Nigeria’s economy showed robust signs of recovery in the second quarter of 2025, with a 4.23% rise in Gross Domestic Product (GDP) and external reserves hitting $42 billion, the highest level since 2019. The positive momentum is attributed largely to strategic fiscal reforms, including subsidy removals and tax policy changes expanding the tax base, alongside a strong rebound in oil production.

According to the Central Bank of Nigeria (CBN), Nigeria’s GDP growth of 4.23% in Q2 is the fastest pace in four years, surpassing projections by the International Monetary Fund (IMF) and building on a 3.4% annual growth forecast for 2025. The surge was boosted by a 20.46% increase in the oil sector, the country’s main revenue source, contributing to expanding foreign exchange inflows essential for the economy’s stability.

External reserves—the foreign currency holdings used to back the country’s currency and manage economic shocks—rose to $42.03 billion by mid-September 2025, the highest in six years and exceeding the previous high of nearly $42 billion in 2019. This represents an increase of over $692 million within 18 days as reserves climbed steadily since July. The reserves now provide more than nine months of import cover, surpassing the six-month threshold considered a sign of economic strength for emerging markets.

Several factors have contributed to this impressive build-up. The CBN Governor, Dr. Olayemi Cardoso, highlighted that tighter monetary policies, including forex demand management and subsidy reforms, have been effective. Subsidy removals, especially on fuel, reduced unnecessary expenditure and eased pressure on foreign exchange. Additionally, tax reforms have expanded the tax base, generating additional government revenue to support infrastructure and social programs. Improved oil production volumes and mild recovery in crude prices, despite market volatility, further bolstered Nigeria’s foreign earnings.

A Bureau De Change operator, Abubakar Ardo, affirmed the CBN’s firm stance on regulating forex activities and import controls, saying, “The combined effect of higher oil receipts, tighter forex policies, increased remittances, and cautious investor confidence is sustaining the reserves at this level.” Remittances from Nigerians abroad, attracted by a relatively weaker naira, and rising foreign portfolio investments driven by higher interest rates have also played important roles.

For Nigerians on the ground, these macroeconomic improvements are beginning to translate into real-life benefits. Inflation, which peaked above 33% in previous years, has dropped to a more manageable 20.12% as of August 2025, easing the cost of living pressures. The trade sector has recorded a surplus for five consecutive quarters, signaling improved export performance and diversifying the economy beyond oil.

Experts remain cautiously optimistic about sustaining this growth trajectory. PwC’s mid-year economic outlook projects a GDP growth of about 3.4% for the entire year while recognizing ongoing risks such as inflation, debt burdens, and poverty. Continued fiscal discipline and reforms will be crucial to maintain investor confidence and enhance Nigeria’s economic resilience.

In summary, Nigeria’s economy is showing tangible signs of recovery backed by solid GDP growth, rising external reserves, and successful tax and subsidy reforms. The next steps involve consolidating these gains through further reforms, infrastructural investment, and inclusive policies to ensure the economic uplift benefits all Nigerians and positions the country for sustainable long-term growth.