 400 basis points by year-end.
The local investment firm Afrinvest expressed a similar optimism, referring to the 4.2 percent expansion as “a potential inflection point” provided that oil output keeps improving and foreign exchange markets stay steady.
According to the EcoFin Agency, disinflation is giving a softer monetary policy more legitimacy. While cautioning that fiscal slack or external shocks, such a precipitous decline in oil prices, could swiftly undo gains, EcoFin stated that “the CBN has room to cautiously pivot towards growth support” as headline inflation eased to 20.1 percent in August and pressure on the naira subsided.
The private sector desires greater relief.
In the event that financial markets are broadly satisfied, the actual economy is somewhat more cautious.
While applauding the CBN’s modest rate drop, the Manufacturers Association of Nigeria (MAN) deemed it to be insufficient. “Borrowing costs must fall well below 10 percent for manufacturers to meaningfully scale operations,” according to Director-General Segun Ajayi-Kadir.
It was also the opinion of the Nigeria Employers’ Consultative Association (NECA). The continued high Cash Reserve Ratio (CRR), which maintains a sizable portion of banks’ deposits protected at the central bank, could stifle credit development and mitigate the effects of lower policy rates, its director general, Adewale Oyerinde, cautioned.
Small business advocates are also concerned. The Association of Small Business Owners’ president, Dr. Femi Egbesola, referred to the rate reduction as “a good start but insignificant” and urged targeted lending windows to provide access for micro and small businesses that are still unable to obtain affordable financing.
The structural headwinds are still present.
Besides monetary policy, economists point out ongoing structural issues.
Although the oil sector has recovered well, economist Stephen Iloba notes that “the future of Nigerian growth lies in ICT, real estate, and fintech—areas that require sustained infrastructure investment and regulatory clarity.”
Despite employing a significant portion of the population, agriculture is nonetheless susceptible to climate shocks and instability. According to a new academic study from Benue State, increased violence lowers crop and livestock output, threatening rural incomes and food security.
Gaps in infrastructure, such as energy and transportation logistics, also slow down the rate at which new borrowing or investment may result in increased output. Chioma Eze, head of research at AlphaCapital, stated that the multiplier effect of monetary easing will be limited if electricity and transportation bottlenecks are not addressed.
Investors Use Caution and Optimism in Balance
Although many portfolio managers are still hedged, they have responded favorably to the facts. Olumide Ogun, a West Africa strategist with a multinational investment bank, stated that the growth figure is positive, particularly when paired with moderate inflation control. “But maintaining it takes more than just a quarter of strong oil production; it requires consistent policy execution.”
Exchange-rate policy is especially important to foreign investors. “The naira has been comparatively stable, but it’s fragile,” said Marie Dubois of MacroVue Partners, a firm based in Geneva. “Any policy error that rekindles foreign exchange volatility could swiftly reverse capital inflows.”
A Careful Act of Balancing
Nigeria is in a stronger situation than it was a year ago, according to the majority of analysts, notwithstanding the warnings. The CBN’s cautious easing shows that it is confident that inflation is declining, and rising oil output, which is aided by increased security in the Niger Delta, provides fiscal leeway.
However, the foundation of the economy is still shaky. Significant reliance on oil earnings exposes governmental finances to fluctuations in world prices, while severe unemployment and poverty highlight the need for rapid and equitable growth.
Assuming oil output holds and foreign exchange markets stay stable, Afrinvest summarizes the consensus: “Our base case for Q3 growth is 3.9 to 4.4 percent.” However, rapid structural reforms and careful macromanagement are needed to convert headline GDP gains into widespread prosperity.
The Path Forward
Nigeria’s climb in the second quarter is therefore both a warning and a milestone. When oil flows improve and monetary policy starts to loosen, the facts demonstrate what can happen. It also emphasizes how much more has to be done, including stabilizing credit channels, reducing structural inflation, diversifying the economy away from oil, and increasing infrastructure spending.
The caution, like the enthusiasm, is sincere. “The numbers are good,” says one fund manager in Lagos. The execution is now even more important.
