West Africa economic outlook 2025

Nigeria

Resilience in the economy

Nigeria’s real gross domestic product grew 4.23% year on year in the second quarter of 2025—the fastest since 2021, following a recent rebasing exercise.¹ The economy is expected to average 3.73% year-on-year growth from 2025 to 2027 (figure 1).²

Some key growth-driving factors are increased activity at the Dangote Refinery, a recovery in consumer demand as prices stabilize, improved dollar liquidity, and expansionary fiscal policy. The announcement of recent reforms³ like the new Tax Acts and Insurance Act is expected to attract more investment and strengthen the business climate. Nigeria is also preparing for elections in 2027, and the anticipated fiscal stimulus from campaign activities will likely boost growth despite inflation concerns.

Despite these positives, structural challenges continue to hinder Nigeria’s growth potential. Infrastructure gaps in critical sectors like power, transportation, and agriculture are affecting business operations. The current tight monetary policy environment, despite the 50-basis-point rate cut, is limiting credit growth, dampening business expansion plans, and overall profitability.

Tight financing conditions to rein in inflation and boost capital flows

Nigeria has maintained high interest rates for the last three years to address a severe cost-of-living crisis. The Central Bank of Nigeria (CBN) recently cut its benchmark rate by 50 basis points to 27% per annum in September 2025—the first reduction in five years.

Other changes include adjusting the asymmetric corridor around the policy rate to +/–250 basis points, cutting commercial banks’ cash reserve ratio to 45% from 50%, and introducing a 75% cash reserve ratio for public sector deposits.⁶ Inflation remains largely structural, driven by cost-push factors such as food insecurity and the exchange rate spillover effect on imported inflation. However, the CBN’s contractionary stance has partly helped limit money supply growth, boost capital inflows, and stabilize the naira.

Despite a projected inflation decrease, the CBN is expected to keep policy tight through 2025 to balance inflation control, financial stability, and address the risk of stunted growth and high operating costs. Anticipated fiscal pressures next year are also likely to prompt cautious monetary policy, leaving little room for further short-term interest rate cuts; at best, there might be modest cuts in 2026 and 2027.

Improved external position, but with pockets of volatility

Nigeria’s external position has improved, with gross external reserves exceeding US$42 billion in October 2025—the highest since September 2019—which is enough to cover around eight months of imports (figure 3).⁷ Several factors are driving this trend, like high interest rates, improved foreign exchange inflows, and a slight rise in domestic oil production. Investor confidence is also strengthening, as government reforms restore trust in Nigeria’s economic and policy environment. The naira has stabilized between 1,450 and 1,500 per US dollar through October 2025.

Barring major shocks to domestic oil production (averaging 1.39 million barrels per day,⁸ excluding condensates) and global oil prices, the naira is expected to remain stable through 2025. Increased refining will further strengthen net exports and enhance Nigeria’s current account. Year-end “Detty December” events will also likely draw higher US dollar inflows from nonresidents and foreigners.

However, renewed naira volatility is anticipated in 2026, driven by rising demand pressures and weaker investment flows as elections approach. Falling global oil prices pose an additional risk, with Brent prices projected to average US$58 per barrel in the last quarter of 2025 and around US$50 in early 2026.⁹ Consequently, the naira is forecast to weaken to an average of 1,650 per dollar in 2026 and 1,858 in 2027.¹⁰

Implications of Nigeria’s tax reform

The recent implementation of four landmark tax legislations by the federal government marks a historic shift in the country’s fiscal framework. Collectively called the “Tax Acts,” they comprise the Nigerian Tax Act 2025, the Nigerian Tax Administration Act 2025, the Nigerian Revenue Service (Establishment) Act 2025, and the Joint Revenue Board (Establishment) Act 2025.

These reforms represent the most comprehensive overhaul of Nigeria’s tax system in decades, redefining its tax landscape with major implications for businesses and taxpayers, including:

1. Increased compliance requirements and stricter penalties for violations, including a fiscalization process for value-added tax and a new e-invoicing system;
2. Expanded role of professional advisers and service providers in helping taxpayers navigate the new framework; and
3. Improved revenue mobilization, boost to investor confidence, and contributions to long-term fiscal sustainability.

Their success will depend on effective implementation, stakeholder engagement, and capacity building. If executed well, they could mark a milestone in Nigeria’s economic transformation and drive inclusive, sustainable growth.

Possible impact of the 2027 elections

Nigerians will head to the polls in 2027, with political realignments already underway and expected to intensify in 2026. The current government will be evaluated on the state of the economy and how market reforms affect consumer welfare.

A new coalition, called the African Democratic Congress, has emerged. Although defections have already started, potential internal leadership disputes could challenge the coalition’s stability.

Ghana

Strong growth expected amid decelerating inflation and rate cuts

Ghana’s economy is outperforming Nigeria, with real GDP growth of 6.3% in the second quarter of 2025, mainly driven by fishing (16.4% growth), information and communication technology (13.1%), and finance and insurance (9.3%).¹¹

Government initiatives like the 24-hour Economy and Accelerated Export Development Programs aim to unlock Ghana’s economic potential, create jobs, foster a supportive business environment, and attract investment. The Bibiani gold mine expansion in Western Ghana should also positively impact export revenues.

Ghana’s economy is projected to grow by 5.5% in 2025, 5.9% in 2026, and 6.1% in 2027 (figure 4).¹² However, several factors like fluctuations in cocoa production levels due to climate events, the spread of the swollen shoot virus, smuggling activities, and commodity price volatility could hinder these forecasts.

Single-digit inflation target reached before end-2025

Ghana achieved a single-digit inflation level of 9.4% in September 2025, after about four years of double-digit levels.¹³ The country has experienced a steady decline in the consumer price index, driven by a strong cedi, falling nonfood prices, and reduced supply-side pressures.

However, inflation is projected to average 15.6% in 2025—exceeding the Bank of Ghana’s 10% upper target—before moderating to an average of 9.7% in 2026 and rising slightly to 10.5% in 2027 (figure 5).¹⁴ Potential risks to Ghana’s inflation outlook include higher tariffs on utilities such as electricity and water and persistently high domestic food prices.

Further interest rate cuts are expected as inflation falls within the BoG’s target

The BoG has resumed adjusting interest rates, implementing a cumulative 650-basis-point cut to its monetary policy rate as of September 2025.¹⁵ Currently at 21.5% per annum, this high-interest-rate environment has helped strengthen the cedi and alleviate inflationary pressures.

Rates are expected to stay steady through 2025 before declining to 17% by end-2026.¹⁶ While these reductions are expected to ease financing constraints and stimulate credit and domestic demand, excessive easing may jeopardize progress made in inflation control.

The cedi swings from worst to one of the best-performing currencies in Africa

The cedi appreciated by over 40% in the first nine months of 2025 to an average of around 13 per US dollar, reaching about 10.3 in June (figure 6), and has continued to rise. This rebound is mainly driven by higher gold revenues, leading to greater international gold reserves. Additionally, frequent central bank interventions, successful debt restructuring, and initiatives like the Ghana Gold Board have further bolstered the cedi’s value.¹⁷

Ghana is set to receive a disbursement of US$385 million from the International Monetary Fund, following five successful staff-level reviews.

The cedi is projected to average 12.33 per US dollar in 2025, 12.5 in 2026, and 12.61 in 2027.¹⁸ However, potential monetary policy easing could reverse some of these gains, especially if the demand for gold diminishes, with declining global uncertainty.

Fiscal discipline, debt restructuring, and debt sustainability are the order of the day

The government has revised its 2025 expenditure forecast, reducing it from 270 billion cedi to 269 billion cedi, as actual spending in the first half of 2025 fell 14.3% below target,¹⁹ mainly due to lower interest payments and better fiscal discipline. The public debt stock has fallen by 15.65%, reaching 613 billion cedi, while the debt-to-GDP ratio is currently at 43.8%, down from 61.8% in December 2024.²⁰—well below the IMF’s 2028 target of 55%, signaling an improvement in Ghana’s debt sustainability.

There is potential for further credit-rating upgrades as investor confidence grows. In June 2025, Fitch upgraded Ghana’s credit rating to “B–“ with a stable outlook.²¹

However, risks to ongoing debt-sustainability efforts remain. To address this, capital spending must increase as the government continues fiscal consolidation. Effective resource planning and mobilization, capitalization on recent macroeconomic improvements, and better public–private sector collaboration are vital to build a resilient foundation for sustained economic recovery.