Five ways Nigeria’s GDP can grow beyond 3% threshold in 2025

Nigeria’s GDP – gross domestic product output – grew again in the face of macroeconomic shocks with an overall annual gross domestic product output of 3.40 percent last year from 2.74 percent reported in 2023.

But much is desired given the size of the country as growth rate of less than 4 percent is “suboptimal” for a 200 million population suffering from a GDP per capita that has fallen to an all time low.

While real GDP growth is on the rise, on a nominal account, the economy has shed $168 billion, falling from 2023’s high of $363 billion to $195 billion, highlighting the impact of the massive devaluation and free fall of the currency from about N500 to 1600/$.

“The GDP growth numbers are suboptimal for a 200 million population growing at 3% as GDP per Capita has fallen to an all time low, with an economy struggling with stagflation,” said Adetilewa Adebajo, the CEO of CFG Advisory.

“This highlights ‘The Output Gap’ problem in the Nigerian economy where we are falling short of our productivity and growth potential.”

Here are five ways Nigeria can raise its GDP output:

Investments engineer economic growth

Nigeria needs to lure in more investments both domestic and foreign to grow beyond the 3 percent threshold, according to Muda Yusuf, CEO of Centre for the Promotion of Private Enterprises (CPPE).

Read also: Nigeria needs $50bn FDI to slash inflation to 5% – Ayo Teriba

“More domestic investment and more foreign investment, especially foreign direct investments are needed. We need to move to create an environment where it is more rewarding to invest in the real economy than to be investing in financial instruments,” Yusuf said.

“The returns on investment in financial instruments is much higher than investment in the real sector of the economy, in most cases. And that is not good for the growth of the economy,” the former director-general of the Lagos Chamber of Commerce and Industry added.

Overhauling of trade policies to boost productivity

For Adebajo, the federal government has to revamp its trade policy and reform HS Codes, realignment of industrial policy to address the declining productivity in manufacturing, industry and agriculture in an effort to boost growth. “Investment policy incentives also need to be amplified,” he said.

Cut off excessive fiscal spending

Nigeria’s debt burden is increasing which is now about N150 trillion and a two-year cumulative N40 trillion deficit is a source of concern. N16 trillion for debt service in the 2025 budget exceeds the defense, education, health and infrastructure budgets combined at N14 trillion. The country is equally betting on a $2.2 billion loan that will see its debts skyrocket.

“While the sovereign risk spreads have fallen to a 5-year low on our sovereign bonds, our credit rating remains at junk bond status,” Adebajo noted.

Read also: How Nigeria can ease N15.8trn debt service pain

Optimizations of equity in government’s capital structures

Battling with dwindling revenue, the Nigerian government therefore has to optimize equity in its capital structure by selling assets in an effort to reduce its debt profile and achieve investment grade credit ratings.

“The direction of the government should be to enact policies that will enhance productivity, create employment, close the output gap and grow the economy,” the CEO of Lagos-based .

Implement industrial policies to achieve import substitution

The Nigeria’s GDP has demonstrated resilience amid global shocks and macroeconomic challenges. To build on this, the FG must implement deliberate industrial policies to achieve import substitution in targeted sectors of the economy.

“We must replicate the success with cement, fertilizer and petroleum refining,” Adebajo advised.

According to Adebajo, the government must put in place a roadmap for the three massive sugar refineries in Nigeria owned by Dangote, BUA and FMN, to stop importing raw sugar. This is a potential FX earner and AfCFTA project, as the three refineries have capacity to meet regional demand.

“Deliberate policies therefore must be put in place to develop the local supply chain with Nigeria farmers, in an effort to boost local sugar cane production, increase agricultural productivity and create employment along that value chain.”