As Nigeria enters the second half of 2025, analysts are offering cautious optimism, pointing to improvements in macroeconomic indicators while warning that significant risks remain.
The first half of the year was marked by bold reforms, currency volatility, tight monetary policy, and early signs of macroeconomic adjustment.
While these moves were applauded by international partners like the International Monetary Fund (IMF) and the World Bank, they brought considerable hardship to households and businesses.
The naira came under intense pressure early in the year, briefly crossing N1,600/$ in February. However, it has since stabilised around the N1,500/$ range, thanks to enhanced foreign exchange liquidity, increased oil receipts, and tighter regulation of the parallel market.
The Central Bank of Nigeria (CBN) intervened heavily, selling $4.72 billion into the FX market amid capital outflows totaling $22.83 billion, largely due to global risk aversion and investor migration to safer assets.
Inflation has shown signs of retreat. Headline inflation slowed to 22.97 percent in May 2025, down from 23.71 percent in April, marking the second consecutive month of moderation.
This decline, according to the National Bureau of Statistics (NBS), reflects a broad slowdown across food, utilities, clothing, and health categories. Food inflation also dipped marginally to 21.14 percent, helped in part by statistical base effects following the recent rebasing of the Consumer Price Index (CPI).
These trends suggest the CBN’s tightening stance is beginning to yield results. The apex bank has held its benchmark interest rate at 27.5 percent for the second consecutive time this year, signaling a pause in its aggressive tightening cycle.
Economic growth has been modest. The last GDP report, covering Q4 and full-year 2024, showed GDP growth reaching a three-year high of 3.84 percent in Q4 and 3.4 percent for the full year.
However, the Nigerian economy is estimated to grow by 3.7 percent in the first half of 2025, buoyed by improved oil production and overall business conditions, according to the June Purchasing Manager Index (PMI) report by Stanbic IBTC.
“Insights from the monthly PMIs and crude oil production data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) suggest an economy that grew by an estimated 3.7 percent y/y in H1:25,” the report stated.
Tola Adeyemi, senior partner, Nigeria, KPMG West Africa, during the BusinessDay’s 13th CEO Forum, disclosed that the first half was a stabilisation phase, where the government tried to reset key economic levers.
“The cost has been high for consumers, but there’s potential for a more efficient economy if reforms are sustained.”
Similarly, Wale Edun, Finance Minister, stated that the reforms have been painful in the short term. However, the economy is gradually recovering from the shocks brought by the reforms, ensuring that respite is underway.
In the last two months, Nigeria’s inflation has slowed after rising and hitting nearly three-decade high last year. The naira has also remained steady despite global shocks and oil volatility that have weighed on emerging market currencies.
Business confidence is also on the high, surging for the sixth consecutive month this year, thanks to the easing inflationary pressures, according to a report by the Nigerian Economic Summit Group.
The NESG-Stanbic IBTC Business Confidence Monitor (BCM) disclosed that the Current Business Index rose to 113.6 points in June, up from 109.8 points in May 2025, as overall business conditions continue to improve on easing macroeconomic fundamentals.
These trajectories are expected to continue throughout the year as per projections by experts, further strengthening investor sentiment.
Edun assured investors and Nigerians alike that the government is committed to “staying the course” while sustaining and consolidating the progress made so far.
Read also: ‘Nigeria needs more rapid economic growth to lift its people out of poverty’
Expectations for the second half (H2)
Analysts at CSL Stockbrokers Research
Heading into the second half of the year, Nigeria’s growth outlook remains cautiously optimistic, as highlighted at the start of the year, supported by improving economic momentum and signs of moderating inflation.
“We forecast real GDP growth of 3.7 percent in 2025 (revised down from 3.9 percent) as structural headwinds, including constrained fiscal space and sluggish household consumption, may temper the recovery,” according to its Between stabilisation and strain: Nigeria’s H2 2025 outlook.
Nonetheless, high-frequency indicators, such as the CBN’s Purchasing Managers’ Index (PMI), continue to signal economic expansion.
Following the rebasing of the CPI, inflation projections have been adjusted downwards. “We expect inflation to average 22.9 percent in 2025, compared with our average inflation forecast of 29.5 percent at the start of the year.
Although real household consumption has declined over the last three years. The report noted that inflation is expected to moderate while the prices of goods and services are likely to remain sticky.
With disinflation and slower core inflation, CSL analysts anticipate the Monetary Policy Committee (MPC) to begin an easing cycle in Q4, reducing the policy rate by 100-150bps, provided global conditions are benign.
Analysts at Afrinvest
Nigeria’s central bank is expected to begin cutting interest rates in H2 following a year of aggressive monetary tightening, as inflation shows signs of sustained moderation and global interest rates lose steam, according to Afrinvest H1 2025 Macroeconomic Review and H2 Outlook.
The analysts project that the regulatory body could lower the interest rate by as much as 150 basis points (bps) to 26.0 percent by year-end.
“Barring any major shocks, we see headroom for up to a 150bps cut in the CBN’s benchmark rate in H2 2025, supported by less attractive rates in advanced markets and sustained disinflation locally,” the analyst said.
Despite the current downward momentum, Afrinvest is maintaining its 2025 average inflation forecast at 24.7 percent, citing expectations of a sharp year-end spike.
“Despite the wiping away of 10.3 percentage points in the headline inflation reading post-rebasing, our model suggests that the average rate for 2025 is not likely to deviate from our earlier projection materially,” they said.
“This is due to the estimated spike in the December 2025 headline rate by no less than 12.0 percentage points as a result of a very low base-year impact.”
Afrinvest also warned of a potential resurgence in food inflation in the H2, driven by rising insecurity in key agricultural regions and continued oil theft in the country’s oil-producing areas.
Analysts at CardinalStone Research
The local macroeconomic environment is expected to see some relief in the second half of 2025, with analysts projecting a moderation in headline inflation, underpinned by continued foreign exchange (FX) stability. The naira is forecasted to remain largely range-bound at N1,550–N1,635 per dollar.
Analysts at CardinalStone stated that Nigeria’s FX reserves is expected to rise to $41 billion by year-end, marginally higher than what was recorded in 2024, with the naira sustaining its gains
They added that the anticipated scale-up in operations by the Dangote Refinery, particularly its direct distribution of petrol and diesel to large-scale users using 4,000 CNG-powered tankers, is expected to ease logistics bottlenecks and support price stability.
In tandem, analysts foresee a potential policy rate cut of 50-100bps, driven by easing inflationary pressures and currency market stability.
Meanwhile, the GDP rebasing exercise is expected to see a shift in sectoral weights, with the services sector likely to expand significantly.
Altogether, the outlook for H2 2025 points to a cautiously optimistic recovery, with improving supply-side dynamics and policy easing providing a more stable economic footing.
