Nigeria's inflation plummets to 18% driving economic recovery

Author

Isaac Osei-Kissi
November 13, 2025

 

Weekly African Market Insights

Date: November 13, 2025

Executive Summary

Africa’s growth outlook remains positive for 2025, driven by easing inflation, currency stabilization in key economies, and surging FDI—especially in digital, green energy, and manufacturing sectors. Notable disinflation in Nigeria and Ghana, resilient GDP expansion in Sub-Saharan Africa, and multi-billion-dollar green technology investments signal broadening opportunity. However, persistent high debt, infrastructure gaps, and policy implementation risks weigh on the region’s full potential[1][5][7] .

Detailed Insights

Economic Indicators

  • GDP Growth

    • Continental average GDP growth for 2025 is projected at 3.7% (up from 3.4% in 2024), reaching 4.0% in 2026, led by recoveries in major economies[5][7][11] .

    • Nigeria recorded 4.23% YoY real GDP growth in Q2 2025—the fastest since 2021—attributed to macro reforms and a rebased GDP methodology. Growth is forecasted to average 3.73% annually through 2027[1] .

    • South Africa's real GDP growth is expected to slow to 1.2% in 2025, due to global volatility and domestic logistical constraints, but could average 1.8% over the medium term if infrastructure reforms accelerate[3] .

    • Rwanda achieved 8.9% growth in 2024, driven by strength in services and agriculture. Growth is expected to normalize but remain among Africa’s highest in 2025[9] .

  • Inflation and Currency

    • Continental median inflation fell to 4.5% in 2024 from a 2022 peak of 9.3%, with further moderation projected in 2025 as commodity prices stabilize and monetary policies tighten[1][7] .

    • Nigeria’s inflation dropped sharply from 32.7% (2024) to 18.02% (Sep 2025), while the naira stabilized; tight monetary policy is set to persist to guard against cost-push pressures[1] .

    • Ghana’s inflation entered single digits (9.4%, Sep 2025) for the first time in years, supporting currency appreciation (+40% for the cedi YTD)[1] .

    • Risks: Inflation could remain above central bank targets where energy/food prices or tariffs rise[1][3] .

  • Debt and Fiscal Position

    • Public debt servicing consumes about 2% of SSA GDP. Fiscal consolidation is underway; however, many states remain vulnerable to external shocks and constrained fiscal space[7][9] .

    • South Africa and several resource-rich countries face ongoing pressure from weak investment and rising debt service[3][7] .

Foreign Direct Investments (FDI)

  • FDI Recovery and Trends

    • FDI into Africa surged by 75% (2024-2025), boosted by mega deals, particularly in Egypt (notably a transformative infrastructure project)[6] .

    • Sectoral rebalancing: There is a decisive pivot away from extractive industries to technology, digital economy, green energy, and manufacturing[2][10] .

    • Top investment destinations in 2025 include Egypt, Nigeria, South Africa, Kenya, Ethiopia, Morocco, and fast-rising Rwanda and Senegal. Manufacturing and large-scale renewable projects are magnets for both intra-African and international FDI[2][4] .

  • Intra-African Investment Flows

    • The African Continental Free Trade Area (AfCFTA), activated in 2023 (including a new Investment Protocol), is accelerating intra-African FDI flows and reducing regulatory barriers, which is key for multi-country supply chain investments and regional growth[4][2] .

  • Key Sectors for FDI

    • Renewable Energy: Multi-billion-dollar green hydrogen, wind, and solar projects are underway in Egypt, Morocco, Mauritania, and South Africa—boosting both FDI and export potential[2] .

    • Technology and Digital Economy: Africa leads emerging markets in new tech investment projects, especially fintech, mobile telecom, and e-commerce[2][10] .

    • Manufacturing: Morocco is building one of the world’s largest EV battery plants ($6+ billion from Chinese investors), while North and West Africa are attracting manufacturing FDI in automotive and textiles[2][10] .

Sectoral Insights

  • Technology & Innovation

    Africa’s start-up ecosystem, especially in Nigeria, Kenya, and South Africa, is seeing strong venture capital and corporate FDI, focusing on fintech, logistics, and agri-tech. Tech is now a main FDI growth driver[2][10] .

  • Renewable Energy

    Egypt, Mauritania, and Morocco attract international investment in green hydrogen and utility-scale solar/wind, reinforcing Africa’s role in global energy transition[2] .

  • Agriculture and Infrastructure

    Rwanda’s rapid agricultural expansion and Ethiopia’s infrastructure-led growth strategies attract ongoing donor and investor attention[9] .

    Infrastructure investment, especially in transport and power, is central to investor and government priorities in Nigeria and Ghana, though gaps persist[1] .

  • Telecommunications and FinTech

    Mobile payments and digital banking platforms are scaling rapidly, drawing FDI and enhancing regional financial inclusion (M-Pesa in East Africa, Flutterwave in West Africa)[2][10] .

  • Real Estate

    Urbanization and demographic growth (Africa’s youth dividend) continue to stimulate demand for commercial and residential property, mostly in major cities and economic zones[2] .

Regulatory and Policy Developments

  • Monetary Policy: Central banks in Nigeria and Ghana have cut rates to stimulate credit, but continued tightness is expected until inflation is durably contained; further easing may be delayed[1] .

  • Trade & Integration: AfCFTA’s Investment Protocol is lowering barriers and harmonizing standards across member states, boosting cross-border trade and FDI flows[4] .

  • National Reforms: Many governments are prioritizing investment-friendly reforms, including digitalization of business processes (notably Morocco, Egypt, and Kenya) and business environment improvements[2][4] .

  • Risks: Further delays in logistics and energy reforms, or sudden regulatory changes, could impede investment[3][1] .

Geopolitical Considerations

  • Political stability: Most major investment destinations (Morocco, Egypt, Kenya, Ghana) maintain relative stability; pockets of risk (e.g., coups in West/Central Africa) have limited spillover on continental FDI outlook thus far[2][4] .

  • International relations: Africa’s alignment with EU, China, Gulf, and US investment interests is reflected in diversified FDI sources, especially in infrastructure and technology[2][6] .

  • Regional economic cooperation is strengthening due to AfCFTA, creating larger, more attractive markets for global investors, though implementation gaps persist[4] .

Investment Opportunity Spotlight

Green Hydrogen & Renewable Energy Hubs

Example: Multi-billion-dollar green hydrogen (Mauritania, Egypt) and wind/solar (Morocco, South Africa) projects are now fast-tracked, enabled by improved policy clarity and export opportunities[2] .

Potential Returns

High, based on rising global demand for green fuels and Africa’s low base costs.

Risk Assessment

Execution risk (infrastructure, grid capacity), evolving global hydrogen market, and policy continuity. Risk can be mitigated via structured PPPs and multilateral finance backing.

FinTech Ecosystems (Nigeria, Kenya, Ghana)

Example: Rapidly expanding mobile banking and digital payments (e.g., Flutterwave, M-Pesa) address a vast unbanked population, with sizeable venture and FDI inflows continuing[2][10] .

Potential Returns

Strong given soaring adoption margins and low penetration rates.

Risk Assessment

Regulatory change, cybersecurity, local market fragmentation; mitigated by phased scale-up and product localization.

Forward-Looking Perspective

Expect continued GDP growth acceleration across Africa in 2026 as inflation abates and monetary policy eases, though external shocks (e.g., commodity prices, debt market volatility) pose downside risk[5][7] .

Significant infrastructure and digital investment deals are anticipated as AfCFTA implementation matures, with further integration likely to buoy cross-border supply chains and investor returns[4] .

Watchlist: Fiscal discipline, pace of digital economy adoption, rollout of AfCFTA investment provisions, and energy-livelihood policy coherence will underpin next year’s investment climate.

Sources & References

© 2025 African Market Insights | Weekly Intelligence Report

Disclaimer: This report is for informational purposes only. Always conduct independent research and consult financial advisors before making investment decisions.