In recent times, two significant global developments have dramatically altered the economic landscape: the return of Donald Trump to the U.S. presidency and the escalation of the Israel-Iran conflict. With Trump reintroducing import tariffs—set at 10% across the board and additional duties on specific countries—global trade tensions have reignited. This move has raised questions about the future of multilateralism and has triggered a retreat of capital flows to emerging markets. Concurrently, the conflict in the Middle East has severely disrupted oil supply routes, increased freight costs, and introduced volatility in global commodity prices.

The cascading effects of these external shocks have compelled the International Monetary Fund (IMF) to lower its global GDP growth forecast for 2025 to 2.8%, down from an anticipated 3.3%. In contrast, Sub-Saharan Africa is expected to see a growth rate of 3.8%, driven by a cocktail of structural reforms and improved export performances. Yet, a caveat lingers—the region’s vulnerability to external shocks, especially in the realms of energy markets and financial flows, remains a pressing concern.

In Nigeria, a country deeply intertwined with oil, the implications of these global shifts are felt acutely. Despite notable efforts to diversify its export base, oil continues to be the lifeblood of the nation’s economy. The Federal Government’s ambitious ₦54.99 trillion budget for 2025 was anchored on a benchmark of US$75 per barrel and a production target of 2.06 million barrels per day. However, reality tells a different story—by the first half of 2025, oil prices averaged only US$72 per barrel, and production consistently lagged behind targets. This dissonance has spurred a widening fiscal gap, leaving many to ponder: Can Nigeria truly meet its ₦35 trillion revenue projection?

Amidst these challenges, glimmers of hope have emerged. The Purchasing Managers’ Index (PMI), a vital gauge of economic activity, maintained a score above 50 between January and May 2025, signaling expansion in sectors such as agriculture, industry, and services. Inflation, while still a concern, saw a slight decline—from 24.5% in January to 23% by May 2025—thanks to improved food supply, relative exchange rate stability, and methodological adjustments instituted by the National Bureau of Statistics.

The dynamics surrounding the exchange rate have shown promising signs of stabilization. As of June 2025, the Naira was trading at ₦1,539/US$, reflecting a mere 0.2% depreciation year-to-date. The implementation of the “willing buyer, willing seller” foreign exchange policy has not only fostered transparency but has also enhanced market confidence. Yet, there’s a caveat; Nigeria’s external reserves decreased by 8.5% in the first half of the year—from US$40.9 billion to US$37.3 billion—largely due to rising import bills and debt repayments.

According to FSDH, the ongoing stability of the exchange rate will hinge on sustained foreign exchange inflows, investor confidence, and fiscal discipline. With oil prices projected to be in the range of US$75 to US$78 per barrel, the onus is on Nigeria to not only maintain production but also to bolster non-oil exports. Analysts warn that any renewed slump in oil output or a further dip in global trade conditions could reignite currency volatility.

A pivotal moment arrived in June 2025, when President Tinubu enacted four transformative tax reform bills. These include the Nigeria Tax Act, the Nigeria Tax Administration Act, the Joint Revenue Board Act, and the Nigeria Revenue Service Act—the aim being to harmonize tax administration, improve compliance, and empower a new, independent national revenue service. Noteworthy provisions include raising the Capital Gains Tax for corporations from 10% to 30%, introducing a Development Levy on larger firms, zero-rating VAT on essential goods, and exempting small businesses with under ₦100 million turnover from tax filing requirements.

While these reforms are ambitious, they represent a significant shift in Nigeria’s revenue strategy, with expectations to elevate the country’s tax-to-GDP ratio from 10% to 18% within three years. Yet, the path to effective implementation remains fraught with challenges, particularly at the state and local levels.

In the capital markets, a sense of optimism is beginning to take root. By June 2025, the Nigerian Exchange (NGX) had reported a year-to-date return of 16.6%, outperforming many global indices. Banking and consumer goods stocks have led the charge, buoyed by solid corporate earnings and macroeconomic reforms. Interestingly, treasury bill yields and long-term bond rates have also dipped, signaling a renewed appetite for Nigerian assets.

Moreover, Foreign Portfolio Investments (FPIs) surged significantly, reaching US$5.46 billion in Q1—a staggering 67% increase from the preceding quarter. This resurgence can be attributed to FX reforms, positive real interest rates, and clearer policy direction. However, the looming risk of short-term capital outflows still hovers, underscoring the necessity for deeper, more stable capital investments in the economy.

Looking forward, FSDH has outlined several strategic imperatives for economic stakeholders in the latter half of 2025. The first priority is to enhance oil production—not just to meet budgetary benchmarks but also to improve export revenues. Additionally, there’s an urgent need to expand Nigeria’s non-oil export capabilities, particularly in agriculture and manufacturing, to diversify foreign exchange sources. Unlocking private-sector credit by lowering the high Cash Reserve Ratio (CRR) is critical for stimulating real sector growth. Finally, leveraging the momentum from ongoing tax reforms to boost state-level revenue and create a favorable business environment is essential.

On a broader scale, Nigeria’s digital economy and fintech landscape present unique opportunities. The integration of AI, open banking frameworks, and digital payment systems is redefining how financial services are delivered across the nation. FSDH recognizes that organizations embedding digital transformation into their operational models will have the agility, customer loyalty, and market reach needed to thrive.

While global risks—ranging from U.S. monetary policy shifts to geopolitical tensions and potential oil shocks—persist, Nigeria possesses the tools necessary for gradual stabilization. The success of the latter half of 2025 hinges on the disciplined execution of reforms, synchronized fiscal and monetary policies, along with a commitment to institutional accountability.

Nigeria’s economic outlook for the remaining months of 2025 exudes cautious optimism. Inflation is projected to continue its downward trend, potentially allowing for monetary easing later this year. The Naira may remain stable within its current range as GDP growth is anticipated to proceed modestly, driven by sectors such as agriculture, services, and a growing investor interest. Structural reforms appear to be taking root, but the second half of the year will require determined political will, strict macroprudential discipline, and courageous leadership.

As FSDH aptly notes, “Resilience is not merely about braving the storm; it’s about constructing systems that thrive amid it.” The forthcoming months present Nigeria with a unique opportunity to exemplify this resilience in H2 2025.

Edited By Ali Musa
Axadle Times international – Monitoring.