By Ade Adesokan
The International Monetary Fund’s recent upgrade of Nigeria’s economic growth forecast to 3.4 percent for 2025 and 3.2 percent for 2026 reflects a cautious optimism that demands deeper scrutiny, a sentiment that finds reinforcement in the World Bank’s parallel assessments. While the IMF’s upward revision from previous estimates signals recognition of recent policy reforms, these projections raise fundamental questions about whether international financial institutions truly recognize African economic progress or remain trapped in paradigms that perpetuate dependency rather than celebrate genuine development.
The World Bank’s projection offers a complementary yet slightly more optimistic perspective on Nigeria’s economic trajectory. The bank forecasts that Nigeria’s economy will grow by 3.6 percent in 2025, building on an estimated 3.4 percent expansion in 2024, with growth strengthening to 3.8 percent by 2027. This cautious optimism from the World Bank stems from what the institution describes as the federal administration’s sustained commitment to economic reforms and the gradual stabilization of the macroeconomic environment. Critical to the World Bank’s projection is the expected improvement in the performance of non-oil sectors, particularly services such as financial services, telecommunications, and information technology, alongside easing inflationary pressures and improved business sentiment.
The convergence of both institutions’ projections around the mid-3 percent range suggests a measured consensus on Nigeria’s near-term growth potential, yet this alignment also underscores the modest nature of expected progress. The IMF’s projections are anchored on what it describes as significant structural reforms undertaken by President Bola Ahmed Tinubu’s administration, particularly the removal of fuel subsidies and the unification of foreign exchange windows. These bold policy moves, implemented within the president’s first year in office, have indeed begun to reshape Nigeria’s economic landscape. The elimination of fuel subsidies alone, which previously consumed nearly $4 billion annually according to various estimates, has freed up considerable fiscal resources while the FX reforms have helped reduce distortions that had plagued the economy for years.
At the conclusion of the 2025 IMF and World Bank Spring Meetings in Washington, D.C., Finance Minister and Coordinating Minister of the Economy Wale Edun acknowledged the Fund’s upgraded projection from the previous 3.0 percent forecast in April 2025, emphasizing the administration’s proactive approach to identified risks. Despite a challenging global environment marked by high debt, rising interest rates, and geopolitical tensions, Edun highlighted that Nigeria remains firmly on the path of reform, stability, and growth. His response to the 3.4 percent forecast underscores the government’s commitment to implementing the 2025 budget with particular emphasis on safeguarding reform gains and maintaining momentum toward inclusive growth that benefits all citizens.
Edun’s measured response reflects the administration’s understanding that while the IMF has commended Nigeria’s reforms in fuel subsidy removal, exchange rate management, and tax policy, these achievements must be sustained through careful monitoring of global oil markets and trade developments. The minister’s emphasis on proactive risk mitigation demonstrates awareness that the projected growth, driven by increased hydrocarbon output, robust services sector performance, and the new domestic refinery operations, remains vulnerable to external shocks. This cautious optimism acknowledges that despite improved investor confidence leading to increased portfolio inflows and successful Eurobond issuance, persistent challenges around poverty and food insecurity require continued policy attention through responsive measures that ensure economic stability.
However, the projected growth rates, while representing an improvement, remain disappointingly modest when measured against Nigeria’s enormous development needs and potential. At 3.4 percent, Nigeria’s expected growth in 2025 lags behind the Sub-Saharan Africa average of 4.0 percent, raising questions about whether current reforms go far enough or fast enough to catalyze the transformational change the country desperately needs. For a nation with a population exceeding 220 million, growth rates hovering around 3 percent barely keep pace with demographic expansion, offering little hope for meaningful poverty reduction or job creation at scale.
The manufacturing sector, represented by the Manufacturers Association of Nigeria, faces a complex set of opportunities and constraints under this growth trajectory. While the FX unification has eased access to foreign inputs and raw materials, manufacturers continue to grapple with the fundamental challenge of unreliable electricity supply. The persistent power crisis, which forces many manufacturers to rely on expensive diesel generators, significantly undermines productivity and competitiveness. Even with 3.4 percent growth, manufacturers will struggle to achieve optimal capacity utilization without substantial improvements in power infrastructure. The projected growth may boost domestic demand marginally, but without addressing the electricity bottleneck, Nigerian manufacturers will find it difficult to compete with imports or expand their market share meaningfully.
For the Nigerian Exchange Group and the broader capital markets, the IMF’s forecast presents a mixed outlook. The reported 126.8 percent surge in foreign portfolio investment from 2023 to 2024, coupled with over $50 billion in foreign direct investment commitments since mid-2023, suggests that international investors are beginning to price in the benefits of recent reforms. However, the modest growth projections may not be sufficient to sustain this momentum. Capital markets thrive on growth stories and transformational narratives, and a 3.4 percent growth rate may struggle to attract the quantum of foreign investment needed to drive significant market expansion. The NGX’s efforts to deepen retail participation and expand listings will require a more robust economic backdrop to truly flourish.
The financial services sector finds itself in a particularly nuanced position. While the growth forecast supports moderate credit expansion and the ongoing banking sector re-capitalization should enhance system stability, the combination of high interest rates exceeding 27 percent and persistent inflation creates a challenging environment for meaningful financial intermediation. The 3.4 percent growth projection suggests limited scope for rapid expansion in lending to productive sectors, particularly small and medium enterprises that form the backbone of Nigeria’s economy. Financial inclusion initiatives may advance incrementally, but transformational change in access to credit will likely remain elusive at current growth rates.
Perhaps most critically, the implications for common entrepreneurs and micro, small, and medium enterprises appear sobering. While the projected stability offers some predictability for business planning, the modest growth rates suggest that job creation and business expansion opportunities will remain constrained. The informal sector, which employs the majority of Nigeria’s workforce, requires much higher growth rates to absorb new entrants and improve living standards meaningfully. The 3.4 percent projection implies that most MSMEs will continue to operate in survival mode rather than experiencing the growth-driven expansion that could lift them to higher productivity levels.
From a foreign direct investment perspective, the IMF’s forecast presents both validation and limitation. The upgrade acknowledges that recent reforms have improved Nigeria’s investment climate and restored some confidence among international investors. The reported increase in FDI from $1.87 billion to $2.6 billion between 2023 and 2024 demonstrates tangible progress. However, for a continental economic powerhouse with Nigeria’s resource endowments and market size, these investment levels and growth projections remain far below potential. Countries like Vietnam and Bangladesh have sustained growth rates of 6-8 percent for extended periods by creating more attractive investment environments and implementing comprehensive structural reforms.
The IMF’s projections also raise important questions about policy sequencing and reform comprehensive, particularly when viewed against Nigeria’s recent demonstration of fiscal responsibility. In May 2025, Nigeria completed the full repayment of its $3.4 billion COVID-19 emergency loan from the IMF, with the final payment made on April 30, 2025, ahead of schedule. This significant achievement, which removed Nigeria from the IMF’s debt list, might reasonably be expected to influence the Fund’s growth projections more positively. However, the modest 3.4 percent forecast suggests that even exemplary debt management and fiscal discipline may not substantially alter the IMF’s assessment of Nigeria’s growth trajectory.
This raises uncomfortable questions about the IMF’s evaluation methodology and whether traditional metrics adequately capture emerging economies’ development potential. The experience of neighboring Ghana provides an instructive parallel that highlights the complex dynamics between African countries and international financial institutions. Despite Ghana’s recent success in stabilizing the cedi through innovative domestic policies, including the Gold4Oil initiative and strategic gold reserve accumulation that increased reserves by 40.6% from May 2024 to April 2025, the country continues to face scrutiny from international financial institutions even as it demonstrates monetary sovereignty.
Ghana’s experience illuminates a broader pattern where African countries implementing independent currency stabilization measures face institutional resistance, even when such policies yield positive results. This echoes concerns raised by leaders like Ibrahim Traoré in Burkina Faso, who has championed economic independence and questioned the sustainability of traditional aid and loan structures that often perpetuate dependency rather than fostering genuine development. The growing movement across the continent toward economic sovereignty suggests that countries are increasingly questioning whether international institutions’ growth projections and policy prescriptions truly serve their development interests.
President Tinubu’s administration appears to be navigating this delicate balance between implementing reforms that satisfy international creditors while maintaining Nigeria’s sovereign decision-making capacity. The administration’s ability to complete early debt repayment while simultaneously pursuing independent policy initiatives demonstrates a nuanced approach to international engagement that prioritizes national interests alongside global integration. Minister Edun’s emphasis on the government’s ongoing monitoring of global developments and proactive stance on risk mitigation reflects this balanced approach to ensuring that reform gains are safeguarded while maintaining the momentum needed for sustainable economic transformation.
While removing fuel subsidies and unifying FX rates represent crucial first steps, achieving higher sustainable growth requires deeper institutional reforms, massive infrastructure investments, and fundamental improvements in governance and business environment. The 3.4 percent forecast suggests that current reforms, while necessary, may not be sufficient to unlock Nigeria’s full economic potential, regardless of the country’s demonstrated capacity for responsible financial management.
Furthermore, the slight decline projected for 2026 to 3.2 percent raises concerns about reform sustainability and momentum. This trajectory suggests that without additional policy interventions, the initial benefits of current reforms may begin to wane, highlighting the need for continuous and deepening reform efforts. The government’s ability to maintain reform momentum while managing social pressures from subsidy removal and other adjustment costs will be critical in determining whether Nigeria can exceed these projections.
The broader context of global economic conditions also influences the relevance of these projections. While the IMF notes improved global financial conditions, the persistence of geopolitical tensions, climate-related disruptions, and shifting global trade patterns could significantly impact Nigeria’s actual growth performance. The country’s heavy dependence on oil revenues makes it particularly vulnerable to external shocks, and the 3.4 percent growth forecast may prove optimistic if global oil markets face unexpected volatility.
In conclusion, while the IMF’s upgraded growth forecasts for Nigeria represent progress and acknowledge important policy reforms, they also underscore the magnitude of structural challenges that remain. The projected growth rates, though improved, fall short of what Nigeria needs to achieve transformational economic development, significant poverty reduction, and meaningful job creation. The World Bank’s slightly more optimistic 3.6 percent projection, while acknowledging progress in non-oil sectors and improved business sentiment, similarly reflects the cautious nature of international institutions’ assessments of Nigeria’s near-term potential. Success in exceeding these projections will require sustained commitment to deeper structural reforms, massive infrastructure investments, and continued improvements in governance and institutional capacity. The forecast should be viewed not as a ceiling but as a baseline that Nigeria must strive to surpass through accelerated and comprehensive reform implementation.
Adesokan is a public affairs commentator and international human rights advocate
