Opinion

GDP Records Robust Growth in Q2-25

Based on the recently released GDP report by the Nigerian Bureau of Statistics (NBS), the Nigerian economy grew by 4.23% y/y in Q2-25, surpassing the GDP growth recorded in the previous quarter (Q1-25: +3.13% y/y | Q2-24: +3.48% y/y).

Analysing by sectors, the oil sector recorded solid growth, expanding by 20.46% y/y (Q1-25: +1.87% y/y), primarily reflecting higher crude oil production. The non-oil sector also grew stronger, settling at 3.64% y/y (Q1-25: +3.19% y/y), underpinned by higher growth in the agricultural (+2.80% y/y vs Q1-25: +0.07% y/y) sector, while the growth in the manufacturing (+1.60% y/y vs Q1-25: +1.69% y/y and services (+3.94% y/y vs Q1-25: +4.33% y/y) sectors moderated from the previous quarter.

Oil Sector Records Robust Growth

The oil sector grew by 20.46% y/y in Q2-25 (Q1-25: +1.87% | Q2-24: +10.08% y/y), expanding at the fastest rate since Q3-17 (+23.03% y/y), while the sector’s contribution to GDP expanded to 4.05% (Q1-25: 3.97%). The strong growth was largely driven by higher crude oil production (including condensates), which averaged 1.68mb/d in Q2-25, representing a 19.1% increase from the Q2-24 average of 1.41mb/d, according to the NBS.

We attribute the increase in crude oil production to the significant reduction in oil theft and pipeline vandalism underpinned by the government’s enhanced security interventions through increased surveillance, as well as improved oil investment. During the period, crude oil production increased across the Bonny (+54.2% y/y), Qua Iboe (+24.8% y/y), Brass (+12.1% y/y), Okwuibome (+8.2% y/y) and Escravos (+6.7% y/y) terminals, while it declined at the Odudu (-23.4% y/y) terminal.

Agricultural Sector Drives Non-Oil Sector Expansion

Growth in the non-oil sector edged higher, increasing by 3.64% y/y in Q1-25 (+3.19% y/y | Q2-24: +2.80% y/y). This stronger growth was driven by higher expansion in the agricultural sector (+2.80% y/y vs +0.07% y/y), while the growth in the manufacturing (+1.60% y/y vs Q1-25: +1.69% y/y and services (+3.94% y/y vs Q1-25: +4.33% y/y) sectors eased.

Services: Within the services sector, key subsectors such as ICT (+6.61% y/y vs Q1-25: +7.40% y/y), trade (+1.29% y/y vs Q1-25: +1.78% y/y), and real estate (+3.79% y/y vs Q1-25: +4.61% y/y) recorded slower growth compared to the previous quarter. In the ICT subsector, we believe the 50.0% tariff increase approved by the Nigerian Communications Commission (NCC) may have weighed on consumer demand for telecom services.

Nevertheless, the sector remained resilient, posting a rebound from the slowdown in the corresponding period of the prior year (Q2-24: +4.38% y/y), which was partly hindered by exchange rate pressures and regulatory constraints. Meanwhile, tighter financial conditions and elevated borrowing costs likely weighed on activity in the trade and real estate subsectors.

By contrast, the transportation sector maintained strong momentum, expanding by 22.09% y/y (Q1-25: +14.08% y/y), supported by improved petroleum product supply and reduced price volatility. Similarly, growth in the finance and insurance (+16.13% y/y vs Q1-25: +15.03% y/y) subsector strengthened, underpinned by robust net interest income in a high-interest rate environment.

Agriculture: The agriculture sector (+2.82% y/y vs Q1-25: +0.07% y/y) recorded its highest growth since 2021 (+3.78% y/y), stemming primarily from a rebound in the livestock (+1.64% y/y vs Q1-25: -16.69% y/y) and fishing (+2.57% y/y vs Q1-25: -0.21% y/y) subsectors. We attribute the improvement to increased consumer demand partly due to festive celebrations (Easter & & Eid-el-Kabir) and ease in cost pressures. However, the crop production (+3.32% y/y vs Q1-25: +3.71% y/y) subsector slowed partly due to the commencement of planting activities.

Manufacturing: In the manufacturing sector, oil refining (+15.78% y/y vs. Q1-25: +11.51% y/y) sustained positive growth for the second consecutive quarter, supported by increased refining activities that boosted the supply of petroleum products. By contrast, other key subsectors posted more moderate performances, with the food, beverage & tobacco (+2.15% y/y vs. Q1-25: +3.48% y/y) and cement (+4.86% y/y vs. Q1-25: +4.94% y/y) subsectors recording slower expansions.

The moderate growth in the food, beverage & tobacco subsector reflects still-recovering consumer demand alongside elevated financing costs that continue to pressure margins and production. Similarly, weaker construction activity (+5.27% y/y vs. Q1-25: +6.21% y/y) likely dampened growth in the cement industry. Meanwhile, the textile, apparel, and footwear (-1.32% y/y vs Q1-25: -1.63% y/y) industry remained in contraction, weighed down by high production costs, infrastructure bottlenecks, and intense competition from imports.

Outlook – GDP to grow by 3.60% y/y in Q3-25

Oil GDP: Despite recent gains in crude oil production, ageing infrastructure, marked by frequent leakages and operational inefficiencies, remains a drag on stronger output growth. Consequently, we project average crude oil production will settle at 1.67mb/d in Q3-25, marginally below the Q2-25 level of 1.68mb/d. Nevertheless, a favourable base effect (Q3-24: 1.47mb/d) is expected to support double-digit growth, with the oil sector forecast to expand by 13.61% y/y.

Non-Oil GDP: We expect the non-oil sector growth to slow from the previous quarter (+3.24% y/y vs Q2-25: 3.64% y/y), The softer growth outlook reflects the impact of three key factors on production including (1) seasonal patterns such as the lean season, (2) subdued consumer demand underpinned by low disposable income, and (3) tight financial conditions. Specifically, we project moderate expansion across the Agriculture (+2.63% y/y vs Q2-25: +2.82% y/y), Manufacturing (+1.55% y/y vs Q2-25: +1.60% y/y) and Services (+3.71% y/y vs Q2-25: +3.94% y/y) sectors.

Agriculture: We forecast the Agricultural sector growth to ease to 2.63% y/y (Q2-25: 2.82% y/y), representing a lower growth in crop production activity due to weaker output during the lean season (typically occurs between July & September). Nonetheless, the livestock subsector is expected to remain in the expansion territory as easing cost pressures continue to support production.

Services: In Services, we anticipate a modest expansion in trade relative to the previous quarter. However, recovery is likely to remain subdued as elevated financing costs and only a gradual rebound in consumption continue to weigh on growth. The ICT subsector is expected to sustain robust year-on-year growth supported by increasing digital adoption (mobile broadband, fintech, e-commerce, cloud services), though rising telecom service costs and weak purchasing power could moderate the pace of expansion from Q2-25.

Meanwhile, the prevailing high-interest-rate environment should continue to support growth in the finance and insurance subsector. In transportation, beyond improved petroleum product supply, growth is being underpinned by fleet expansion among logistics firms, spurred by e-commerce, as well as ongoing investments in road expansion and railway modernisation projects.

Manufacturing: Manufacturing sector growth (+1.55% y/y) is projected to outpace the level recorded in the corresponding period of last year (+0.76% y/y) aided by improved business confidence due to naira stability and lower cost pressures. However, activities may soften relative to Q2-25, partly reflecting the seasonal slowdown in production typically observed in the third quarter.

The rainy season effect, most evident in construction-related industries, is expected to weigh on cement output, while still-weak consumer demand, despite gradual improvement, is likely to constrain growth in the food, beverage, & tobacco and other manufacturing subsectors.

Based on our projections for both the oil and non-oil sectors, we expect real GDP growth to settle at 3.60% y/y in Q3-25, with full-year 2025 growth at 3.65% y/y (vs. +3.34% y/y in 2024).

Cordros

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

To Top