Nigeria’s economy is expected to accelerate, with real GDP growth projected to rise from 3.0% in 2024 to 3.6% in 2025, according to new forecasts by Afreximbank Trade Intelligence Solutions.
The expansion is attributed to increased fuel production at the Dangote Petroleum & Petrochemicals Refinery, declining inflation, and financial sector reforms aimed at stabilizing the banking system.
Analysts predict that between 2025 and 2029, Nigeria’s real GDP growth will average 4.0% annually, driven by exchange rate stability and improved household purchasing power. This sustained expansion is expected to trigger a recovery in private consumption and encourage greater investment across multiple sectors, reinforcing Nigeria’s position as Africa’s largest economy.
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Nigeria on Track to Become a Net Fuel Exporter
For decades, Nigeria, despite being a leading crude oil producer, has relied heavily on refined petroleum imports due to inadequate refining capacity. This imbalance has strained the economy, as fuel importation consumes a significant share of foreign reserves. However, the operational ramp-up of the Dangote refinery is set to change this narrative.
According to Afreximbank, output from the refinery is likely to exceed domestic fuel demand, positioning Nigeria as a net exporter of refined petroleum products for the first time. This transition could significantly improve the country’s trade balance and ease pressure on foreign exchange reserves by curbing fuel import bills.
The refining sector’s transformation presents a major economic breakthrough, intensifying competition among industry players. The Nigerian National Petroleum Company Limited (NNPCL), which has long dominated the market, now faces a new reality where privately owned refining firms such as Dangote’s refinery are poised to dictate domestic fuel pricing and supply. The competition has prompted NNPCL to expedite its ongoing rehabilitation of the Port Harcourt, Warri, and Kaduna refineries to avoid losing market share to the Dangote facility.
Additionally, international oil companies such as Shell, ExxonMobil, and TotalEnergies, which have traditionally focused on crude exports, may need to reassess their strategies in Nigeria. The shifting landscape raises the question of whether more IOCs will invest in refining or gradually exit Nigeria’s downstream sector, following the trend of divestments in upstream oil blocks.
Reforms Driving Business Confidence and Investment Growth
Afreximbank further noted that Nigeria’s reform momentum has strengthened investor confidence, particularly in the financial and energy sectors. The Central Bank of Nigeria (CBN) has increased capital requirements for banks, a move expected to enhance financial sector resilience, foster industry consolidation, and improve liquidity management. The move signals a broader effort by the government to create a more stable financial environment, thereby boosting both domestic and foreign investor confidence.
Similarly, the removal of fuel subsidies and foreign exchange policy adjustments have begun addressing chronic dollar shortages, making the business climate more predictable. These reforms, while painful in the short term due to inflationary pressures, are viewed as necessary steps to create a more competitive economic environment.
However, not all reforms have yielded immediate relief for businesses, according to the bank. Inflation remains a key concern, as price levels—though slowing—continue to affect consumer spending power. Additionally, the foreign exchange liberalization policy has yet to deliver full stability, with the naira still facing fluctuations. These factors highlight that while Nigeria’s economy is gaining traction, structural weaknesses remain.
Manufacturing and Healthcare Investment Surge
The bank also pointed out that Nigeria’s manufacturing sector is witnessing renewed investor interest, particularly in industrial hubs such as the country’s Export Processing Zones (EPZs). These zones, overseen by the Nigeria Export Processing Zones Authority (NEPZA), offer attractive incentives, including tax exemptions, duty-free imports, and capital repatriation. Investors see these EPZs as a strategic platform for increasing local production, reducing reliance on imports, and enhancing Nigeria’s competitiveness in regional and global trade.
In the healthcare sector, the government’s Presidential Initiative to Unlock the Healthcare Value Chain (PVAC) has spurred a wave of new investments. A landmark $1 billion memorandum of understanding (MoU) with Afreximbank, signed in February 2024, has already facilitated the establishment of over 70 pharmaceutical manufacturing firms. This development is particularly significant as Nigeria seeks to reduce dependence on imported drugs and medical supplies, a problem that was laid bare during the COVID-19 pandemic.
However, while there is growing optimism about economic growth, Afreximbank noted that security concerns, particularly oil theft and vandalism in the Niger Delta, pose challenges, as they continue to disrupt crude production and exports. Additionally, lingering inefficiencies in the power sector pose a constraint on industrial productivity, raising concerns about whether Nigeria can sustain its manufacturing ambitions.
Another critical factor is the geopolitical risk associated with global oil markets. While rising fuel exports will benefit Nigeria’s trade balance, global crude price volatility remains a concern. If oil prices slump, Nigeria’s revenues could take a hit, potentially stalling the economic growth trajectory projected by Afreximbank.
Nonetheless, with structural reforms underway, an expanding manufacturing base, and a refining sector on the brink of transformation, Nigeria’s economy appears poised for significant progress. Analysts have noted that if the government sustains its current reform drive and addresses critical infrastructure gaps, the country could solidify its position as a regional economic powerhouse in the coming years.