Nigeria’s Economy Slides To Fourth In Africa.
Nigeria, once heralded as Africa’s economic powerhouse, has slipped to fourth place among the continent’s largest economies, according to the International Monetary Fund’s (IMF) World Economic Outlook for April 2025. The projections estimate Nigeria’s gross domestic product (GDP) at $188.27 billion for 2025, trailing South Africa ($410.34 billion), Egypt ($347.34 billion), and Algeria ($268.89 billion). Despite the drop, analysts highlight signs of resilience and potential for recovery in Nigeria’s economic trajectory.
A decade ago, in 2015, Nigeria held the top spot with a GDP of $494.31 billion, outpacing Egypt ($350.12 billion) and South Africa ($346.66 billion). The country’s economic dominance was bolstered by its oil-rich resources and a 2013 GDP rebasing that accounted for fast-growing sectors like telecommunications and entertainment. However, recent years have seen Nigeria grapple with significant challenges, including currency devaluation and high inflation, which have eroded its GDP in dollar terms.
The IMF attributes Nigeria’s slide to a combination of factors, notably the naira’s sharp devaluation following economic reforms initiated in 2023 under President Bola Tinubu. The official exchange rate of the naira has plummeted by over 55% since these reforms, which included floating the currency and removing fuel subsidies. This has significantly reduced Nigeria’s GDP when measured in US dollars, despite nominal growth in naira terms from N202.4 trillion in 2022 to N234.4 trillion in 2023. Inflation, which surged to 33.95% in May 2024, has further strained purchasing power and economic stability.
South Africa has reclaimed its position as Africa’s largest economy, driven by its diverse economic base, including mining, manufacturing, and services. The rand’s relatively modest 4% depreciation against the dollar in 2024, coupled with improvements in energy supply and logistics, has bolstered its economic outlook. Egypt, despite its own currency devaluation of nearly 40% in 2024, holds second place, supported by economic reforms and foreign investment. Algeria’s rise to third is fuelled by its hydrocarbon exports, particularly to Europe amid global energy disruptions.
Despite Nigeria’s ranking drop, there are glimmers of optimism. The IMF projects a GDP growth rate of 3.34% for Nigeria in 2024, up from 2.86% in 2023, driven by sectors like financial services and mining. The non-oil sector grew by 4.13% in Q2 2024, according to Nigeria’s National Bureau of Statistics, signalling diversification efforts. The Dangote refinery, now operational, is expected to reduce fuel import costs and stabilise energy prices, potentially easing inflationary pressures projected to moderate to 20.7% in 2025.
Economic analyst Dr. Aisha Bello commented, “Nigeria’s fall to fourth reflects global economic realities and domestic policy shifts, but it’s not the full story. The country’s youthful population, growing tech sector, and agricultural potential are under-leveraged assets. With sustained reforms, Nigeria could regain ground.”
Government initiatives are also gaining traction. Federal revenue allocations rose by 91.6% from N976 billion in May 2023 to N1.87 trillion in April 2024, reflecting improved fiscal management. The Central Bank of Nigeria’s increase in the Monetary Policy Rate to 26.25% aims to curb inflation, while banking sector reforms strengthen financial stability.
However, challenges persist. Nigeria’s debt-to-GDP ratio is projected to rise to 46.6% in 2024, and debt servicing consumed 111% of federal revenue in 2023. Insecurity, low oil production, and food price spikes continue to hinder growth. The IMF notes that Nigeria’s current account surplus is expected to improve to 3.6% of GDP in 2025, driven by higher oil exports, offering a potential buffer.
As Nigeria navigates these turbulent waters, the focus remains on structural reforms and economic diversification. With Morocco ($165.84 billion) now fifth in the rankings, the competition among Africa’s economic giants is intensifying. For Nigeria, the path to reclaiming its former glory lies in harnessing its vast potential and addressing longstanding structural issues.
Sources: IMF World Economic Outlook April 2025, African Development Bank, National Bureau of Statistics, Nairametrics, Bloomberg.