If you look at the macroeconomic indicators, Nigeria’s economy is recovering. The GDP is projected to grow by 3.6 percent in 2025, inflation is expected to slow marginally by year-end, and the stock market posted decent returns in the first half of the year.
But ask the average Nigerian on the street, and the story is different. Food prices remain stubbornly high, fuel is unaffordable for many, and businesses are still struggling to access affordable credit.
“If inflation continues to erode savings, if businesses cannot access credit, and if the informal economy stays squeezed, then headline GDP numbers will matter little.”
So, what’s really going on?
Afrinvest’s latest outlook offers insight that challenges the optimism in official growth numbers. The Nigerian economy, it argues, is stuck between headline improvements and deep-rooted structural pain.
The first half of the year offered signs of progress, but they weren’t enough to ease pressure on households or businesses. And the second half may test the government’s resolve even more.
H1 2025: the good, the bad, and the uneven
In the first half of 2025, Nigeria benefitted from modest global tailwinds and reforms that have started to take shape, like exchange rate adjustments and subsidy removal. The Central Bank maintained tight monetary policy, and while inflation remained high, the pace of increase slowed slightly.
But the real economy felt little relief. Afrinvest notes that inflation was “sticky,” especially in food and energy prices. Wages haven’t kept up. Informal businesses continue to be squeezed by low demand and rising costs. The pain was especially sharp in agriculture and manufacturing, two of Nigeria’s largest labour-absorbing sectors, according to the National Bureau of Statistics (NBS).
Budget gaps, borrowing races
Government spending has not kept up with expectations. In fact, the fiscal gap is widening faster than previously feared. According to the report, Nigeria is projected to run a staggering ₦11.5 trillion net deficit in the second half of the year. That means the government will borrow heavily to stay afloat, mostly by issuing short-term debt like Treasury bills and OMO instruments.
This strategy has consequences. Short-term borrowing comes with high interest rates, which tightens liquidity for the private sector. In simpler terms, when the government borrows so much, it leaves less room for banks to lend to businesses. And what’s left comes at a steep cost.
Read also: What’s driving Nigeria’s commodity price volatility?
Equities shine, but for whom?
On paper, the Nigerian stock market did well in H1 2025. Afrinvest reports that the consumer goods index led sectoral performance, with investors piling into defensive stocks, companies that sell everyday essentials. But even this trend reflects caution, not confidence. Investors are seeking shelter in stable sectors while avoiding riskier plays like oil and gas or industrials.
Afrinvest expects a more muted performance in the second half. As interest rates remain high and inflation, though easing for two consecutive months, stays elevated, equities may lose some of their shine, especially if investors begin to doubt the government’s ability to sustain reforms.
What to expect in H2 2025
The second half of 2025 won’t be easy. Afrinvest flags five big challenges: Inflation will remain high, particularly in food and transport sectors; debt servicing will rise, eating into government revenue; the naira may face renewed pressure, especially if oil prices dip or capital inflows weaken; Private investment will remain cautious, as credit is expensive and policy direction still appears shaky, and capital markets may cool, especially if inflation expectations worsen.
However, the report also sees opportunities. Sectors like fintech, telecoms, and export-focused agriculture could grow if the government manages to maintain policy consistency and resolve infrastructure bottlenecks.
A Disconnect between policy and people
At the heart of the issue is a disconnect. Government reforms are being implemented, but the impact is taking too long to reach everyday Nigerians. Policies like fuel subsidy removal or exchange rate unification are praised in boardrooms and multilateral reports, but on the ground, they have translated into higher prices and deeper uncertainty.
Afrinvest stresses that real growth must be inclusive. If inflation continues to erode savings, if businesses cannot access credit, and if the informal economy stays squeezed, then headline GDP numbers will matter little.
A narrow window for political will
Nigeria is at a critical juncture. With elections far enough away, the government has space to push through deeper reforms without immediate political cost. But time is limited. H2 2025 could either consolidate fragile progress or see policy fatigue set in.
The decisions made over the next six months will determine whether Nigeria lays the foundation for sustainable growth or remains stuck in a cycle where macro gains never quite make it to market stalls, salary slips, or school fees.
As Afrinvest puts it, the outlook is not hopeless, but caution and discipline must replace quick fixes.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
