Nigeria’s economy is anticipated to slow down in Q1 2025, continuing a decade-long trend marked by decreased post-holiday spending, inflation concerns, and currency instability. Key analysts stress the importance of consistent government spending and economic diversification to mitigate these seasonal downturns.
Nigeria’s economy typically experiences a sluggish start in the first quarter (Q1) due to a historical pattern of post-holiday downturns. As the fourth quarter (Q4) concludes with robust spending fueled by festive activities, Q1 sees reduced economic activity—projected GDP growth may decrease from 3.8% in Q4 to 3.6% in Q1 of 2025, largely due to waning post-holiday spending and diminished agricultural output.
Prominent economist Bismarck Rewane identifies seasonality as a key factor behind this annual trend. Following the economic high of Q4, attributed to significant spending and governmental expenditure, Q1 brings a stark contrast as household budgets tighten and agricultural productivity wanes. Muda Yusuf of the Centre for the Promotion of Private Enterprises echoes this sentiment, suggesting that uncertainty in early-year investments further exacerbates the slowdown.
The pattern, documented in a recent BusinessDay report, shows that from 2014 to 2024, Q1 GDP growth consistently lags behind Q4. Economic activities peak in Q4 due to festive spending, with Lagos generating N4.32 billion from its top nightclubs alone in December 2024. However, as the year begins, households curtail expenditures, government spending decreases amid budget planning, and agricultural activities slow down, leading to a decline in overall economic performance.
Inflation poses a significant challenge, with December 2024 seeing rates reach 34.8%. Although projections suggest a slight easing to 33.12% by the end of Q1 2025, persistence above 30% could burden consumer purchasing power and hinder economic recovery. Consequently, while the Purchasing Managers’ Index hints at some resilience in business activities, high borrowing costs, attributed to a sustained Monetary Policy Rate (MPR) of 27.50%, complicate expansion plans.
Currency stability remains a pressing concern; while Nigeria’s official exchange rate may strengthen slightly due to central bank interventions, parallel market volatility presents ongoing risks. Without significant investment in non-oil exports and sustained financial inflows, the naira may continue to face pressure. Additionally, predictions indicate that Nigeria’s trade balance will contract in Q1 2025, further complicating the economic landscape.
To break this cyclical downturn, economists advocate for more consistent government spending throughout the year rather than last-minute budget settlements in Q4. Moving towards economic diversification—expanding sectors beyond agriculture and festive-driven consumption—is critical. With already familiar seasonal slowdowns underway in early 2025, deeper structural reforms are necessary to ensure long-term stability and to transform the existing economic patterns.
In summary, Nigeria’s economy is forecasted to continue its first-quarter underperformance in 2025 due to seasonal spending cycles, inflationary pressures, and currency volatility. Experts emphasize the need for more balanced government expenditure and an expanded focus on diverse economic sectors. As Q1 2025 progresses, substantial reforms will be essential to break the prevailing cycle of economic downturns following Q4 highs.
Original Source: businessday.ng
