AfDB Downgrades Nigeria’s Economic Growth To 3.2%

The African Development Bank has launched its 2025 Nigeria Country Focus Report (CFR), urging a more strategic and coordinated approach to capital mobilisation as Nigeria advances its economic reform agenda.

Titled “Making Nigeria’s Capital Work Better for Its Development,” the report highlights the urgent need to improve how Nigeria mobilises, manages, and invests all forms of capital; fiscal, financial, human, natural, and business capital to accelerate structural transformation and foster inclusive growth.

The launch comes amid Nigeria’s economic reforms, including the removal of fuel subsidies, unification of exchange rates, and tax reforms. These measures reflect the government’s commitment to long-term macroeconomic stability and self-reliant development.

Despite this momentum, the report projects that real GDP growth will moderate to 3.2 per cent in 2025 and 3.1 per cent in 2026, down from 3.4 per cent in 2024, largely due to persistent structural bottlenecks and heightened global uncertainty.

In his opening remarks, director general for Nigeria at the African Development Bank, Dr. Abdul Kamara emphasised the significance of this moment for the country’s development agenda: “This report is both timely and practical. Nigeria is demonstrating bold leadership through difficult but necessary reforms. Its capital is more than financial, it includes human, natural, and institutional assets. What this report shows is the need for integrated strategies that make every form of capital work together to drive inclusive and sustainable transformation.”

Prominent among the report findings is the urgent need to enhance domestic resource mobilisation to close Nigeria’s annual development financing gap of $31.5 billion. While tax reforms and non-oil revenue expansion are beginning to yield results, the informal sector remains large, tax compliance low, and the tax-to-GDP ratio among the lowest in the region.

Head of fiscal and tax reforms implementation division at the Federal Inland Revenue Service (FIRS), Olufemi Olarinde,officially launched the report on behalf of the federal government, noting its relevance to Nigeria’s current fiscal trajectory: “We appreciate the efforts of the African Development Bank in contributing to this important report, which reflects our ongoing work in fiscal and tax reforms. It accurately captures both the strides we are making and the challenges we face as we strengthen Nigeria’s public finance system.”

To meet development goals, the CFR recommends broadening the tax base, improving compliance, reducing tax expenditures, and investing in the institutional capacity of revenue-generating agencies, while ensuring public spending is both efficient and impactful. The report also highlights governance constraints as key obstacles to effective capital mobilisation.

Fragmented oversight, overlapping mandates, and limited institutional coordination continue to undermine public trust and investment confidence.

In this context, lead economist for West Africa at the African Development Bank, Dr. Jacob Oduor, emphasised that policy tools like market-based exchange rate systems can support Nigeria’s economic resilience but only when backed by credible institutions and disciplined macroeconomic management.

Reinforcing this, country economist for Nigeria, Peter Engbo Rasmussen, noted:

“Nigeria’s commitment to fiscal reform is crucial to building a resilient economy. The CFR reveals that strengthening non-oil revenue and improving public financial management will not only reduce reliance on volatile oil markets but also provide the fiscal space needed to invest in people and infrastructure.”

Beyond fiscal policy, the CFR aligns with private-sector perspectives. Head of Research and Development at the Nigeria Economic Summit Group (NESG), Dr. Joseph Ogebe,echoed the report’s attention to inflationary pressure and the role of productivity: “The CFR’s findings resonate with our position at NESG.

“Price stability remains a pressing concern, with inflation disproportionately affecting micro and medium-sized businesses. We continue to advocate for a productivity-led deflation strategy and recommend a growth with depth approach that prioritizes sustainable economic expansion over reliance on borrowing.”

The 2025 Nigeria Country Focus Report is part of the Bank’s annual analytical series that mirrors the African Economic Outlook at the country level. These reports offer localized, evidence-based analysis tailored to national priorities and are designed to support reform implementation, policy dialogue, and development planning across the Bank’s Regional Member Countries.