Nigeria’s economic growth will remain positive in the second quarter of 2026, but the pace of expansion may slow due to mounting downside risks, the Centre for the Promotion of Private Enterprise has warned.
In its Q1 2026 economic review and Q2 outlook released on Sunday, the Chief Executive Officer, Dr Muda Yusuf, said, “Economic growth is expected to remain positive in the near term, but the momentum is likely to moderate amid a confluence of downside risks, as elevated energy costs continue to exert significant pressure on production and operating expenses, while weak consumer demand, driven by eroded purchasing power, remains a binding constraint on output expansion.”
The CPPE noted that rising global crude oil prices, triggered by the ongoing Middle East conflict, pose a major threat to Nigeria’s fragile disinflation process. While higher oil prices could boost export earnings and government revenue, the think tank stressed that the domestic impact would be adverse.
“The cost pass-through effect poses a significant threat to the fragile disinflation process, potentially reversing recent gains in price stability, weakening real incomes, and further exacerbating the cost-of-living pressures facing households and businesses,” Yusuf said.
On the exchange rate, the CPPE projected relative stability in the second quarter, supported by improved foreign reserves and liquidity, but cautioned that volatility risks remain.
The report also warned of a growing risk of stagflation, as persistent cost pressures combine with fragile growth conditions. It added that rising political activities ahead of the 2027 general elections could weaken reform momentum and distract from economic management.
Highlighting monetary policy concerns, Yusuf said the current inflationary trend is largely driven by structural and cost-related factors rather than excess demand.
“Additional monetary tightening would have limited effectiveness in addressing the underlying drivers of inflation, while potentially exacerbating constraints on investment, credit expansion, and overall economic growth,” the economist observed.
The CPPE further raised concerns over the implementation of the proposed ₦68tn 2026 budget, citing weak revenue performance, delays in capital releases, and growing political influence on spending priorities.
“As political pressures intensify, there is a risk of weakening fiscal discipline, with greater emphasis on recurrent and politically expedient spending,” Yusuf said.
The think tank advised businesses to shift focus towards resilience and efficiency, urging firms to prioritise cost containment, adopt alternative energy sources, and strengthen foreign exchange risk management strategies.
It also called on policymakers to take urgent steps to safeguard economic stability and protect vulnerable groups.
“Policy priorities should therefore focus on consolidating macroeconomic stability, addressing structural bottlenecks, and implementing targeted measures to protect vulnerable populations,” Yusuf stated.
The CPPE concluded that while macroeconomic stability gains recorded in the first quarter of 2026 are notable, the outlook for the second quarter remains cautiously positive but increasingly uncertain due to geopolitical tensions, fiscal risks, and domestic political dynamics.
