Nigeria has marked its strongest economic growth in nearly a decade, with a notable performance in the fourth quarter of 2024. However, while fiscal improvements have bolstered growth, inflation remains a significant concern, according to the latest analysis by the World Bank.
The country’s economy expanded by 4.6% year-on-year in the fourth quarter, driven by sweeping reforms introduced by President Bola Tinubu’s administration. These include the removal of costly fuel subsidies, reductions in electricity allowances, and the devaluation of the naira. While these reforms are seen as vital for long-term fiscal health, they have contributed to upward pressures on inflation, particularly impacting essential goods.
Alex Sienaert, the World Bank’s lead economist for Nigeria, highlighted that early indicators point to continued expansion into early 2025, with business activity showing positive momentum. The World Bank has revised its forecast for Nigeria’s 2024 growth to 3.6%.
A central aspect of the country’s economic reform has been foreign exchange policy changes, which have resulted in a more stable and unified exchange rate. This move has enabled the Central Bank of Nigeria to rebuild foreign reserves, now surpassing \$37 billion. Sienaert described these reserves as a vital cushion for Nigeria against global economic volatility, particularly given the country’s dependence on oil exports.
On the revenue front, Nigeria saw a 4.5% increase in GDP from government revenue, a significant achievement driven by subsidy removals, improved tax collection, and increased remittances. This surge in revenue helped reduce Nigeria’s fiscal deficit to an estimated 3% of GDP in 2024, down from 5.4% in the previous year. However, the full benefits of the subsidy removal are still unfolding, with Sienaert noting that additional fiscal gains are expected over time.
Despite these positive developments, inflation continues to challenge Nigeria’s economic stability. Rising prices, particularly for food and transportation, have made life increasingly difficult for many Nigerians. The World Bank has warned that maintaining tight monetary and fiscal policies will be essential for keeping inflation in check while supporting the ongoing recovery.
In summary, while Nigeria’s economic growth has been impressive in 2024, the country must continue to navigate the dual challenges of inflation and fiscal reform. If these issues are managed effectively, the country’s economy is expected to maintain its positive trajectory in the coming years.