Lagos: Cementing city’s role as hub for investment, trade, opportunity

Recently, the Lagos Economic Development Update (LEDU) 2025 was released to the public, which shows that for ten consecutive quarters, the state has demonstrated consistent and commendable budgetary performance which impacts its growth and attracts investments to the city.

The Lagos Economic Development Update is a comprehensive report offering a data-driven assessment of the state’s economic performance and strategic policy directions for sustainable growth.

Specifically, economy size for Lagos is projected to approach N51 trillion by 2025, with inflation expected to moderate gradually. Sustained policy reforms, private sector engagement, and strategic investments will be crucial in achieving these goals.

It also emerged that the Gross Domestic Product (GDP) of Lagos State reached $259 billion, based on Purchasing Power Parity (PPP), placing it as the second-largest economy in Africa and trailing only behind Cairo, the Egyptian capital.

Lagos State did not arrive at this position overnight, but through planning and hard work. The effort has made Lagos one of the top economic hubs in Africa, largely driving economic activities in West Africa.

For instance, data from the National Bureau of Statistics (NBS) and Lagos Bureau of Statistics (LBS) show that national gross domestic products (GDP) stood at N234.43 trillion, with Lagos contributing N43.06 trillion, representing 18.38 per cent of the national economy in 2023. For the first half of 2024, the national economy recorded a GDP of N122.51 trillion, with Lagos accounting for N27.39 trillion or 22.36 per cent of Nigeria’s GDP.

As Nigeria’s commercial hub, Lagos state has consistently attracted a substantial share of foreign investments, thereby playing a pivotal role in shaping the broader national economic trajectory.

Take for instance, capital importation serves as a critical indicator of the health of an economy, reflecting the level of investor confidence in the economy.

The capital importation figure for third-quarter (Q3) 2024 represents a robust increase of 110.59 percent compared to the $308.87 million recorded in the third quarter of 2023 (Q3’ 2023). This sustained year-on-year (YoY) growth underscores the underlying resilience of the economy of Lagos State amid fluctuating quarterly trends,” the report shows.

The report also shows Lagos State remains a preferred destination for foreign capital despite the quarterly contraction.

“The steady year-on-year growth highlights the resilience of the Lagos economy, which continues to attract both foreign direct and portfolio investments, even amidst global economic challenges and domestic uncertainties. The recent data reaffirms the strategic importance of Lagos as a focal point for capital inflows, with the state’s robust infrastructure, investor-friendly policies, and targeted economic reforms providing a degree of insulation against broader market volatility,” the report noted.

The improvement in the business environment and remarkable resourcefulness of the Lagos workforce have positioned the state at the forefront of Nigeria’s economic prowess compared to other states. In line with the Lagos State Development Plan (LSDP) target of realising an economic size of $800 billion-$1 trillion by the year 2052, the state is on the path to achieving this objective.

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As a result of the state’s fiscal responsibility and sound development agenda, investors globally are rushing to invest in Lagos, making the state the preferred destination for foreign capital. As Nigeria’s commercial hub, Lagos state has consistently attracted a substantial share of foreign investments, thereby playing a pivotal role in shaping the broader national economic trajectory. The capital importation figure for 2024Q3 represents a robust increase of 110.59 per cent. This sustained year-on-year growth underscores the underlying resilience of the economy of Lagos State amid fluctuating quarterly trends.

This remarkable improvement can be attributed to several key initiatives, including the implementation of the Lagos Revenue Portal, frequent updates to the tax register, and increased federal transfers resulting from the removal of the fuel subsidy. On the expenditure side, performance followed a more variable trajectory. It declined from 84.8 percent in 2021 to 72.7 per cent in 2022, improved to 86.8 per cent in 2023, and then dropped again to 78.3 per cent in 2024. Despite these fluctuations, the strong revenue performance in the third quarter of 2024 stands out, highlighting the effectiveness of the State’s revenue enhancement strategies,” the report said.

The findings underscore resilience of Lagos State in revenue generation and its commitment to fiscal innovation. The steady improvement in revenue performance reflects the effectiveness of strategic reforms, including digitised revenue collection and broader fiscal transparency. Meanwhile, the fiscal year 2024 has witnessed several interventions, policies, and projects guided by the budget of 2024.

Building on the remarkable achievements in 2023, several areas of the economy, such as transport, security, food security, housing, youth employment, entertainment, health, education, public order and safety, energy, and social protection, were captured in the budget.

“Revenue performance, which stood at 79.5 percent in 2021, declined slightly to 77.8 percent in 2022. However, it rebounded significantly, reaching 85.8 percent in 2023 and an impressive 106.6 percent in 2024”, the report stated.

Not without challenges

There are however a couple of risks that pose a threat to the economic stability of the state, such as persisting insecurity in major food producing states and climate-induced disruptions exacerbating supply chain vulnerabilities, impacting food prices and availability, thus leading to food insecurity. Mismatches between education outputs and labour market needs are hindering productivity and economic competitiveness, highlighting skills gaps.

Rising sea levels and flooding pose significant risks to infrastructure, urban settlements, and livelihoods. There is also the issue of inadequate electricity supply and reliance on imported petroleum products, which undermine industrial and economic activities, as well as rapid urbanisation, which strains housing, infrastructure, and social services, intensifying socioeconomic inequalities. There is also high revenue gap as the revenue-to-GDP remains very low.

A positive outlook

The Lagos Economic Development Update projected the Lagos State economy to expand from N43.06 trillion in 2023 to N54.77 trillion in 2024 and N66.47 trillion in 2025. This upward trend, it added, is primarily driven by the continued expansion of the services sector, although the agriculture and industrial sectors are also experiencing growth.

“The services sector has remained the key driver of the state’s economy, reflecting Lagos’s position as the commercial hub of Nigeria and West Africa. Over the past four years, the trade, transport, information and communication, arts, entertainment and recreation, and financial and insurance sub-sectors have recorded substantial expansion. Given the state’s growing potential in innovation and the significant digital transformation driven by start-ups, the services sector is expected to further strengthen its contribution to nominal GDP.

“Additionally, the industrial sector, largely propelled by the manufacturing sub-sector, has followed an upward trajectory over the past four years. This expansion is expected to continue through the end of 2024 and into 2025, supported by the rapid development of modern infrastructure across the state.

“Several key road infrastructure projects have been completed in 2024, alongside the commissioning of the Red Rail Line and the ongoing expansion of the Blue Rail Line. These public investments are anticipated to enhance the productivity of the manufacturing sector, further bolstering Lagos’s economic growth trajectory,” it said.

The best is yet to come

Lagos Governor Babajide Sanwo-Olu said, “Lagos is not just growing; we are leading. With a GDP of $259 billion based on Purchasing Power Parity (PPP), we have cemented our place as Africa’s second-largest city economy. This milestone is more than a number; it reflects the strength of our economy, the resilience of our people, and our city’s role as a hub for investment, trade, and opportunity.

“Economic indices like PPP are crucial. They highlight real economic strength, competitiveness, and the cost-of-living advantage. From infrastructure to technology, tourism to manufacturing; we are driving sustainable growth. Lagos remains at the forefront of Africa’s economic transformation, and the best is yet to come.”

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Sustainability is key

Ope George, Commissioner, Ministry of Economic Planning and Budget, while speaking during the launch of the Lagos Economic Development Update (LEDU) recently described LEDU as a comprehensive report that provides a data-driven assessment of Lagos State’s economic performance and outlines strategic policy directions for sustainable growth. The report, he added, is designed to pave the way for a 21st-century economy in Lagos State.

“The update focuses on key areas such as revenue mobilisation, economic diversification, and fiscal sustainability. It aims to enhance the state’s economic growth, improve living standards, and reduce poverty among its residents,” he said.

He noted that, “The Lagos Economic Development Update (2025) themed ‘Lagos Economic Outlook: Charting a Resilient Path Towards a Sustainable Future’, stands as a testament to the unwavering commitment of the Lagos State Government to transparency, evidence-based policymaking, and sustainable economic growth.

“As the Honourable Commissioner for Economic Planning and Budget, it is my privilege to present this second edition, which provides an in-depth analysis of the dynamic interplay between global, national, and local economic landscapes and their implications for Lagos State.

“Lagos remains the economic nerve centre of Nigeria and a hub of innovation, investment, and opportunities within Africa. In a rapidly evolving global economy, maintaining this leadership position requires forward-thinking policies, a deep understanding of emerging trends, and the ability to anticipate and mitigate risks.

“This update provides actionable insights into key economic developments, including sectoral performance, fiscal sustainability, social protection, and the labour market, while highlighting the policies driving progress and the challenges that require our urgent attention.

“The 2025 edition builds on the successes of the maiden edition, delving further into critical issues such as capital importation, inflation, and macroeconomic outlook. It also underscores the importance of building resilience against possible vulnerabilities such as food insecurity, climate change, revenue gap, energy deficit and skill gaps in a manner that ensures inclusive and sustainable future.”

Need to bridge revenue gap

Taiwo Oyedele, chairman Presidential Fiscal Policy and Tax Reforms Committee, while delivering a keynote address titled: “Bridging the Revenue Gap in Lagos: Innovative Pathways to Enhanced Revenue Mobilisation,” emphasised the urgency of bridging the revenue gap in Lagos through innovative and transformative strategies.

He noted that while Lagos remains Nigeria’s economic powerhouse, its current revenue generation, “less than 2 percent of the GDP, lags behind comparable economies worldwide.”

He stressed that despite its size and economic influence, the state is not generating enough revenue to match its ambitions and that now is the time to change this narrative.

“Lagos is big, but its revenue is small, collecting less than 2 per cent of GDP. While some progress has been made, we still have a big room for improvement, and the time to change this narrative is now,” Oyedele opined.

Oyedele outlined three key pathways for revenue mobilization. First, he highlighted the potential of property taxation, pointing out that cities like Bogotá in Colombia generate over $1 billion annually from property tax, while Lagos, with one of the most valuable real estate markets in the world, collects far less.

He attributed this gap to inefficiencies in land titling, property valuation, and enforcement and proposed reforms that could help the state generate at least N1 trillion annually. Recommendations included improving land titling processes, incentivising compliance, and ensuring a transparent property valuation system.

The second pathway focused on personal income tax expansion, leveraging technology to capture high-income earners who should be contributing more to the system.

Oyedele underscored the need to formalise the informal sector, particularly in Lagos’ thriving digital and creative industries, ensuring that entrepreneurs, event planners, content creators, and entertainers contribute fairly without being overburdened. He advocated for a fair presumptive tax regime, allowing small businesses to grow before being taxed heavily on their successes.

Data-driven policies are significant

Olayinka Ojo, Permanent Secretary of the Ministry of Economic Planning and Budget in her welcome address underscored the significance of data-driven policy decisions in shaping Lagos’ economic trajectory.

She stated that as the economic nerve centre of Nigeria, “Lagos must navigate global and national economic complexities with foresight and strategic planning.”

She reiterated that, “the 2025 LEDU report provides critical insights into fiscal sustainability, labour market dynamics, and revenue generation,”

Ojo, therefore stressed that the state’s future prosperity depends on collective efforts to enhance fiscal governance, strengthen revenue mobilisation, and create an enabling environment for businesses to thrive.