Rising Debt, Oil Sector Weakness Threaten Nigeria’s 2026 Growth, CCPE Warns

Nigeria’s economy achieved notable macroeconomic stability in 2025, but rising debt-service obligations, oil sector volatility and structural constraints pose significant risks to the 2026 outlook, the Centre for the Promotion of Private Enterprise (CPPE) has said.

In its review of the Nigerian economy and outlook for 2026, the CPPE said 2025 marked a turning point following the turbulence that accompanied the early phase of economic reforms, with exchange-rate stability emerging as the most visible gain.

The naira largely traded within the N1,440–N1,500 per dollar band, helping to restore pricing predictability, ease imported inflation and strengthen business confidence.

The private-sector think tank, led by its Chief Executive Officer, Dr. Muda Yusuf, said inflation decelerated sharply during the year, falling from 24.48 per cent in January to about 14.45 per cent by November.

The moderation was attributed to currency stability, easing logistics pressures and improved supply conditions, with prices of several food items and imported consumer goods declining.

According to the CPPE, the stabilisation gains supported a recovery in business sentiment, as reflected in the NESG–Stanbic IBTC Business Confidence Index, which remained positive for most of 2025.

Many companies that posted losses in 2024 returned to profitability in 2025, signalling a gradual recovery in corporate performance.

However, the report said fiscal performance at the federal level remained weak, as rising debt-service obligations continued to constrain fiscal space and undermine budget execution.

Revenue underperformance persisted, largely due to sub-optimal performance in the oil sector.

The 2025 Federal Budget, which was based on an oil price benchmark of $75 per barrel and production of 2.06 million barrels per day, fell short of expectations, with average oil prices around $66 per barrel and production closer to 1.66 million barrels per day.

As a result, the projected ₦41tn revenue target was significantly missed, leading to weak implementation of capital expenditure.

In contrast, the CPPE noted that sub-national governments recorded relatively stronger fiscal outcomes, supported by improved liquidity, better internally generated revenue performance and stronger execution of capital projects, resulting in more visible delivery of infrastructure and social services in several states.

On sectoral performance, the report said the services sector remained the primary driver of growth, accounting for about 53 per cent of GDP by the third quarter of 2025, compared with 3.44 per cent for oil.

The non-oil sector contributed 96.56 per cent of GDP and grew by 3.91 per cent, underscoring Nigeria’s gradual shift away from oil dependence.

Services grew by 4.14 per cent, driven by telecommunications, financial services, trade, construction and real estate.

Manufacturing, however, remained fragile, expanding by just 1.25 per cent and contributing 7.62 per cent to GDP, weighed down by power shortages, high logistics costs, import competition, limited access to finance and elevated operating costs.

Agriculture recorded modest growth of 3.79 per cent, contributing 31.21 per cent to GDP, but insecurity, low productivity and post-harvest losses continued to limit its impact on exports and fiscal revenues.

Looking ahead, the CPPE said the outlook for 2026 is one of cautious optimism, with the economy expected to transition from stabilisation to growth if reform momentum is sustained. GDP growth is projected at between 4.0 and 4.5 per cent, supported by moderating inflation and stronger performance in the non-oil sector.

The report said easing inflation could strengthen domestic demand and create room for gradual monetary easing, potentially lowering interest rates and stimulating private investment.

It added that services, particularly telecommunications, finance, construction, real estate and trade, would remain the main drivers of growth.

The CPPE also identified positive capital market prospects, citing the potential listing of the Dangote Refinery as a development that could deepen market liquidity and attract domestic and foreign portfolio inflows.

Despite these positives, the organisation warned that significant downside risks remain.

These include persistent insecurity affecting agriculture and investment, oil price and production volatility, high energy and logistics costs, and mounting debt-service obligations, estimated at over N15trn in the 2026 appropriation, representing about half of projected government revenue.

Other risks highlighted include external shocks from geopolitical tensions, pre-election fiscal pressures and growing resistance to tax reforms, which could undermine revenue expectations.

Overall, the CPPE said the stability achieved in 2025 provides a solid foundation, but translating it into sustainable and inclusive growth in 2026 will depend on maintaining reform credibility, addressing security challenges and easing structural constraints across the economy.