KEY POINTS

• The oil and gas sector faces declining demand, theft, and policy delays, threatening its profitability and competitiveness.
• Agriculture is hindered by climate change, outdated tools, and funding gaps, risking a worsening food crisis.
• Manufacturing struggles with energy costs, import dependence, and currency depreciation, limiting its growth and global competitiveness.

Nigeria, Africa’s largest economy, continues to be a land of opportunity for many businesses across diverse sectors (WorldBank). 

Its substantial population of over 250 million frequently leads to increased product demand, resulting in more market opportunities (WorldBank, 2022). 

However, the country’s inherent political, economic, and technological dynamics place certain sectors at significant risk as 2025 unfolds. 

In addition to the inherent challenges, global shifts have compounded the vulnerability of these sectors and businesses, necessitating businesses to adapt and thrive in Nigeria’s evolving business ecosystem (Nigeria Agenda 2050). 

Interestingly, the pivotal sectors of the Nigerian economy such as the oil and gas and agricultural sectors surprisingly make the vulnerable list due to the shifting market dynamics.

1. The Oil and Gas Sector

The oil and gas sector has been the backbone of Nigeria’s economy for decades as it contributed approximately 5.57 percent to the GDP in the third quarter of 2024, accounting for the most significant portion of export earnings, according to the National Bureau of Statistics.

Despite the glorious contribution of the sector, the sector is under siege from multiple fronts:

Global Energy Transition

The worldwide transition to renewable energy is decreasing the need for fossil fuels. 

Nations such as the United States and EU members have committed to reaching net-zero emissions by 2050, hastening the reduction of reliance on oil. 

This trend has a direct impact on Nigeria, as its crude oil exports significantly depend on foreign purchasers.

Regional Difficulties

There continues to be oil theft, vandalism of pipelines, and inefficiencies in operations.

From January to July 2024, Nigeria averaged a loss of 437,000 barrels of crude oil each day, valued at approximately $10 billion due to theft, vandalism, and other criminal actions according to Punch.

In addition, discrepancies in policy and the slow execution of the Petroleum Industry Act (PIA) impede the sector’s competitiveness.

Outlook for 2025: According to a monthly Reuters poll, oil prices are anticipated to be limited around $70 a barrel in 2025 due to sluggish demand from China and increasing global supplies, which are likely to undermine OPEC+-led attempts to stabilize the market.

This will further compress profit margins. Expanding into natural gas and funding renewable energy initiatives may provide salvation, yet the rate of change continues to be sluggish.

2. Agricultural Sector

The sector employs over 75 percent of the Nigerian population (it is the highest employer), which is not surprising given that over 70 percent of Nigerians engage in agricultural activities.

Despite its importance, the sector faces severe threats:

Effects of climate change

Erratic precipitation trends and increasing temperatures are interfering with agricultural cycles.

According to the Food and Agriculture Organization (FAO), 2024, by 10 September 2024, FAO had recorded 1.3 million hectares (ha) of land submerged, including 558 000 ha of cropland across the country.

Inadequate infrastructure

Inadequate storage options and insufficient mechanization still hinder productivity. The tools remain hoes, cutlasses, rakes and archaic implements used ages ago.

Many farmers are unaware of contemporary crop varieties; some require just a brief period to be harvested, while others are resistant to harmful pests.

This culminated in N3.5 trillion in 2024 in annual post-harvest losses, further mounting the scale of food challenges in the country.

Policy and Funding Gaps

Although programs such as the Anchor Borrowers’ Program have offered some assistance, obtaining credit continues to be a major obstacle.

Fewer smallholder farmers were able to obtain loans because of elevated interest rates and administrative obstacles.

Outlook for 2025: The agricultural sector needs substantial investment to upgrade its infrastructure and enhance climate resilience. Without such investments, Nigeria faces a worsening food crisis.

3. Manufacturing Sector

Nigeria’s manufacturing sector has historically struggled with infrastructural shortcomings and elevated operational expenses.

These difficulties are anticipated to worsen in 2025 unless there is intervention.

Expenses for energy

Electricity continues to pose a major challenge, with most manufacturers depending on diesel generators for energy.

Rising fuel prices and regular power outages raise production expenses, rendering Nigerian products less competitive on the global market.

Data revealed companies spent N635.2 billion on alternative power sources such as generators, inverters and solar power amid poor electricity supply and rising tariffs.

Import Reliance

The dependency of the manufacturing sector on imported raw materials makes it vulnerable to fluctuations in exchange rates.

In 2024, the naira lost value by more than 40 percent, adding extra pressure to manufacturers’ budgets.

Global Tensions

The persistent impact of the COVID-19 pandemic, alongside continuing geopolitical conflicts like the Russia-Ukraine war, have interrupted global supply networks, posing challenges for Nigerian manufacturers in obtaining raw materials affordably.

Forecast for 2025: Manufacturing expansion will likely continue sluggishly unless structural reforms address energy and supply chain issues.

4. Retail sector

The retail sector in Nigeria, especially small and medium-sized enterprises (SMEs) contributes enormously to the informal sector. It has been affected by decreasing consumer purchasing power.

Inflation reached 34.6 percent in late 2024, diminishing disposable incomes and curbing demand.

E-commerce vs traditional retail

Although online platforms such as Jumia and Konga have experienced growth, physical stores are facing difficulties.

The elevated expenses of leasing commercial properties, varying exchange rates and cost of operations have intensified their difficulties.

Supply chain disruption

Worldwide supply chain challenges, along with the naira’s decline, have raised the prices of imported items.

Retailers encounter the simultaneous difficulties of increased input expenses and decreased consumer expenditure.

Outlook for 2025: The survival of the retail industry will hinge on creative approaches, including the adoption of e-commerce and the implementation of affordable supply chain methods.

Policies implemented by the government to stabilize the naira and control inflation will also be essential.

Navigating a challenging landscape

While this analysis highlights significant challenges, it is not intended to dishearten stakeholders in these sectors but rather to serve as an awakening call to brace up and implement proactive strategies for resilience and growth.