GDP: Diversify into non-oil sectors for true sustainability

Nigeria’s latest GDP data has sparked excitement in certain quarters.

At face value, it is the kind of news that should inspire celebration. Economic expansion, after all, is the sign of a country moving forward. Yet the deeper truth, which many Nigerians know all too well, is that GDP figures alone cannot mask the cracks in the economic foundation. Growth that does not translate into jobs, improved purchasing power, and broad-based prosperity risks becoming little more than statistical triumphalism.

According to the National Bureau of Statistics, the country’s economy grew by 4.23 per cent year-on-year in the second quarter of 2025, up from 3.48 per cent in the same period of 2024. This makes it the highest quarterly growth rate since mid-2021. In nominal terms, the size of the economy jumped to N100.73 trillion, up from N84.48 trillion in Q2 2024. These are not minor numbers; they demonstrate resilience at a time when many global economies are struggling with inflation, geopolitical shocks, and post-pandemic headwinds.

But look closer, and the excitement dims. The bulk of the growth in Q2 came from the oil sector, which recorded a striking 20 per cent expansion year-on-year, compared to a meagre 1.87 per cent in the preceding quarter. The reason was straightforward: daily oil production rose to 1.68 million barrels per day, up from 1.41 million in the previous year. Oil’s contribution to GDP rose to 4.05 per cent, from 3.51 per cent. For a country that has long depended on crude oil as its lifeblood, this rebound was predictable. Yet, paradoxically, the oil sector still accounts for less than five per cent of GDP, a stark reminder of how structurally lopsided Nigeria’s economy has become.

The real story lies in the non-oil economy, which contributed an overwhelming 95.95 per cent of GDP. This sector grew by 3.64 per cent in Q2 2025, up from 3.26 per cent in the same quarter of 2024. The services sector was a key driver, expanding by 3.94 per cent. Telecommunications and Information Services stood out with a 7.40 per cent increase, now accounting for more than a tenth of total GDP. Finance and Insurance, another bright spot, surged by over 15 per cent. These figures reveal that Nigeria’s growth engine is quietly shifting away from oil toward services, technology, and financial intermediation.

Agriculture, real estate, construction, and trade also contributed, though unevenly. The construction industry is gaining momentum, powered by urban expansion and public infrastructure projects. Agriculture continues to provide jobs but remains hampered by low productivity, climate vulnerabilities, and insecurity in rural areas. Manufacturing, alarmingly, slowed to just 1.6 per cent, its share of GDP falling to 7.81 per cent from 8.01 per cent in Q2 2024 and a worrying 9.62 per cent earlier in 2025. Manufacturing’s persistent underperformance is a red flag: no nation has achieved lasting prosperity without building a strong industrial base.

This disconnect between headline GDP growth and lived realities is clear. Inflation remains stubbornly high, especially food inflation, which is crushing household budgets. Per capita GDP stood at just $835 at the end of 2024, a staggering 58 per cent lower than the 2020 figure of over $2,000. In simple terms, the average Nigerian is worse off today than they were five years ago, even as official GDP data points upward. Growth without inclusivity risks entrenching poverty, fuelling inequality, and deepening the distrust between government pronouncements and the daily struggles of citizens.

For President Bola Tinubu and his economic team, the task ahead is not simply to grow GDP but to make growth work for Nigerians. Ideally, the economy should be expanding at between 7 and 10 per cent annually to absorb the millions entering the labour market each year and to reduce poverty meaningfully. More importantly, the composition of growth matters. An oil-driven surge cannot deliver long-term stability, not when global energy markets are in transition, and the world is moving steadily away from fossil fuels. The lesson from history is clear: every oil boom has been followed by painful busts, and Nigeria has repeatedly paid the price of over-reliance on hydrocarbons.

The path forward is to double down on non-oil sectors. Other emerging economies have shown what is possible when diversification is pursued with seriousness. Vietnam, once a war-ravaged agrarian economy, now earns over $50 billion annually from electronics exports and another $4 billion from rice. Brazil pulls in more than $41 billion each year from soybeans, while Indonesia generates over $30 billion from palm oil and rubber. These countries made deliberate choices to industrialise, add value to raw materials, and integrate themselves into global supply chains.

Nigeria has similar potential. Agriculture can be transformed from subsistence to agribusiness, leveraging technology for higher yields and value addition. Instead of exporting raw cocoa or cashew, Nigeria should be exporting finished chocolate and packaged cashew products. Instead of crude palm oil, the country should be shipping refined oils, cosmetics, and biofuels. Manufacturing clusters around textiles, pharmaceuticals, and consumer goods can reduce import dependence and create jobs. The services sector, already vibrant in telecoms and fintech can be scaled further into knowledge industries like outsourcing, digital content, and software engineering. Nigeria’s young population is a demographic asset if given the skills, infrastructure, and enabling environment to thrive.

Critical to all this is infrastructure. The cost of moving goods within Nigeria remains one of the highest in Africa. Investing in railways, roads, and ports will cut logistics costs, boost exports, and attract industries that depend on efficient supply chains. Power supply remains the Achilles heel: without reliable and affordable electricity, manufacturing will never be competitive. Tackling Nigeria’s chronic electricity crisis, including fixing the national grid while encouraging decentralised renewable solutions, is non-negotiable.

Security is another non-oil challenge that cannot be ignored. Banditry, kidnappings, and terrorism continue to cripple agricultural production and scare off investors. No investor, local or foreign will put capital into industries when workers cannot move freely or supply chains are constantly disrupted. A sustainable economic future rests on restoring law and order, especially in food-producing regions.

Access to finance is equally critical. Nigerian entrepreneurs are innovative, but high interest rates, cumbersome regulations, and lack of credit facilities often stifle them before they can scale. The government must reduce the cost of doing business, simplify regulations, and provide targeted financing for small and medium enterprises. This is how to unlock job creation and lift more people into prosperity.

Tourism is another underdeveloped sector with enormous potential. From the Obudu Cattle Ranch in Cross River to the ancient Kano city walls, Nigeria has destinations that could attract millions of visitors annually. With the right investment in infrastructure, branding, and security, tourism could become a significant foreign exchange earner, much like it is in Kenya, South Africa, or Morocco.

What the latest GDP data ultimately shows is that Nigeria cannot afford to rest on oil laurels. Yes, the oil sector’s rebound helped lift growth in Q2, but this is fragile and unsustainable. The non-oil sector already accounts for the bulk of the economy; it must now become the deliberate focus of government policy. Every policy lever from taxation to incentives, from infrastructure to education should be geared toward deepening the non-oil base.

The administration should not be satisfied with single-digit growth that fails to dent unemployment or reduce poverty. What Nigerians need is an economy that produces jobs, raises incomes, and builds resilience against external shocks. To get there, the country must do in earnest what it has long promised: diversify. Oil may still bring in revenue, but the future belongs to agriculture, industry, services, and innovation.