Over the past few weeks, I have been reflecting on Nigeria's projected economic growth of over 3 per cent in 2025. I must assume I am not alone in this reflection. The projection has attracted increasing scrutiny, particularly because it has not translated into measurable improvements in living standards for most citizens. Despite reported economic growth, poverty in Nigeria has worsened consistently over the past four years. World Bank estimates suggest that the share of Nigerians living below the poverty line rose from about 56 per cent in 2024 to nearly 62 per cent in 2025, the highest level in recent history, underscoring the growing disconnect between headline growth figures and lived economic realities.
While some observers point to improved performance in selected sectors, this narrative is undermined by two critical realities. First, the Federal Government reportedly implemented only about 25 per cent of its appropriated budget during the fiscal year. Second, this occurred amid rising commodity prices, accelerating inflation, and continued reliance on sectors with limited production and employment elasticity. Together, these conditions raise legitimate concerns about the quality and sources of Nigeria's growth.
In most developmental states, public expenditure plays a catalytic role in economic growth. It crowds in private investment, expands economic infrastructure, lowers transaction costs, and builds productive capacity. Over time, this process deepens domestic capital formation, enhances local value creation, drives industrial productivity, enables structural sectoral shifts, and supports export diversification.
Nigeria's recent experience, however, appears to diverge sharply from this pathway.
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Rather than deploying fiscal policy to stimulate productive capacity, the government has increasingly relied on the domestic capital market to finance deficits. This approach has inevitably crowded out private sector access to finance. While it has contributed to increased foreign capital inflows, a closer examination of the data shows that these inflows have been driven largely by portfolio investments in money market instruments, FGN bonds, treasury bills, and other short-term assets.
Such inflows may temporarily support liquidity and exchange rate stability, but their multiplier effects on the real economy are minimal. In the absence of productive investment, this form of financial inflow resembles building a skyscraper on a weak foundation; impressive in appearance but structurally fragile.
This pattern in capital inflows mirrors developments across the broader economy. Rather than being driven by productivity gains or industrial expansion, growth in 2025 appears increasingly survival-led. Households, investors, and more worryingly, industrial firms are adjusting to rising costs and declining real incomes by expanding low-productivity activities. As a result, key indicators of structural development, industrial depth, domestic capital accumulation, export capability, and labour productivity, remain weak or continue to deteriorate.
This raises a critical question: Where did the growth come from?
Driven by political expedience and the need to sustain a highly import-dependent, consumption-led economy, recent reforms liberalised commodity prices and the exchange rate. These measures sharply increased prices and nominal transaction values. Once adjusted through national accounting deflators, this translated into reported real GDP growth, despite limited changes in underlying physical output. Although such outcomes may not have been intended, they represent the lived economic reality, one that government policies have increasingly normalised rather than addressed.
Significantly, therefore, much of the reported growth appears to reflect price and valuation effects, rather than genuine increases in productive output.
At the same time, growth has been concentrated in sectors such as trade, telecommunications, financial services, and informal activities. These sectors tend to expand with population growth and inflation rather than productivity or value addition. While they contribute to GDP, they offer limited employment absorption, weak domestic production linkages, and minimal capacity for structural transformation.
Although countries can, under certain conditions, strategically defy comparative advantage to stimulate growth, such strategies require symmetrical information, strong coordination, and coherent industrial policy execution across all tiers of government. These conditions remain largely absent in Nigeria.
Consequently, Nigeria's economy has become increasingly circulatory rather than productive, recording growth figures without building the productive capabilities required for sustainable development. The prevailing model is consumption-driven, services-heavy, import-dependent, externally financed, and statistically inflated by price dynamics.
In this context, it is reasonable to conclude that the observed growth is superficial rather than structural.
Growth vs Inclusive Growth: What Should Be the Priority?
Some commentators argue that growth should take precedence, with development expected to follow later. Others suggest that the government should focus primarily on 'keeping the economy running', even if inclusive or structural outcomes lag. This thinking may partly explain recent efforts at banking and insurance sector recapitalisation, alongside broad tax reforms aimed at 'taxing the fruit rather than the tree'.
However, financial deepening alone cannot transform an economy that remains structurally stagnant, largely trading primary commodities in global markets amid weak coordination between industrial and FDI policies. Despite the financial sector's preference for trade financing, Nigeria remains a low trade-dependent, weakly integrated global value chain economy with high commodity exposure.
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While keeping the economy operational is necessary, it is equally the responsibility of the government to ensure that growth generates real productivity gains, not merely survival-based economic activity. This requires effective coordination across all tiers of government in managing national industrial policy and deliberately directing capital toward productive sectors with high employment and innovation elasticity.
Nigeria must begin to import knowledge and capability, not ignorance, and export competitiveness, not imitation.
Conclusion
While Nigeria's reported 3 per cent growth rate is not necessarily false, it is shallow. Growth, in a developmental sense, must be accompanied by rising productivity, export capability, domestic capital formation, and industrial depth.
The central question, therefore, is not whether Nigeria is growing, but whether it is building the productive foundations required for sustainable and inclusive development. The government must rebalance its priorities so that growth not only sustains the economy but also facilitates development by strengthening domestic productivity and institutional absorptive capacity.
Dipo Baruwa is a business climate development analyst.
