A recent report by Rand Merchant Bank (RMB), a subsidiary of the FirstRand Group, has raised concerns about Nigeria’s economic outlook in 2025, highlighting the country’s heavy reliance on crude oil prices to sustain growth.
The report outlines three possible scenarios for Nigeria’s GDP growth, with projections ranging from a modest 3.8 per cent to a bleak 0.8 per cent, depending on global oil price trends.
In the most optimistic scenario, GDP growth could reach 3.8 per cent if crude oil prices remain above $72 per barrel. However, in a worst-case scenario where prices drop to $40 per barrel, GDP growth could fall to its lowest level since 2021 at 0.8 per cent. “Nigeria’s output performance hinges heavily on crude oil prices. If prices drop to $40 per barrel, the country’s economy could spiral downward as the cost of production exceeds revenue from sales,” the report cautions.
The warning comes as global oil markets face increasing volatility due to geopolitical tensions and concerns over oversupply. Analysts suggest an average crude price of $60 per barrel for 2025, which RMB estimates would result in GDP growth of just 2.4 per cent. “Geopolitical risks and supply imbalances are key variables that could derail Nigeria’s economic recovery. The crude oil market is likely to remain highly volatile,” the report notes.
The report also warns of fiscal pressures, projecting a potential deficit of 5.1 per cent of GDP in the worst-case scenario. Nigeria’s last experience with oil prices at $40 per barrel was during the COVID-19 pandemic, a period marked by significant economic contractions. With the cost of producing a barrel of Bonny Light crude averaging $48.7, any sustained drop in oil prices could deepen financial losses.
On the domestic front, RMB forecasts an easing of inflationary pressures following reforms implemented by President Bola Tinubu’s administration in 2023. The government has set an inflation target of 15 per cent for 2025, a significant reduction from recent highs. “Inflation will decelerate due to a stable naira and steady petrol pump prices,” the report states.
The Monetary Policy Committee is expected to maintain the benchmark interest rate at 27.5 per cent, with potential cuts in the fourth quarter if real interest rates turn positive.
The naira, which dropped by more than 42 percent in 2024, is expected to stabilize this year with a slight depreciation of just two to four percent. “While the naira and the Egyptian pound were among the lowest-performing currencies last year, their exchange rate reforms have helped mitigate ongoing balance-of-payments issues. The period of maximum strength for the U.S. dollar seems to be over, which is likely to benefit African currencies,” notes RMB.
In 2024, Nigeria’s GDP showed consistent growth, rising from 2.98 percent in the first quarter to 3.46 percent in the third quarter, culminating in an estimated annual growth rate of 3.4 percent. However, the IMF forecasts a more conservative growth rate of 3.2 percent for 2025. Nigeria’s economy is influenced by uncertainties in the oil market and domestic reforms, necessitating a careful balance to achieve both stability and growth.
