Nigeria’s economy has recorded its fastest growth rate in nearly four years, with Gross Domestic Product (GDP) expanding by 4.23% year-on-year in the second quarter of 2025, according to data released by the National Bureau of Statistics (NBS) on Monday. This represents a significant improvement from the 3.48% growth recorded in the same period of 2024 and marks the strongest quarterly performance since 2021.
The impressive growth figures reflect the early success of President Bola Tinubu’s ambitious economic reforms, including the controversial removal of fuel subsidies and foreign exchange market liberalization that have begun to yield positive results despite initial economic shocks. The performance was driven by a remarkable recovery in oil production, robust industrial expansion, and steady growth across agriculture and services sectors.
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Oil Sector Drives Dramatic Economic Turnaround
The star performer in Nigeria’s economic recovery was the oil sector, which posted exceptional growth of 20.46% year-on-year in Q2 2025, a dramatic improvement from the 10.08% recorded in the same period of 2024. This surge was underpinned by Nigeria’s crude oil production averaging 1.68 million barrels per day (mbpd) during the quarter, representing the highest quarterly output in four years.
The significant increase from 1.41 mbpd in Q2 2024 and 1.62 mbpd in Q1 2025 demonstrates Nigeria’s success in meeting its Organization of Petroleum Exporting Countries (OPEC) quota for the quarter. This achievement is particularly noteworthy given the persistent challenges Nigeria has faced in recent years with pipeline vandalism, oil theft, and security issues that have hampered production capacity.
The oil sector’s contribution to total real GDP increased to 4.05% in Q2 2025, up from 3.51% in Q2 2024 and 3.97% in Q1 2025. On a quarter-on-quarter basis, the sector grew by 6.01%, indicating sustained momentum in oil production recovery. This improvement reflects both enhanced security measures in oil-producing regions and increased investment in upstream activities following the sector’s liberalization.
Industry Sector Posts Strongest Growth Performance
The industrial sector emerged as another key driver of economic expansion, recording impressive growth of 7.45% in Q2 2025, more than double the 3.72% achieved in the corresponding period of 2024. This robust industrial performance was broad-based, encompassing manufacturing, construction, and utilities.
Within the industrial sector, electricity, gas, steam and air conditioning supply posted 11.47% growth in real terms, up from 7.71% in Q2 2024. This significant improvement reflects ongoing investments in power infrastructure and the gradual impact of electricity sector reforms. The sector’s contribution to GDP rose to 1.23%, compared with 1.15% in the same quarter of the previous year.
Construction activities expanded by 5.27% in real terms, up from 4.20% in the previous year, though the sector experienced a quarter-on-quarter contraction of 21%. Manufacturing growth, while positive at 1.60%, remained modest and slowed from the 2.07% recorded in the previous quarter. The manufacturing sector’s contribution to GDP dipped slightly to 7.81% from 8.01% in Q2 2024.
The industry sector’s strong performance accounted for 17.31% of aggregate GDP in Q2 2025, up from 16.79% in Q2 2024, highlighting its growing importance in Nigeria’s economic structure and the success of initiatives to boost industrial production.
Agricultural Sector Shows Steady Improvement
Nigeria’s agricultural sector demonstrated resilience with growth of 2.82% year-on-year in Q2 2025, an improvement from 2.60% in the corresponding quarter of 2024 and a significant recovery from just 0.07% growth in Q1 2025. Crop production remained the key driver, accounting for more than half of agricultural output.
The agricultural sector contributed 26.17% to real GDP in Q2 2025, slightly lower than the 26.53% recorded in Q2 2024, but significantly higher than the 23.33% reported in Q1 2025. This performance is particularly encouraging given the security challenges facing Nigeria’s agricultural regions, including farmer-herder conflicts and banditry that have disrupted farming activities in several states.
The improvement in agricultural output is attributed to various government initiatives, including increased access to fertilizers, improved seedlings, and enhanced security in farming communities. However, the sector continues to face challenges from climate change, inadequate irrigation infrastructure, and limited access to modern farming techniques that constrain potential productivity gains.
Services Sector Maintains Steady Momentum
The services sector, which remains the largest component of Nigeria’s economy, grew by 3.94% in Q2 2025, slightly higher than the 3.83% recorded in Q2 2024. Key drivers within the services sector included telecommunications, real estate, financial institutions, and trade, which accounted for positive GDP growth during the quarter.
The telecommunications sub-sector continued to demonstrate robust growth, driven by increased mobile phone penetration, expanding internet connectivity, and the rollout of 4G and 5G networks across the country. Real estate activities also showed positive momentum, supported by urbanization trends and increased construction activities in major cities.
Financial institutions recorded steady growth as they benefited from higher interest rates and increased lending activities following the Central Bank of Nigeria’s monetary policy adjustments. The trade sub-sector remained resilient despite inflationary pressures, with both wholesale and retail activities contributing positively to economic growth.
Non-Oil Sector Demonstrates Economic Diversification
The non-oil sector, which represents the backbone of Nigeria’s economy, grew by 3.64% in real terms during Q2 2025, higher than both the 3.26% recorded in Q2 2024 and the 3.19% achieved in Q1 2025. This sector contributed 95.95% to total GDP in Q2 2025, maintaining its dominance despite the strong performance of the oil sector.
The continued strength of the non-oil sector demonstrates Nigeria’s ongoing economic diversification efforts and the resilience of domestic economic activities. Growth was driven mainly by agriculture (crop production), information and communication (telecommunications), real estate, financial and insurance institutions, trade, construction, and electricity supply.
This diversification is crucial for Nigeria’s long-term economic stability, as it reduces the country’s vulnerability to oil price shocks and provides a more sustainable foundation for growth. The performance suggests that structural reforms implemented by the current administration are beginning to take root across various sectors of the economy.
Economic Reforms Bear Fruit Amid Initial Challenges
The strong GDP performance comes after a challenging period following President Tinubu’s bold economic reforms implemented immediately after taking office in May 2023. These reforms included the removal of fuel subsidies, foreign exchange market unification, and significant monetary policy adjustments that initially triggered economic shocks and contributed to high inflation.
The removal of petrol subsidies, while deeply unpopular, has begun to free up fiscal resources previously trapped in subsidy payments. The unification of exchange rates has improved foreign exchange market transparency and reduced arbitrage opportunities, though it initially led to significant naira depreciation.
President Tinubu recently declared that his administration’s reforms have restored Nigeria’s global respect, noting that “the bleeding has stopped” and the economy is now stable and attracting international interest. These assertions appear to be supported by the latest GDP figures and improved investor confidence.
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GDP Rebasing Provides More Accurate Economic Picture
The reported growth figures follow a recent GDP rebasing exercise where the base year was updated from 2010 to 2019. Leading economist Bismarck Rewane noted that this rebasing has helped reflect current economic realities more accurately, providing a clearer picture of Nigeria’s economic structure and performance.
The rebasing exercise resulted in significant adjustments to nominal GDP figures, with aggregate GDP at basic prices standing at ₦100.73 trillion in Q2 2025, compared to ₦84.48 trillion in Q2 2024, representing a nominal growth of 19.23% year-on-year. This substantial increase partly reflects the impact of inflation and currency adjustments following the exchange rate reforms.
GDP rebasing is a standard practice conducted periodically to ensure that economic statistics reflect structural changes in the economy. Nigeria’s rebasing exercise has provided updated weights for different sectors and incorporated previously unrecorded economic activities, offering a more comprehensive view of economic performance.
International Recognition and Credit Rating Improvements
The positive economic performance has translated into improved international recognition and credit rating assessments. Fitch upgraded Nigeria’s long-term foreign-currency issuer default rating from B- to B with a stable outlook in April 2025, reflecting increased confidence in the government’s commitment to policy reforms.
The World Bank recently reported that Nigeria’s economy grew at its fastest rate in nearly a decade in 2024, attributing this to the early successes of President Tinubu’s macroeconomic reforms. The country’s fiscal deficit dropped from 5.4% of GDP in 2023 to 3.0% in 2024, bolstered by increased national revenue from ₦16.8 trillion to ₦31.9 trillion.
The Central Bank of Nigeria has increased foreign exchange reserves to more than $38 billion, demonstrating improved external sector performance. These developments have resulted in increased investment inflows, with both domestic and international investors regaining confidence in the economy.
Challenges and Social Impact of Economic Reforms
Despite the positive macroeconomic indicators, Nigeria continues to face significant social challenges stemming from the economic reforms. Inflation surged to 34.19% by June 2025, with food inflation exceeding 40%, severely impacting household purchasing power and living standards.
The removal of fuel subsidies contributed to a 200% increase in petrol prices, while the naira’s depreciation from approximately 450 per dollar to over 800 per dollar has dramatically increased the cost of imported goods. These price increases have disproportionately affected low-income households and small businesses that depend on imported inputs.
The government’s social intervention programs, including cash transfer schemes, have been criticized for inadequate coverage and implementation challenges. Human Rights Watch notes that while fuel subsidies needed reform, the lack of adequate compensatory measures has pushed millions of Nigerians deeper into poverty.
Future Economic Prospects and Policy Targets
President Tinubu has set ambitious targets for Nigeria’s economic future, recently announcing a new 7% annual economic growth target, higher than the 6% he initially aimed for when he took office in 2023. This target reflects confidence in the reform agenda’s ability to deliver sustained economic expansion.
The 2025 Budget of Restoration, valued at ₦47.90 trillion, focuses on “Securing Peace, Rebuilding Prosperity” and aims to consolidate key policies for economic restructuring, boost human capital development, and increase trade and investment volumes.
The administration’s Renewed Hope Agenda envisions transforming Nigeria into a trillion-dollar economy within the next decade by leveraging the country’s population, natural resources, and key sectors. This ambitious goal requires sustained GDP growth rates significantly above current levels and continued structural reforms.
Sectoral Analysis and Investment Opportunities
The strong performance across multiple sectors has created diverse investment opportunities. The oil sector’s recovery, combined with ongoing sector liberalization, presents opportunities for increased private sector participation in upstream, midstream, and downstream activities. The Petroleum Industry Act implementation continues to provide a more investor-friendly framework for the sector.
The industrial sector’s 7.45% growth rate indicates potential for manufacturing expansion, particularly in import substitution industries that can benefit from the weaker naira. The government’s focus on infrastructure development through public-private partnerships creates opportunities in construction, power generation, and transportation sectors.
Agriculture remains a priority area for investment, with significant potential for productivity improvements through mechanization, irrigation, and value chain development. The sector’s contribution of over 26% to GDP demonstrates its continued importance as an employer and source of livelihood for millions of Nigerians.
Regional Economic Context and Comparisons
Nigeria’s 4.23% growth rate compares favorably with regional and global economic performance. The UN Resident Coordinator in Nigeria, Mohamed Malick Fall, acknowledged that Tinubu’s economic reforms are gaining momentum and transforming the country positively, despite challenges from declining overseas development assistance.
The performance positions Nigeria as one of the faster-growing economies in sub-Saharan Africa and demonstrates the potential for sustained economic expansion. However, the growth rate needs to be maintained and accelerated to address Nigeria’s development challenges, including high unemployment, poverty levels, and infrastructure deficits.
The success of Nigeria’s economic reforms is being closely watched by other African countries considering similar structural adjustments. The experience provides valuable lessons on the sequencing and implementation of economic reforms in developing economies.
Conclusion: Building on Reform Momentum
Nigeria’s 4.23% GDP growth in Q2 2025 represents a significant milestone in the country’s economic transformation journey. The broad-based growth across oil, industry, agriculture, and services sectors demonstrates the effectiveness of structural reforms implemented by the Tinubu administration, despite their initial social costs.
The challenge ahead lies in sustaining this growth momentum while addressing the social impacts of economic reforms and ensuring that growth translates into improved living standards for ordinary Nigerians. The government’s ability to maintain policy consistency, attract increased investment, and implement effective social protection programs will be crucial for long-term economic success.
As Nigeria works toward its ambitious economic targets, the Q2 2025 performance provides encouraging evidence that the country’s economic fundamentals are strengthening and that the reform agenda is beginning to deliver measurable results. The task now is to build on this momentum and ensure that economic growth becomes both sustained and inclusive.
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By: Montel Kamau
Serrari Financial Analyst
23rd September, 2025
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