Nigeria’s domestic economy recorded an expansion of 3.84% year-on-year in the fourth quarter of 2024, reaching N22.61 trillion, according to the latest economic report from the Central Bank of Nigeria (CBN).
This growth, largely driven by the non-oil sector, highlights the deepening structural shift in the country’s economic composition as the oil sector continues to underperform.
While the non-oil sector expanded by 3.96%, the oil sector lagged behind with a modest 1.48% growth, reflecting persistent challenges in the country’s crude oil production. Economists believe that the performance of the non-oil sector underscores the struggles of Nigeria’s once-dominant oil industry, which has faced years of declining output due to pipeline vandalism, oil theft, regulatory uncertainties, and underinvestment in upstream activities.
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For years, Nigeria has struggled to meet its crude oil production targets, significantly impacting overall GDP growth. Despite being Africa’s largest oil producer, the country has consistently fallen short of its OPEC quota, limiting the oil sector’s contribution to economic expansion.
Recently, Nigeria briefly exceeded its OPEC production quota of 1.5 million barrels per day (mbpd) for the first time in a long while, signaling a potential rebound. However, this progress was short-lived as output declined again in subsequent months, hampering the government’s push to achieve its ambitious target of 2.2mbpd.
The drop in oil production has been linked to ongoing security issues in the Niger Delta, where crude theft and pipeline sabotage remain widespread. Additionally, logistical and technical challenges at key oilfields have slowed production recovery efforts.
The CBN’s report noted that while increased crude oil production from 1.33mbpd to 1.43mbpd helped moderate the slowdown in the oil sector, the overall contribution of oil to GDP growth remained marginal. In total, the oil sector contributed just 0.07 percentage points to the economy’s 3.84% growth in Q4 2024, further underscoring its diminished role in driving Nigeria’s economic expansion.
Economic analysts have consistently emphasized that increased crude oil output could significantly accelerate Nigeria’s GDP growth. Historically, when oil production surged above 2mbpd, the economy experienced higher expansion rates. However, the country has struggled to sustain such levels, with recent production figures falling well below expectations.
According to industry experts, achieving the government’s 2.2 mbpd target would not only boost export earnings but also strengthen Nigeria’s foreign exchange reserves, stabilize the naira, and provide much-needed fiscal revenues to support economic development.
Although the uptick in the non-oil sector’s performance is seen as a sign of economic diversification, analysts caution that relying on it as the primary growth driver without addressing structural issues in the oil sector could limit Nigeria’s long-term economic potential. Given that crude oil still accounts for the bulk of Nigeria’s foreign exchange earnings and government revenue, the sector’s weak performance poses a significant risk to fiscal sustainability.
The non-oil sector’s 3.96% growth in Q4 2024 outpaced the previous quarter’s 3.37% expansion, contributing a substantial 3.77 percentage points to total GDP growth. The CBN report emphasized that the non-oil sector expanded at a faster pace, making it the primary driver of economic growth.
Key industries leading this expansion include financial services, information and communication, trade, crop production, and transportation. The financial and insurance sector recorded significant growth due to the increasing adoption of financial technology, higher banking penetration, and rising investment inflows into capital markets. The expansion of digital banking services and mobile payment solutions contributed to stronger financial sector performance.
The information and communication sector also continued its upward trajectory, benefiting from improved internet penetration, rising demand for data services, and increasing digital transformation across various industries.
The trade and agricultural sectors remained robust, particularly in crop production, which was supported by favorable weather conditions and government interventions aimed at boosting food security. Trade activities surged due to increased logistics efficiency and a recovering consumer demand.
The transportation and storage sector also saw significant improvements, driven by government investments in infrastructure projects and growing e-commerce logistics networks.
However, Nigeria’s electricity and gas subsector contracted by 5.05% in Q4 2024, highlighting ongoing challenges in the country’s energy sector. The downturn was attributed to increased electricity tariffs, continued grid collapse, and a growing shift towards alternative energy sources such as solar power.
Looking ahead, the CBN projects that Nigeria’s economy will continue on a growth trajectory in 2025, supported by government policies, increased investor confidence, and exchange rate stabilization. However, the ability to sustain this momentum will depend on several factors, including oil production recovery, inflationary pressures, exchange rate stability, and infrastructure development. Achieving and maintaining higher crude oil output remains critical for overall economic performance.