Nigeria’s economy, long battered by inflation, foreign exchange volatility, and fiscal instability, is expected to post a stronger Gross Domestic Product (GDP) growth in the fourth quarter of 2024, surpassing the 3.46% recorded in the preceding quarter.
However, even as analysts predict this seasonal boost, the full-year GDP is anticipated to fall below expectations, further cementing concerns that the country’s economic recovery remains fragile.
The federal government, optimistic about its policy reforms, had projected a 3.75% GDP growth rate for 2024, a target that now appears increasingly out of reach. Independent estimates from economic analysts suggest that Nigeria will likely close the year with a more modest 3.3% expansion, trailing the government’s projections and exposing deeper structural weaknesses that continue to limit broad-based economic development.
A Closer Look at GDP Projections
Among the analysts offering insights into Nigeria’s economic performance, Onyinyechi Onwubu, an investment advisor at FCSL Asset Management, remains cautiously optimistic about the country’s short-term trajectory. She expects the Q4 GDP growth rate to hover between 3.5% and 3.6%, attributing the projected increase to the usual surge in commercial activities during the festive season.
However, she warns that this momentum may not be sustained into the new year, noting that “the average GDP growth rate for 2024 is however expected to come in lower than this.”
For Moyosore Onanuga, Head of Investments at AIICO, the holiday-driven boost in spending will push GDP within the range of 2.5% to 3.5% for Q4. She also highlights Nigeria’s continued trade surplus, which stood at N5.81 trillion in Q3 2024, as another key factor supporting economic expansion.
She, however, points out that Nigeria’s GDP is set to be rebased, a development that could alter how future economic performance is assessed. While rebasing allows for a more accurate reflection of economic activities, she cautions that “GDP is also expected to be rebased, which will likely affect expectations going forward. However, we expect the fundamentals to still hold—economic activity does not increase due to the rebasing. It more accurately captures the economic activity that is already happening in the country.”
Meanwhile, Samuel Oyekanmi, Research Lead at Norrenberger, underscores that while the economy is expanding, it is doing so at a pace that remains well below potential. He reports that GDP grew by an average of 3.21% between January and September 2024, with his full-year estimate sitting at 3.3%—a slight improvement over the 2.74% recorded in 2023. He notes that “this highlights a modest but sustained economic expansion despite the challenges posed by contractionary policies and economic headwinds.”
Why Q4 2024 GDP Growth is Expected to Outperform Q3
The expected increase in economic output in the fourth quarter is largely driven by the seasonal increase in consumer demand, particularly in retail, food, entertainment, and energy consumption. This annual pattern sees businesses ramping up operations to capitalize on heightened spending during the festive period, fueling a temporary boost in GDP.
Beyond seasonal factors, Nigeria’s external trade performance remains a critical driver of economic activity. The country recorded a substantial trade surplus in Q3, and this positive balance is expected to persist in Q4, providing additional momentum for growth.
The services sector, which has become the backbone of Nigeria’s economy, continues to dominate, contributing 53.58% to GDP in Q3 2024. Industries such as telecommunications, banking, legal services, and financial technology (FinTech) have maintained steady expansion despite broader economic challenges, further reinforcing expectations for a stronger Q4 performance.
Additionally, oil output recorded an increase in January, with the government reporting production of over 1.5 million barrels per day – which meets for the first time, Nigeria’s OPEC quota.
Economic Challenges Threatening Long-Term Growth
While the projected Q4 GDP improvement may offer a temporary sigh of relief, it does little to mask the deeper economic struggles confronting Nigeria. Inflation remains unyielding, eroding consumer purchasing power and limiting real economic gains. The government’s efforts to curb inflation through aggressive monetary policies, including interest rate hikes and tighter banking regulations, have yet to yield the desired effect.
Nigeria’s exchange rate instability has further complicated economic planning. While President Bola Tinubu’s administration moved to float the naira as part of broader economic reforms, the Central Bank of Nigeria (CBN)’s behind-the-scenes interventions have raised concern that the currency stability is still a long walk.
The government has outlined several fiscal and monetary policy initiatives aimed at stabilizing the economy and fostering long-term growth. Among these are significant reforms in the oil and gas sector, including the restructuring of the Nigerian National Petroleum Corporation (NNPC) into a fully commercial entity.
While these reforms are designed to improve efficiency and revenue generation, concerns persist over the delays in rehabilitating the country’s major refineries. The continued dependence on imported petroleum products has exacerbated the pressure on foreign exchange reserves and contributed to higher fuel prices, further straining household incomes.
On the revenue side, the government’s push to digitize the tax system and enhance compliance is expected to improve tax collection and expand the revenue base. However, with widespread economic hardship, many question whether increasing tax burdens on individuals and businesses is the right strategy at a time when economic recovery remains fragile.
In the monetary policy space, the CBN’s aggressive stance on curbing inflation has included raising interest rates and tightening money supply. While this may help stabilize prices in the long term, it has also led to higher borrowing costs for businesses and consumers, potentially stifling investment and economic expansion.
Will Nigeria Meet Its 3.75% GDP Growth Target for 2024?
The combination of inflationary pressures, exchange rate instability, contractionary monetary policies, and fiscal challenges is expected to keep economic growth below 3.5% for the full year.
The real test for Nigeria’s economy is expected to come in 2025 when the impact of current policies becomes clearer. If the government fails to address the structural issues driving economic instability, short-term GDP gains may amount to little more than a temporary respite in what remains a long and difficult journey toward sustained economic recovery.
