H1’2025 Macroeconomic Review and H2’2025 Outlook – Beyond Silver Linings: Statistical Gains, Social Strains
The Trump 2.0 administration’s efforts to restructure global trade, combined with the IMF’s upward revision to the 2024 baseline, led to a (0.5ppt downgrade in 2025 global growth projections to 2.89% (the weakest pace since the 2020 COVID-19 pandemic). This outlook reflects concerns over reinflation risks, geopolitics, supply chain, and broader challenges to global integration and migration. As such, Advanced Economies (AE5) and Emerging Markets and Developing Economies (EMDES) are projected to see a 0.5ppt decline apiece, to 1.4% and 3.7%, respectively. While the outlook for H2 remains modest, the continued strength in key economic indicators over, interest rate cut stimulant, potential for meaningful trade truce, and a rebound in commodity markets are key catalysts that are supportive of global economy and financial market performance going forward.
Shifting gears to the domestic macroeconomy, we made some bold calls at the start of the year regarding the expected performance of key macroeconomic indicators. Our projections were anchored on the historical trajectory of these variables, the policy antecedents of the current administration (fiscal and monetary), and permutations around global policy shifts, particularly with the clarity that a power change in the US. was imminent following Donald Trump’s victory in the November 2024 general elections. Despite limited guidance on factors such as the NBS choice of a new base year, sector reclassifications, component reweighting, and the inclusion of new activity sectors, we projected that GDP and the average inflation rate for 2025 would settle at 3.3% and 24.7%, respectively, in our base case scenario down from 3.4% and 33.0% in 2024. Halfway into 2025, the NBS has yet to publish the Q1:2025 GDP data, which should reflect, among other things, the contributions of eight newly introduced activity sectors unveiled during the GDP rebasing sensitization held in January 2025.
Meanwhile, the rebasing of the CPI has been completed, resulting in a reduction in the weighting of the food basket from 51.8% to 40.1%, while the core inflation weighting has risen from 48.2% to 59.9%. This statistical recalibration led to a notable drop in headline inflation by 10.3% in January 2025, bringing it down to 24.5% y/y. Since then, it has fluctuated mildly, averaging 23.7 % in H1:2025. While controversies linger around the rebased CPY’s true reflection of consumer price realities, we partly align with the NBS in recognizing Nigeria’s recent episodes of modest disinflation.
Furthermore, the only major positive surprise to our projections has been the exchange rate. Contrary to our initial average projection of N1,804.45/$ for the year, the Central Bank of Nigeria (CBN) has successfully stabilized the Naira exchange rate within N1,550.10/$ to N1,620.00/$, compared to the record volatility recorded in 2023 (down 48.0% to N907.11/$) and 2024 (down 41.0% to N1,538.25/$). This achievement has been driven by improved market transparency, tech-driven trading enhancements, strategic FX interventions, attractive OMO bill yields, reduced FX demand for energy imports (due to supply from the Dangote Refinery), and effective curtailment of speculative trading Consequently, we have revised our average exchange rate projection for 2025 to a more bullish N1,577.25/$ 1.00.
On the fiscal side, performance remains mixed. The timely repayment of the $3.4bn principal amount of the IMF Rapid Financing Instrument (RFI), twin credit rating upgrades (by Fitch and Moody’s), and a record Q1 trade surplus of N5.2trn are noteworthy highlights. However, persistent insecurity, particularly across key agricultural regions, static growth in crude oil production, and a growing debt profile remain the achilles’ heels of the fiscal narrative.
On balance, while Nigeria is making progress on several statistical metrics that appeal to international institutions, the most pressing issues for ordinary citizens, particularly inflation and insecurity, remain deeply troubling. Hence the call for authorities to look beyond statistical silver linings, as only statistical gains that translate to reducing social strains enhance the citizens’ welfare.
In the global fixed income space, sentiment was mixed: while EM bond markets rallied on dovish pivots in advanced economies, Sub-Saharan Africa faced higher average Eurobond yields (+60bps to 8.6%) and cautious sentiment. Nigeria’s debt market, too, remained under pressure as liquidity constraints, weak FX inflows, and low corporate issuance activity limited investor flexibility. Commercial paper and corporate bond issuance volumes fell y/y, with higher average pricing levels reflecting tighter credit conditions
