The African Development Bank has reduced Nigeria’s economic growth projection to 3.2% for 2025, down from 3.4% in 2024, citing persistent structural bottlenecks and global uncertainty despite ongoing reform efforts and macroeconomic stability measures.
The downward revision comes as Nigeria implements comprehensive economic reforms including fuel subsidy removal, exchange rate unification, and tax system overhauls. While these measures demonstrate government commitment to long-term stability, their immediate impact on growth momentum remains constrained by underlying structural challenges.
Dr. Abdul Kamara, Director General for Nigeria at the African Development Bank, emphasized the strategic importance of integrated capital mobilization approaches. “Nigeria is demonstrating bold leadership through difficult but necessary reforms. Its capital is more than financial, it includes human, natural, and institutional assets,” he stated.
The bank’s 2025 Nigeria Country Focus Report, titled “Making Nigeria’s Capital Work Better for Its Development,” highlights the urgent need for improved coordination in mobilizing fiscal, financial, human, natural, and business capital. This comprehensive approach aims to accelerate structural transformation and foster inclusive economic growth.
Nigeria faces a significant development financing gap of $31.5 billion annually, requiring enhanced domestic resource mobilization strategies. Despite ongoing tax reforms and non-oil revenue expansion efforts, the informal sector remains large, tax compliance low, and the tax-to-GDP ratio among the lowest regionally.
Olufemi Olarinde, Head of Fiscal and Tax Reforms Implementation Division at the Federal Inland Revenue Service, acknowledged the report’s relevance to current fiscal initiatives. “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,” he noted.
The report recommends broadening the tax base, improving compliance mechanisms, reducing tax expenditures, and investing in institutional capacity of revenue-generating agencies. These measures aim to ensure public spending efficiency while maintaining fiscal sustainability and economic growth momentum.
Governance constraints represent key obstacles to effective capital mobilization, with fragmented oversight, overlapping mandates, and limited institutional coordination undermining public trust and investment confidence. Addressing these challenges requires comprehensive institutional reforms and enhanced policy coordination.
Dr. Jacob Oduor, Lead Economist for West Africa, emphasized that market-based exchange rate systems can support economic resilience when backed by credible institutions and disciplined macroeconomic management. This approach aligns with Nigeria’s current reform trajectory and long-term stability objectives.
The projected growth moderation to 3.1% in 2026 reflects continued structural adjustment challenges amid global economic uncertainty. However, successful implementation of ongoing reforms could potentially improve medium-term growth prospects and economic resilience.
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