Nigeria’s economy grew at its fastest pace in three years in 2024, signalling that the painful economic reforms of the government are gradually yielding fruit and productivity is increasing.
Buoyed by the non-oil sector, the Gross Domestic Product of Africa’s most populous nation rose to an annual 3.8 percent in the three months through December, compared with growth of 3.46 percent in the previous quarter, according to data released by the Abuja-based National Bureau of Statistics on Tuesday.
For 2024, Nigeria’s GDP growth stood at 3.40 percent, up from 2.74 percent in 2023, reflecting a recovery from the shocks of previous years, particularly the COVID-19 pandemic, global commodity price fluctuations, and domestic economic challenges.
The growth rate in Q4 is in line with the forecast of 8 economists polled by BusinessDay.
Bismarck Rewane, managing director of Financial Derivatives Company (FDC) expected growth in Q4 to jump on the back of the festivities in December.
Rewane however noted that the economy may experience a sluggish start in the first quarter of this year due to “reduced post-festive spending and the typical lull in agricultural activities” which would see the GDP decline to 3.6 percent in Q1.
For Ayo Teriba, CEO of Economics Associates, the growth in gross domestic product (GDP) and stability in exchange rate means “there is hope that the roads of Nigeria will begin to look bright.”
GDP measures the total value of goods and services produced in a country. A 3.84 percent growth rate suggests that the Nigerian economy is expanding, with increased productivity across key sectors.
More production and services signal that businesses are growing, which can lead to more job opportunities as seen in the expansion of purchasing managers index.
“A growing economy means more tax revenue for the government, which can be used for infrastructure, healthcare, and other public services. The GDP performance can attract both local and foreign investors, boosting capital inflow,” a Lagos-based macroeconomic research analyst said.
Nigeria’s GDP growth has, in recent times, been powered by the services sector which contributes almost 60 percent to the economy.
Analysts fear that such growth may not be “job elastic” especially as key sectors such as agriculture, industry witnessed a decline.
Can Nigeria achieve 5.5% GDP growth in 2025?
The Nigerian Economic Summit Group (NESG) projects that the country could hit 5.5 percent GDP growth in 2025, assuming the government sees through its bold economic reforms, from the exchange rate liberalisation to the removal of petrol and energy subsidies.
Though bold and ambitious, the country will need to almost double its GDP growth to attain such a lofty target this year given that real economic growth now stood at 3.4 percent.
Olusegun Omisakin, chief economist of the Nigerian Economic Summit Group (NESG), a policy think-tank projected that Nigeria’s economy could achieve a 5.5 percent gross domestic growth rate in 2025 if efficient reforms are implemented.
Omisakin said achieving this growth rate hinges on three key strategies. First, he highlighted the need to control inflation. Secondly, the need to boost foreign exchange (FX) liquidity and stabilise the exchange rate, which is critical for fostering investor confidence and economic stability.
Lastly, he called for optimising fiscal performance, including prudent government spending and improving revenue generation to reduce fiscal deficits.
Nigeria plans to rejig its economy that may further expand its GDP from the current levels and see growth almost double in statistics.
“If the government fully implements its economic restructuring plans, controls inflation, and boosts non-oil exports, 5.5 percent is possible,” a senior economist at a Lagos-based research institute said.
“Given current challenges—persistent inflation, insecurity, and forex instability—growth may be more moderate, possibly around 4 percent to 4.5 percent,” the economist added.
Samuel Sule, CEO of Renaissance Capital Africa also noted that “if all the caveats are fully met, then Nigeria will be poised for a strong growth”, corroborating the position of the Lagos-based policy think-tank.
But GDP growth must be inclusive for it to trickle down to the ordinary Nigerians who are feeling the pinch of the various reforms of the government for the past 18 months.
According to Adeola Adenikinju, president of the Nigerian Economic Society (NES), Nigeria is going through different economic pressures, especially inflation that is reducing purchasing power and limiting business expansion, a situation that may dampen the 5.5 percent projection.
Adenikinju explained that economic output increases in an environment that’s business friendly, possesses the right infrastructure and allows for business growth through access to credit facilities.
But with benchmark interest rates up 25.7 percent and may continue to rise in the most part of 2025 albeit slowly, economic activities may shrink, dashing hopes for a rise in GDP.
“While economic indicators show progress, the impact on everyday Nigerians remains the true test of success. If government policies do not translate into lower unemployment, affordable living costs, and improved social services, then economic growth will remain a mere statistic rather than a lived reality for the majority of Nigerians,” Adeola Adenikinju, president of the Nigerian Economic Society (NES) said. (BusinessDay)
