OPINION: Q1 GDP Report: Growth Resilience Amid Inflation, Global Uncertainty

Nigeria’s Q1 2026 GDP report presents a picture of an economy that is still expanding, but under increasingly difficult conditions. The 3.89 per cent real GDP growth recorded in the quarter is respectable given the pressures businesses and households faced, especially from inflation, high interest rates, currency instability, and growing global uncertainty. However, the number also shows that growth momentum has softened slightly from the 4.07 per cent achieved in Q4 2025, suggesting that the economy is growing, but not yet accelerating in a broad-based or fully sustainable way.

What stands out immediately is that the non-oil economy remains the real engine of growth. At 96.08 per cent of GDP, Nigeria’s growth continues to be driven primarily by telecommunications, financial services, trade, construction, crop production, transportation, and selected manufacturing activities. The Information and Communication sector was particularly impressive, growing by 10.98 per cent, confirming that digital services, fintech, telecoms expansion, and data consumption remain among the strongest growth anchors in the economy. Financial and Insurance services also remained resilient with 8.54 per cent growth, despite tighter monetary conditions.

Agriculture also deserves attention. The sector rebounded to 3.15 per cent growth from near stagnation a year earlier. That improvement likely reflects relative stability in some food-producing regions, improved market activity, and higher prices incentivizing production. However, agriculture’s quarter-on-quarter contraction of over 35 per cent also shows that structural weaknesses remain severe. Food insecurity, insecurity in farming belts, logistics challenges, and high input costs continue to limit the sector’s full potential.

One major issue behind the slower pace of growth compared with Q4 2025 is inflation. Nigeria’s inflation spike in March clearly had a dampening effect on economic activity in Q1 2026. While nominal GDP rose strongly by 17.79 per cent, real GDP growth remained under 4 per cent, which means a significant portion of the apparent expansion was price-driven rather than output-driven.

High inflation eroded household purchasing power, weakened consumer demand, increased operating costs for businesses, and reduced investment appetite in several sectors.

Trade growth illustrates this clearly. Although the sector still expanded, growth remained relatively weak at 2.08 per cent, and its contribution to GDP declined slightly. Consumers are spending more cautiously because real incomes are under pressure. Manufacturers are also struggling with elevated energy costs, imported raw material costs, exchange rate volatility, and financing costs due to aggressive monetary tightening by the Central Bank.

The Central Bank’s tight monetary stance likely contributed to moderating growth in Q1. Higher interest rates helped support financial sector stability and partially contain inflationary expectations, but they also increased borrowing costs across the economy. Sectors dependent on credit such as manufacturing, real estate, and small business activity, felt the pressure. The Real Estate sector’s slowdown to 2.29 per cent growth reflects this financing constraint quite clearly.

The current Middle East crisis, which escalated in late February 2026, also likely introduced new risks into the Nigerian economy toward the end of the quarter. Although its full impact may become more visible in Q2 figures, early effects were already emerging through higher global oil price volatility, shipping disruptions, and increased uncertainty in global financial markets.

For Nigeria, higher crude prices can improve fiscal revenues and foreign exchange earnings in the short term. However, the problem is that Nigeria has not fully benefited from global oil price increases because crude production remains relatively weak at 1.55 million barrels per day, lower than both Q1 2025 and Q4 2025.

That is a critical weakness in this report. The oil sector grew modestly at 2.57 per cent, but output levels remain too low for the sector to significantly transform overall GDP performance or fiscal stability. Oil contributed just 3.92 per cent to real GDP, which reinforces the reality that Nigeria’s economy is increasingly non-oil driven.

Persistent production challenges, oil theft, underinvestment, and operational inefficiencies continue to constrain the sector.
The banking sector recapitalization programme may also have influenced Q1 growth dynamics. In the short term, recapitalization exercises tend to make banks more cautious with lending as institutions preserve capital, restructure portfolios, and strengthen balance sheets.

That could partly explain weaker momentum in credit-sensitive sectors such as real estate and parts of manufacturing. However, the strong 8.54 per cent growth in Finance and Insurance suggests that the banking sector itself remains profitable and operationally strong, benefiting from higher interest margins, foreign exchange trading gains, and increased digital financial activity.

From a policy perspective, government reforms appear to be producing mixed outcomes. Fiscal reforms, subsidy removal adjustments, exchange rate liberalization, and efforts to improve revenue mobilization may have helped support medium-term macroeconomic restructuring. Infrastructure spending and public construction activity likely supported the strong 6.38 per cent growth in construction.

However, the adjustment costs of these reforms remain substantial for households and businesses. Inflationary pressures linked to fuel prices, electricity tariffs, and exchange rate pass-through continue to suppress real consumption growth.

Overall, the Q1 2026 GDP report reflects an economy that is demonstrating resilience rather than rapid expansion. Nigeria avoided a major slowdown despite intense domestic and external pressures, which is positive. But the quality of growth remains uneven. Strong performances in telecoms, finance, and construction contrast with weaker consumer demand, soft oil production, and slowing momentum in sectors tied closely to household spending.

The key message from the report is that Nigeria’s economy is still growing, but growth is fragile increasingly being carried by a narrow set of sectors while inflation continues to erode the benefits for ordinary Nigerians.

Unless inflation moderates meaningfully to single-digit, oil production improves, and reforms begin translating into stronger real incomes and investment confidence, GDP growth may remain positive but below the level required to significantly improve employment, reduce poverty, or deliver broad economic prosperity.

Prof Uche Uwaleke is Nigeria’s renowned Professor of Capital Market and President of the Capital Market Academics of Nigeria