Economic growth ebbs in the first quarter of 2026

Q1 reading falls just short of expectations: Nigeria's GDP expanded 3.9% on a year-on-year basis in Q1, following a 4.1% expansion in the prior quarter. Q1's reading was the weakest since Q1 2025 and marginally undershot market expectations.

Oil sector decelerates and crop losses hit agriculture: The oil sector grew 2.6% in annual terms in Q1, following a 6.8% expansion in the prior quarter. Meanwhile, the non-oil sector grew 3.9% in annual terms in Q1, following 4.0% growth in the previous quarter. Compared with the prior period's data, readings in Q1 worsened for the agricultural sector (+3.2% in annual terms vs +4.0% in Q4) and the industrial sector (+3.5% vs +3.9% in Q4). In contrast, the reading for the services sector improved in Q1 (+4.3% vs +4.2% in Q4). The slowdown was mainly driven by a sharp slowdown in the oil sector and softening across industry due to contractions in coal and metal ore production. Agricultural growth also softened, hampered by unusually warm temperatures early in the year. Non-oil activity nonetheless continued to underpin the broader economy, with telecoms, financial services, construction and trade doing the heavy lifting. Services proved the most resilient, supported by steady digital adoption and healthy credit conditions.

GDP growth set to accelerate ahead: GDP growth is seen picking up over the coming quarters, remaining above the prior decade average. The government has already loosened its fiscal stance in response to the global energy shock, with further election-driven spending ahead of the January 2027 general election expected to bolster activity in H2. On the external side, the Dangote refinery, now operating near full capacity, has sharply reduced Nigeria's reliance on fuel imports and should continue to support the trade balance and net exports ahead. Elevated global oil prices should provide tailwinds to government spending. For the full year, 2026 growth is seen broadly matching 2025 levels. A prolonged U.S.-Iran war poses a key risk. While elevated oil prices benefit Nigeria as an exporter, a sustained disruption to global energy markets would keep retail fuel prices high, deepen inflationary pressures, and erode household purchasing power—weighing on domestic demand.

Panelist insight: Regarding the Iran war’s impact on the 2026 outlook, Oxford Economics’ Brenden Verster noted: “We maintain our view that the surge in global oil prices will have a net positive effect on the West African economy, but consumption demand could still take flak amid the jump in domestic fuel prices.”

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