How Naira Devaluation Problem Renders Nigeria’s GDP Growth Meaningless in 2025
By Aremu Adebayo
At the start of 2024, the World Bank predicted Nigeria’s Gross domestic product (GDP) would grow by 3.3%, a leap from the 2.9% growth recorded in 2023. The IMF shared similar sentiments, forecasting a 3.1% growth. By April, the IMF nudged its projection upward to align with the World Bank’s numbers at 3.3%.
Nigeria, on its part, set its sights on a 3.49% GDP growth for 2024 and an ambitious 4.6% by 2025, as outlined in the 2024-2026 Medium-Term Expenditure Framework (MTEF).
The National Bureau of Statistics (NBS) reported a 3.4% GDP growth in Q3 2024, an improvement from the 2.54% growth in the same period the previous year.
On paper, it looks like Nigeria is heading in the right direction. However, comparing the relative value of the currency to others in the global economy tells a different story.
READ MORE: ANALYSIS: Devalued Naira, Inflation Undermine Reported 3.46% GDP Growth
NAIRA VALUE UNDERMINES GDP GROWTH
Nigeria’s GDP might look promising in the local currency, but the naira’s devaluation has stripped away its value in foreign exchange.
In 2023, Nigeria’s GDP was N234 trillion — equivalent to about $364 billion at the time, according to the IMF. But in 2024, and despite the projected GDP rising to N302 trillion, its value has plunged to just about $200 billion. That represents more than a 45% drop in value.
The currency projections for 2025 are cautious. The 2024 budget assumed an exchange rate of N750 to the dollar, according to the MTEF. By 2025, the government forecasts that this rate will be doubled to N1,500.
VERIV, a regional data platform, also warned the naira could plummet to N2,000 in a worst-case scenario or stabilise at N1,790 in a more optimistic outlook.
PROJECTIONS FOR 2025
For 2025, the World Bank predicts a GDP growth of 3.5%, while the IMF has trimmed its earlier forecast to 3.0%. VERIV remains optimistic, estimating a higher 3.6% growth.
However, the naira’s freefall may continue to overshadow these perceived gains.
At a 3.0% growth rate, Nigeria’s GDP might reach N352 trillion, according to the IMF. Yet, this figure’s value against the dollar would shrink to just $195 billion.
OPTIMISM OR OVERREACH
Nigeria’s targets of 3.49% GDP growth for 2024 and 4.6% for 2025, the IMF’s projections and the World Bank’s forecast, suggest overall optimism for the economy. Whether this translates to real-time change, however, is a different question.
By Q3 2024, capital expenditure performance was at 50%, meaning half of the planned projects for that year, were yet to be funded.
Recurrent expenditure — covering salaries and overheads — fared worse at 48%.
