Lagos State’s Gross Domestic Product (GDP) has reached $259 billion based on purchasing power parity (PPP), making it the second-largest city economy in Africa, following Cairo, Egypt.
The announcement was made during the launch of the Lagos Economic Development Update (LEDU) 2025, where officials provided an in-depth analysis of the state’s economic growth and future projections.
The report revealed that Lagos’ economy grew commendably in the first half of 2024, expanding to ₦27.38 trillion from ₦19.65 trillion in 2023.
Even with this expansion, there are still issues over the state’s low tax-to-GDP ratio, which stands at just 2.3%. Experts stressed the need for improved revenue mobilisation strategies to sustain growth and fund critical infrastructure projects.
Economic Outlook for 2025
The Lagos State Government has outlined economic projections for the 2025 fiscal year, with expectations for sustained growth and stability. Key highlights include:
- GDP Growth: Lagos state’s economy is projected to grow from ₦54.77 trillion in 2024 to ₦66.47 trillion in 2025, with real GDP growth estimated between 5.02% and 6.49%.
- Sectoral Performance: The service industry is expected to maintain its upward trajectory, supported by gains in agriculture and industrial production.
- Inflation Forecast: Overall inflation is projected at 34.2%, while food inflation is expected to be slightly higher at 34.9%.
- Revenue Projections: The government aims to generate ₦2.79 trillion in 2025, reinforcing the need for fiscal discipline and diversification of revenue sources.
Revenue Mobilisation Challenges and Reforms
Addressing the revenue gap was a key focus at the LEDU 2025 presentation. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, highlighted the disparity between Lagos’ economic size and its revenue generation.
“Lagos is big, but its revenue is small, collecting less than 2% of GDP,” Oyedele noted. “While some progress has been made, we still have a big room for improvement, and the time to change this narrative is now.”
He proposed three major strategies to enhance revenue collection:
- Property Taxation – Lagos, with its booming real estate sector, could generate substantial revenue if inefficiencies in land titling and valuation are addressed. Oyedele pointed out that cities like Bogotá earn over $1 billion annually from property taxes, a benchmark Lagos should aim for.
- Personal Income Tax Expansion – The government must leverage technology to capture high-income earners and the informal sector without stifling businesses. “A better approach to taxation is not to tax the seed, but the fruit. Let businesses grow, and tax them fairly on their successes,” he advised.
- Tax Harmonisation – The state needs to simplify its tax system to reduce redundancy and improve compliance. “A fragmented tax system breeds confusion and inefficiencies,” Oyedele said, stressing the need for a streamlined approach that fosters transparency and investor confidence.
According to him, with the right reforms, Lagos could generate up to ₦5 trillion annually in Internally Generated Revenue (IGR), enabling the government to fund infrastructure, education, and healthcare effectively.
The Bigger Picture
The LEDU 2025 report also aligns with Governor Babajide Sanwo-Olu’s ‘Budget of Sustainability,’ which prioritises economic diversification, social inclusion, and infrastructural development. Commissioner for Economic Planning and Budget, Ope George, underscored the importance of evidence-based policymaking in shaping Lagos’ future.
“Themed ‘Lagos Economic Outlook: Charting a Resilient Path Towards a Sustainable Future,’ this year’s LEDU underscores our commitment to fiscal sustainability and inclusive development,” George stated.
Meanwhile, Olayinka Ojo, Permanent Secretary of the Ministry of Economic Planning and Budget, acknowledged the need to address macroeconomic challenges such as inflation and revenue constraints.
“As the economic nerve centre of Nigeria, Lagos continues to set the pace… However, we must address macroeconomic uncertainties, inflationary pressures, fiscal constraints, and global economic headwinds,” she stated.
Lagos is an attractive destination for investors, with continued growth in infrastructure, technology, real estate, and manufacturing. However, economic stability will depend on addressing inflation, exchange rate volatility, and infrastructural challenges.
The State needs to balance economic expansion with sustainable revenue strategies to secure its long-term growth.
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