While favourable external conditions often helped to sustain economic growth, good policies matter a lot. The exchange rate unification policy of the Central Bank of Nigeria (CBN), other reforms supporting inflation numbers decline are opening the economy to global investors. With the re-emergence of monetary policy easing era after five years break, comes the drive to attract new investments, lower lending costs and promote government’s overall plan of growth and stability. Precious Ugwuzor reports 

Nigeria economy has held up remarkably well in recent months despite drop in crude oil prices which constitute over 90 per cent of its forex earnings.

From the growth in Gross Domestic Product (GDP) numbers, drop in inflation rate, exchange rate stability, surge in external reserves to rise in capital inflows are strong points to show that the economy is pushing up.

Aminu Gwadabe, president, Association of Bureaux De Change Operators of Nigeria, said Nigeria’s monetary policy implementation has improved, and the resilience of economy strengthened in recent times.

“Findings showed that in the past, many economies were reluctant to let their exchange rates move freely. But with better-anchored inflation expectations and stricter macroprudential regulation, Nigeria has increasingly allowed the exchange rate to act as a shock absorber, and central bank shifted its focus toward stabilizing economic activity,” he said.

For him, by sustaining the reforms and stronger foundations, Nigeria can turn hard-won resilience into long-lasting stability and growth of the economy.

The monetary policy easing started last month with the Central Bank of Nigeria (CBN)-led Monetary Policy Committee cutting benchmark interest rate by 50 basis points from 27.5% to 27%, marking the first rate cut since the tightening cycle began five years ago. 

The decision to cut rate was reached at the 302nd Monetary Policy Committee meeting, and reflects a shift towards supporting economic growth amid easing inflationary pressures.

The rate cut follows five consecutive months of slowing inflation, with projections indicating continued disinflation through the rest of 2025.

This policy easing signals the CBN’s confidence in a stabilizing macroeconomic environment while aiming to stimulate economic activity and is expected to ease borrowing costs, improve liquidity in the banking sector, and potentially support stronger consumer spending and investment growth.

Adeyemi Adeniran, Statistician-General of Nigeria and CEO of the National Bureau of Statistics (NBS),  said the latest  Consumer Price Index (CPI) report showed that headline inflation rate dropped from 21.88% in July to 20.12% in August.

“Headline inflation (year-on-year) moderated further to 20.12% in August 2025, from 21.88% in July, driven by the decline in both food and core inflation. Besides, the second quarter GDP report solidly puts growth within the quarter at 4.23%, representing a 4-year high of 4.23% in second quarter of the year’, up from 3.13% in first quarter,” he said.

The NBS report showed the growth was driven by appreciable improvements across the oil and non-oil sectors, with stability in the oil sector and expansions in agriculture, industries and services sectors cumulating in above average performance output.

According to the GDP breakdown, oil sector grew by 20.46% in second quarter 2025 as against 1.87% recorded in first quarter, riding on the back of double-digit growth in crude oil production.

Olayemi Cardoso, CBN governor, said monetary policy easing became necessary following a review of macroeconomic developments. According to him, the decision by the MPC to ease the policy stance was made in the light of improving inflation trends.

“The committee’s decision to lower the monetary policy rate was predicated on the sustained disinflation recorded in the past five months, projections of declining inflation for the rest of 2025 and the need to support economic recovery efforts,” Cardoso said.

Bukola Bankole, Partner & Corporate Finance Expert at TNP, said that by lowering the benchmark rate by 50 basis points to 27%, the MPC made a modest but symbolic move as it marks the first break from months of aggressive tightening. For businesses already borrowing at rates above 30% however, this adjustment will not ease financing costs immediately, but it signals recognition that growth cannot be perpetually stifled in the name of inflation control.

“For investors, Nigeria’s yield story remains unchanged because even after the cut, local instruments remain among the most attractive across frontier and emerging markets. So, a half point change does little to alter that. The real test is whether inflation starts to ease and whether the Naira can achieve meaningful stability”.

“As we all know, inflation in Nigeria is not demand-driven; it is cost-push, reflecting exchange rate volatility, the knock-on effects of subsidy removal, high energy costs, and food supply disruptions. So certainly, against this backdrop, further hikes would have been the wrong medicine,” she said.

“I will say this MPC decision reflects an effort to balance vigilance on inflation with the need to create space for credit expansion and investment. The real challenge however remains consistency, as without predictable policy, stronger fiscal alignment, and structural reforms that address the root causes of inflation, this cut will remain symbolic as with a lot of other actions previously taken”. 

“If those elements are however in place, then this small cut could truly mark the beginning of a more sustainable policy mix that supports growth without abandoning the fight for price stability”.

Bismarck Rewane, managing director, Financial Derivatives Company Limited, said the remainder of 2025 appears poised for a stronger performance, with foreign currency inflows and stable commodity prices providing support.

Monetary Policy perspectives

In its efforts to tame inflation, the CBN recently hosted the Monetary Policy Forum 2025, featuring fiscal authorities, legislative, private sector, development partners, subject-matter experts, and scholars with the theme: “Managing the Disinflation Process”.

The forum is a major push to improve monetary policy communication, foster dialogue, and collaborate on critical issues shaping monetary policy.

During the event, Cardoso explained that the apex bank’s focus is to sustain price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship.

He said the apex bank is continuing its disciplined approach to monetary policy, aimed at curbing inflation and stabilising the economy.

Cardoso reiterated that the goal of the CBN is to ensure that monetary policy remains forward-looking, adaptive, and resilient.

In addressing our economic challenges, collaboration is key: “Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence,” Cardoso said.

“Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship,” he added.

The CBN also focused on strengthening the banking sector, introducing new minimum capital requirements for banks (effective March 2026) to ensure resilience and position Nigeria’s banking industry for a $1 trillion economy.

These reforms and developments reflect the Bank’s commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.

“As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability,” Cardoso stated.

He said moving from the exchange rate targeting framework to the inflation targeting framework aligned with the apex bank’s determination to bring inflation upsurge under control in line with its price stability mandate.

Inflation uptick has remained a major concern to the CBN and is the time to use monetary policy tools to control it.

Non-oil sector growth continues

The non-oil sector also recorded growth of 45 basis points, expanding by 3.64 per cent in second quarter 2025 as against 3.19 per cent in the previous quarter. Non-oil sector’s contribution to the economy stood at 95.95 per cent in second quarter as against 96.03 per cent in first quarter, despite the strong oil sector growth.

Segmental analysis indicated appreciable growths across the non-oil sector. Agriculture GDP grew by 2.82 per cent in second quarter 2025 as against 0.07 per cent recorded in previous quarter. It had grown by 2.60 per cent in second quarter 2024.

Industries GDP, which had grown by 3.72 per cent in second quarter 2024, doubled to 7.45 per cent in second quarter 2025 as against 3.42 per cent in first quarter 2025. However, Services GDP was slower with a growth of 3.94 per cent in second quarter as against 4.33 per cent in previous quarter. It had recorded 3.83 per cent in second quarter 2024.

In terms of contribution, Services, Agriculture, and Industries accounted for 56.53 per cent, 26.17 per cent, and 17.31 per cent of the overall GDP respectively.

Experts said the latest GDP report showed that the economy was on the right track but called for more synergistic policies to deepen economic productivity.

Chairman, Nigeria Economic Summit Group (NESG), Mr. Niyi Yusuf, said the economic report underlined the gains of macroeconomic reforms, although the government needs to do more to catalyse the full potential of the economy.

“This is a steady progress in the right direction, and we need to stay the course, maintain momentum, and drive for broad based growth across all sectors of the economy. We need more pro-growth regulations and regulators, predictable justice system, more private sector investments in critical sectors and security of lives and assets to fully unlock the potential of the economy,” Yusuf said.

World Bank growth projection

The World Bank recently gave a positive verdict on Nigeria’s economic growth trajectory, highlighting three-year unbroken growth for the country.

In the bank’s Global Economic Prospects for June, the bank posited that Nigeria will have three-year unbroken growth records- growing at 3.6 per cent in 2025, 3.7 per cent in 2026 and 3.8 per cent in 2027.

The World Bank however, slashed its global growth forecast for 2025 by 0.4 percentage point to 2.3 per cent, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.

In its twice-yearly Global Economic Prospects report, the bank lowered its forecasts for nearly 70 per cent of all economies – including the United States, China and Europe, as well as six emerging market regions – from the levels it projected just six months ago before U.S. President Donald Trump took office.

The bank stopped short of forecasting a recession, but said global economic growth this year would be its weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5 per cent, the slowest pace of any decade since the 1960s.

The bank said global inflation was expected to reach 2.9 per cent in 2025, remaining above pre-COVID levels, given tariff increases and tight labor markets.

 According to the World Bank, growth in Sub Saharan Africa is projected to strengthen to 3.7 per cent in 2025 and average 4.2 percent in 2026- 27, assuming the external environment does not deteriorate further, inflation declines as expected, and regional conflicts subside.

The World Bank Group’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said that outside of Asia, the developing world is becoming a development-free zone. 

The World Bank’s Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose, said emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict.