Nigeria’s economy showed encouraging signs of macroeconomic stability in the first quarter of 2026, but persistent cost pressures, structural challenges, and rising geopolitical risks continue to pose significant threats to sustained growth, the Managing Director of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf has said.
In its latest Policy Brief titled “Q1 2026 Economic Review and Q2 Outlook: Macro Stability Gains Amid Persistent Cost Pressures and Rising Geopolitical Risks,” the CPPE noted that while key economic indicators have improved, the real economy remains under strain.
According to the report, inflation continued its downward trend, easing to about 15.06 per cent by February 2026 from over 24 per cent in early 2025. The relative stability of the naira, which traded within the ₦1,340 to ₦1,430 per dollar band during the quarter, also contributed to moderating imported inflation and improving business confidence.
The CPPE further highlighted a significant boost in Nigeria’s external reserves, which rose above $50 billion in early 2026, driven by improved oil earnings and enhanced foreign exchange liquidity. Economic growth also remained positive, supported by recovery in the oil sector and sustained expansion in non-oil activities, with business indicators such as the Purchasing Managers’ Index (PMI) remaining above the 50-point benchmark for growth.
Despite these gains, the organisation stressed that the high cost of living remains a major concern for Nigerians. Elevated transportation and energy costs continue to erode household purchasing power, while businesses grapple with rising production expenses due to unreliable electricity supply and dependence on expensive alternative energy sources.
“Insecurity in key agricultural regions continues to disrupt food supply, sustain inflationary pressures, and weaken rural economic activities,” the report stated, adding that high lending rates and weak consumer demand are further constraining economic expansion.
Looking ahead to the second quarter of 2026, the CPPE expressed cautious optimism but warned of increasing downside risks. It noted that the current disinflation trend is fragile and could be reversed by rising global oil prices triggered by ongoing geopolitical tensions, particularly in the Middle East.
While higher crude oil prices may boost Nigeria’s export earnings and government revenue, the report warned that the immediate impact would likely be higher domestic fuel costs, increased logistics expenses, and renewed inflationary pressures.
The think tank also cautioned that the economy faces a growing risk of stagflation, where rising prices coincide with slowing growth, driven by persistent cost pressures and weakening consumer demand.
On monetary policy, the CPPE advised caution, noting that while the Central Bank of Nigeria has begun a modest easing cycle, further aggressive tightening could be counterproductive. It argued that the current inflationary trend is largely cost-driven rather than demand-induced, and additional rate hikes could stifle investment and economic recovery.
The report also flagged emerging political risks ahead of the 2027 general elections, warning that increasing political activities could distract from economic governance and slow down critical reforms.
In addition, the CPPE raised concerns about the implementation of the 2026 federal budget, estimated at about ₦68 trillion, citing potential challenges such as weak revenue performance, delays in capital releases, and rising political influence on spending priorities.
For businesses and investors, the organisation advised a shift towards resilience and efficiency, emphasising cost control, energy diversification, foreign exchange risk management, and cautious investment strategies.
“Success in the current environment will depend on strong operational efficiency, prudent financial management, and strategic positioning in sectors with resilient demand and growth potential,” the report noted.
The CPPE described Q1 2026 as a critical turning point for Nigeria’s economy, with clear gains in macroeconomic stability. However, it stressed that sustaining these gains will require deliberate policy actions to address structural bottlenecks, manage emerging risks, and protect vulnerable populations.
