Nigeria’s economic outlook is facing a precarious shift as its current account surplus is projected to halve, dropping from an estimated 9.2 per cent of GDP in 2024 to 4.7 per cent in 2025, according to the latest African Development Bank’s (AfDB) African Economic Outlook 2025 report.
The report, released Wednesday amid growing global uncertainties, paints a sobering picture of Nigeria’s external vulnerabilities, driven by weakening trade dynamics, persistent inflation, and structural bottlenecks that threaten to undermine recent macroeconomic gains.
Titled “Making Africa’s Capital Work Better for Africa’s Development,” the AfDB’s report underscores a fragile recovery across the continent. Africa’s real GDP growth edged up slightly from 3.2 per cent in 2023 to 3.3 per cent in 2024, but the outlook remains clouded by inflation, currency depreciation, and rising debt servicing costs.
For Nigeria, the robust current account surplus recorded in 2024, fueled by stronger oil production and reduced fuel import costs following the operationalisation of the Dangote Refinery, is expected to erode rapidly. By 2026, the surplus is forecast to shrink further to 3.9 per cent of GDP, as global demand weakens and commodity prices falter amid trade tensions, particularly between the United States and China.
The decline in Nigeria’s external balance reflects broader pressures. Global financial market volatility and shifting trade policies have dampened demand from key trading partners like the U.S. and China, hitting export-dependent economies hard. These headwinds are already reverberating across West Africa, where GDP growth is expected to slow to 4.3 percent in 2025 and 2026.
Nigeria’s own GDP growth is projected to remain sluggish, inching up to 3.2 percent in 2025 before dipping to 3.1 percent in 2026 both figures revised downward due to trade uncertainties and domestic challenges. Inflation remains a formidable challenge, with Nigeria recording a staggering 33.2 percent rate in 2024, amongst the highest in West Africa. The surge stems from a perfect storm of factors: the naira’s depreciation after its float, the removal of fuel subsidies, insecurity disrupting food production, and chronic infrastructural deficits.
The AfDB’s analysis highlights agriculture’s critical role in Nigeria’s price stability, noting that a 1 per cent decline in agricultural output triggers a 33-basis point increase in inflation. This dynamic underscore the economy’s structural fragility, as monetary tools like interest rate hikes and reserve ratio adjustments have proven largely ineffective against inflation rooted in supply-side constraints.
Nigeria’s fiscal position is equally strained. The continent-wide fiscal deficit widened to 4.7 per cent in 2024, and Nigeria’s public debt servicing costs have surged, crowding out development spending. With Africa’s external debt refinancing needs projected at $112.4 billion in 2025 and $84 billion in 2026, Nigeria faces heightened risks without deeper fiscal reforms.
The naira is expected to weaken by at least 6 per cent in 2025, exacerbating external financing pressures alongside declining private savings and rising investment spending. The AfDB offers a roadmap to navigate these challenges, urging Nigeria and other African nations to adopt flexible exchange rate regimes to absorb external shocks, strengthen inflation-targeting frameworks, and avoid procyclical fiscal cuts that could stifle infrastructure investment.
The report also advocates for preemptive debt restructuring, citing successes in Ghana and Zambia, and emphasizes the need to deepen regional trade through the African Continental Free Trade Area (AfCFTA) by enhancing labor mobility and domestic productivity. “The best way to get out of debt is to grow the economy,” the AfDB asserts, stressing that governance reforms and better capital allocation are essential for sustainable growth.
Nigeria’s grappling with a narrowing current account surplus, persistent inflation, and mounting fiscal pressures, the AfDB’s report serves as a stark reminder of the urgent need for structural transformation. Without coordinated policy responses and reforms to address global volatility, Nigeria’s economic recovery risks faltering, leaving its long-term stability in jeopardy.
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