FSDH Merchant Bank has released its Nigeria Macroeconomic Report for H1 2025, providing a comprehensive analysis of both global and domestic economic trends. The findings were presented during the bank’s Mid-Year Economic Outlook Roundtable, held on Wednesday, July 9, 2025.
Themed “Balancing on the Edge in a Fragile World,” the report explores the economic ramifications of global instability particularly trade tensions and geopolitical crises—on Nigeria’s performance in the first half of the year. It also offers projections for the remainder of 2025, highlighting potential risks and opportunities.
According to the report, key global influences such as the escalating Israel-Iran conflict, increased protectionism under U.S. President Donald Trump, and unstable capital flows contributed to global uncertainty, which in turn impacted Nigeria’s external outlook. Despite these challenges, Nigeria managed to maintain a degree of economic resilience, supported by a surge in non-oil exports, a gradual decline in inflation, and renewed investor confidence.
At the roundtable event, Bukola Smith, Managing Director and CEO of FSDH Merchant Bank, underscored the significance of reform-driven resilience:
“Nigeria has demonstrated encouraging signs of macroeconomic stability in the face of global headwinds. Our PMI data suggests an expanding economy, inflation is decelerating, and exchange rate reforms are strengthening market confidence. However, sustaining this progress requires deep structural reforms, especially in energy, trade, and fiscal management.”
Key Insights from the H1 2025 Report:
- Global Instability, Domestic Impact: Heightened geopolitical tensions and trade barriers have led to downward revisions in global growth forecasts by the IMF. Oil price fluctuations and trade uncertainties are influencing Nigeria’s external sector.
- Inflation Trends: Inflation moderated from 24.5% in January to 23% in May 2025, aided by a revised Consumer Price Index methodology and improving supply-side conditions.
- Exchange Rate Stability: The Naira traded within a more stable range, benefiting from enhanced foreign exchange transparency and reforms by the Central Bank of Nigeria (CBN), which helped restore investor confidence.
- Expansion Signals: Although official GDP figures are yet to be released, the Purchasing Managers’ Index (PMI) remained consistently above 50 points throughout the first half of the year, indicating growth across major sectors.
- Oil Revenue Concerns: Oil’s contribution to total exports dropped to 62.9%, down from 81% in Q1 2024. Continued production shortfalls could strain fiscal revenue targets.
- Capital Market Performance: The NGX All Share Index (NGX-ASI) posted a 16.6% year-to-date return, outperforming several global indices. Foreign portfolio inflows also reached US$5.03 billion in Q1 2025.
- Tax Policy Advancements: In June, four key tax legislations were enacted to harmonize tax administration, boost compliance, and promote equity. These reforms are expected to lift the tax-to-GDP ratio from 10% to 18% within three years.
Hakeem Muhammed, Executive Director, Global Markets and Institutional Banking, commented on the shifting investor landscape:
“Investor sentiment has begun to turn positive. Nigeria’s bond and T-bill markets are attracting renewed interest, and equity markets are gaining momentum. At FSDH, we understand that in times like this, clarity and partnership matter more than ever. While we can’t control global events or predict every market move, we remain committed to helping you navigate the complexity with perspective, precision, and purpose.”
The report also highlighted modest recovery in fixed-income markets, where yields on government bonds and Treasury Bills began to soften. However, oil-related stocks on the NGX continued to lag, weighed down by global crude market pressures.
Stella-Marie Omogbai, Executive Director, Corporate Banking and Branches, provided an interest rate outlook:
“With the MPR at 27.5%, prime lending rates currently exceed 30%, but projected downward trends in H2 2025 offer a more favourable outlook for debt-funded expansion and capital investments,” she said.
“Interest rates are expected to ease due to projections on MPC rates dropping to at least 27%, supported by fresh capital inflows in the banking industry and reduced inflation concerns. FSDH, in partnership with DFIs, will continue to provide funding at competitive rates to help businesses grow.”
Outlook for H2 2025:
In its forecast, FSDH projects that with improved oil production and continued disinflation, Nigeria could achieve a GDP growth rate of 4.4%, a reduction in inflation to 17.1%, and foreign reserves reaching US$44.3 billion in a best-case scenario. However, this would require consistent progress on structural reforms, particularly in the power and petroleum sectors, and enhanced policy coordination between fiscal and monetary authorities.
The report concludes that while Nigeria has shown promising signs of recovery, the road ahead demands strategic policy execution, deeper economic diversification, and continued vigilance in a fragile global environment.
