Given that government’s borrowing is a drag on domestic savings, and much of the resulting spend drives rapid increases in domestic prices, reforms to public finance, improvement in revenue quality, and public sector efficiency, top the list of reforms recommended by the GDP figures for Q3 2025. Despite the hoopla generated by the Federal Government’s tax reforms, the main goal here is to broaden the tax base, rather than raise tax rates.
The aggregate output numbers for the three months to end-September, released last week by the National Bureau of Statistics (NBS), show that the Nigerian economy continues to grow. Although still below the rates recorded pre-2014, the real GDP growth of 3.98 per cent year-on-year in the third quarter of this year was down in relation to the 4.23 per cent (year-on-year) growth recorded in the second quarter of 2025, but slightly higher than the 3.86 per cent recorded in Q3 2024. This general picture notwithstanding, weak manufacturing and consumer demand, together with the dampening effect of inflation on the real gains from economic expansion, mean that much of the growth recorded in the first nine months of this year is structurally fragile.
Up 18.12 per cent on an annual basis, a strong nominal GDP growth in the third quarter underlined the adverse toll that strong domestic price increases continue to inflict on the economy. The fact that the Nigerian economy is now overwhelmingly non-oil remains important, nonetheless. At 53.02 per cent of domestic output, services sector-led growth held steady last quarter, followed by agriculture (31.21 per cent), and industry (15.8 per cent). Seasonal harvests pushed real growth to 3.79 per cent (up on previous quarters) in the agriculture sector, where crop production remained the dominant activity. Weak nominal growth (3.18 per cent), however, highlights downsides to the sector from input-cost inflation and suppressed profitability.
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Because oil export receipts will be important for securing initiatives and reform efforts designed to boost domestic growth — structural reforms to the economy will have to be paid for, if nothing else — even as we celebrate an increasingly diversified domestic economy, we cannot ignore the oil sector’s fortunes. It matters, therefore, that the NBS’ figures show that despite output improvement, the sector remains too small and unstable to play this role. Especially because of security challenges, OPEC production ceilings, and infrastructure bottlenecks that continue to limit performance, oil production in the third quarter of this year averaged 1.64 million barrels per day (mbpd), up from 1.47mbpd in Q3 2024 but slightly down from Q2 2025. (Until December 2026, OPEC has set the country’s production quota at 1.5mbpd.)
With a growth rate of 19.63 per cent, the finance and insurance industry’s momentum is one of the most positive trends in the NBS’ report. On the other hand, weak consumer demand, likely reflecting inflation-driven income erosion, showed up in the trade numbers. At 1.98 per cent year-on-year, real output growth here is still below population growth. Similar concerns show up in the figures for the industry sector, where weak output momentum remains a structural concern for job creation and export diversification.
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In the last two years, the Federal Government has gone some way to stabilising the economy. However, the fact that the manufacturing and trade sectors continue to show weak real growth, despite high nominal increases, underscores the role of inflation and foreign exchange instability in suppressing domestic economic activity.
The manufacturing sector’s weakness is, arguably, one of Nigeria’s biggest structural bottlenecks. Real manufacturing growth of 1.25 per cent is not just weak, at 3.45 per cent, nominal growth is far below inflation. And, together, both are still below the 5–7 per cent needed if the economy is to significantly reduce the current levels of poverty. High energy costs, foreign exchange shortages, along with import dependence, and logistics inefficiencies, are the proximate causes of the sector’s problems, and they provide a useful backdrop for considering possible reform ideas for strengthening domestic production.
In the last two years, the Federal Government has gone some way to stabilising the economy. However, the fact that the manufacturing and trade sectors continue to show weak real growth, despite high nominal increases, underscores the role of inflation and foreign exchange instability in suppressing domestic economic activity. The further deepening of the foreign exchange market (to increase transparency and reduce arbitrage); the use of export diversification incentives (e.g., tax credits for non-oil exporters), to increase supply; and the lowering of transaction costs in the financial services space to expand diaspora remittance capture via official channels would all matter.
As will expanding the economy’s strategic food reserves to cushion food price shocks, reducing logistics and transport bottlenecks to lower inflation pass-through, and coordinating fiscal policy tightly with monetary policy to avoid contradictory signals to the markets. The need for this portfolio of reforms is highlighted by the 18 per cent+ surge in nominal GDP growth last quarter. Given food prices’ impact on general price levels, and agriculture’s contribution to domestic output (31 per cent), it is concerning that profitability in the sector is eroding rapidly, despite last quarter’s modest growth.
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We can do no worse, then, than rapidly push for the sector’s mechanisation, including through the provision of long-tenured tax rebates for local agro-machinery assembly. The bulk purchase of fertiliser/seed inputs and their distribution through digital platforms (to eliminate intermediaries) will be important if we are to stabilise the availability of input in the sector. Two more reform initiatives will help in the sector: expanding irrigation by prioritising low-cost community irrigation across the northern states to reduce dependence on rain-fed farming; and the improvement of rural roads to increase post-harvest evacuation of produce.
Together with the quarterly conduct by governments of payroll audits, linkage of budget releases to performance measures, and reduction of recurrent spending to free up capital expenditure, governments should be able to provide an ambient economic space supportive of the economy’s speedier growth.
Manufacturing, on the other hand, will require energy reforms that offer embedded and cluster power licences for industrial zones; allow manufacturers to get into contracts directly with gas suppliers at discounted tariffs; export rebates for finished goods to revive textile, food processing, and pharmaceuticals; and the expansion of backward integration mandates in cement, sugar and steel to other industries like plastics and pharmaceuticals, to strengthen local value chain development.
The expansion of community-based pipeline policing models that reduce vandalism in the oil rich Niger Delta is critical to meeting the goal of stabilising crude output between 1.7–2.0 mbpd and increasing gas monetisation. Both the fast-tracking of refinery rehabilitation and private refinery integration to reduce the drain from fuel import, and the resolution of joint venture cash call arrears through asset swaps or long-term settlement instruments, would help create a growth-sustaining ecosystem in the oil and gas sector.
Given that government’s borrowing is a drag on domestic savings, and much of the resulting spend drives rapid increases in domestic prices, reforms to public finance, improvement in revenue quality, and public sector efficiency, top the list of reforms recommended by the GDP figures for Q3 2025. Despite the hoopla generated by the Federal Government’s tax reforms, the main goal here is to broaden the tax base, rather than raise tax rates. Three channels for doing this recommend themselves: integration of informal sector revenues via simple, digital micro-tax regimes; enforcement of property taxes in high-value urban areas; and the digitisation and automation of all federal and state tax collection systems.
Together with the quarterly conduct by governments of payroll audits, linkage of budget releases to performance measures, and reduction of recurrent spending to free up capital expenditure, governments should be able to provide an ambient economic space supportive of the economy’s speedier growth.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
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