Elections, growing inflation, and a slow GDP indicate an uncertain 2026 H2

With a rebounding currency, falling inflation, and an economy that had expanded more quickly in 2025 than the previous year, Nigeria had momentum going into 2026. Growth persisted but left the majority of Nigerians behind, inflation turned around, the government borrowed more heavily than before, and the naira, contrary to all expectations, remained stable.

These four factors explain how all of that occurred simultaneously and what it means for the remainder of the year, albeit not all of the stories do. 

GDP, or gross domestic product

One of the defining elements of Nigeria’s first half was its economic growth rate. According to figures from the National Bureau of Statistics, GDP grew by 3.89% in the first quarter of 2026, which was slightly higher than the 3.87% growth reported for the entire year 2025 and better than the 3.13% growth reported in the same quarter the previous year.

The economy appears to be expanding. In actuality, it is still not expanding quickly enough to raise living standards.

Economists generally believe that for a country with Nigeria’s fast rising population and labour force, GDP growth needs to routinely surpass 5% and preferably remain there over several years to generate enough employment, reduce poverty meaningfully and absorb new entrants into the workforce.

Achieving that level of growth requires persistent investment in large-scale infrastructure, industry, agriculture, energy, logistics and other sectors capable of producing employment at scale.

For now, the gains of Nigeria’s economic changes remain unevenly dispersed. Consumers continue to face the burden through higher living costs, while the government enjoys stronger tax collections, investors benefit from elevated rates on government assets, and exporters win from a more competitive exchange rate. Widespread increases in employment and wages have not yet resulted from these reforms in the overall economy.

A closer examination of the GDP figures reveals why.

Services once again carried the economy in the first quarter. Telecommunications climbed by 12.24%, financial services grew by 8.54%, and cement manufacturing rose 11.53%.

These are key sectors that generate considerable revenues, profits, and market capitalization, yet they do not employ enough Nigerians to significantly change the country's employment composition.

Meanwhile, agriculture the country's largest employer grew by only 3.15%. Manufacturing climbed by only 3.29%, while oil and gas, which continues to fund much of government spending and foreign exchange revenues, grew by only 2.57%.

When examined through the lens of Nigeria's economic system, the mismatch becomes even more apparent. Crop production, trade, real estate, telecommunications, construction, and livestock contribute approximately 65% of nominal GDP. However, with the exception of telecoms, the majority of these sectors continue to develop at low single-digit rates.

Nigeria is likely to stay caught in a cycle of decent but ultimately mediocre economic growth as long as the country's key economic components keep growing at this rate.

The International Monetary Fund's increased caution can also be explained by this. In its April 2026 World Economic Outlook, the Fund reduced Nigeria’s 2026 growth prediction down by 0.3 percentage points to 4.1%. With 3.89% growth in the first quarter, the economy will need to significantly pick up speed in the second half of the year to reach even that goal.

More significantly, the growth's quality is just as significant as the headline figure. Faster expansion driven purely by finance and telecommunications will continue to bolster corporate earnings, but it will do nothing to affect job outcomes or consumer incomes. Stronger growth in the industries where the majority of Nigerians are employed and where government policy can have the most multiplier effect—agriculture, manufacturing, construction, commerce, and energy—will be necessary for sustained gains in living standards.

If these sectors fail to accelerate, Nigeria risks completing another year with GDP growth that looks decent in official numbers but remains mostly invisible in the daily lives of ordinary Nigerians.

The N1,431 to N1,384 exchange rate
Another aspect that molded H1 is the stability of the currency rate, unlike what we had in 2023 and 2024, which affected corporates.

When the NFEM window opened in January 2026, the naira was exchanging at N1,431 to the dollar. By June, it had increased to N1,384; an appreciation of N47 during 118 trading days, with an average of N1,375.93.

In 2024, the naira was more volatile, producing enough uncertainty to make business planning practically impossible

But by H1 2026, the naira was stable as well as stronger. For firms pricing imports, manufacturers planning output, and people budgeting for school fees, the constancy mattered as much as the direction.

Diaspora remittance inflows, CBN's managed float, and Dangote Refinery's increasing petrol output, which started reducing Nigeria's reliance on refined product imports—one of the main structural sources of dollar demand—were the three factors that propelled that stability.

The rate movement shaped more than the foreign exchange market. Businesses reported lower foreign exchange losses as a result of a calmer naira, which immediately increased profitability. Although it did not close, the parallel market gap shrank, and the trend was correct.

The naira trajectory for H2 is contingent upon the persistence of the same factors that propelled H1. Flows of remittances are seasonal. CBN intervention capacity depends on reserves, and Dangote’s import substitution effect depends on both refinery output and global product pricing.

The band holds if such circumstances continue. If anyone weakens, H2 will rapidly test how much of H1’s naira stability was fundamental and how much was simply situational.

Total public debt and government borrowing

One of the key figures that defined H1 2026 and will continue to impact H2 is federal government borrowing.

The Debt Management Office calculates Nigeria’s overall debt stock at N159.28 trillion as of December 2025; external commitments of N74.43 trillion and domestic debt of N84.85 trillion.

However, credit to the Federal Government increased by N779.7 billion in just one month, from N22.99 trillion in May 2025 to N40.38 trillion by May 2026, a 75.6% increase. Nigeria was not merely carrying a huge debt load into 2026.It was actively adding to it.

The effects permeated every aspect of H1. The risk-free, high-yielding, and limitless supply of government paper made it tempting to banks. Even as government borrowing increased, credit to the private sector increased very little to N81.04 trillion.

Due to the crowding out of manufacturers, farmers, and small companies, many turned to commercial paper at even higher yields.

As a result, the financial sector appeared to be doing well on the surface; banks were making money, and returns were appealing, but the real economy was still deprived of the cheap credit it required to expand.

The cost of money and inflation
Another variable is inflation, which entered 2026 at 15.10% and crept to 15.93% by May, moving in the wrong way. More striking was food inflation, which nearly doubled from 8.89% in January to 16.96% by May. For households whose food consumes the highest part of monthly spending.

The benchmark rate was first lowered by the CBN from 27.00% in January to 26.50% in February before being maintained. H1's easing was limited to only one 50 basis point reduction.

The price of that caution was instantly apparent.

Savings deposit rates sat at just 7.24% against inflation of 15.93%, meaning Nigerians saving money in the bank were losing buying power every month. 

The result was a stress on the economy from both sides. Nigeria's GDP growth in H2 was directly limited by businesses' inability to borrow money and grow, consumers' inability to spend, sluggish consumer demand, and the suppression of private investment.

The forecast for the second half rests on whether food inflation recovers during the harvest season and whether the CBN feels confident enough to cut again.

Both reduce borrowing prices and lessen consumer pressure. The MPC is cautious and the squeeze continues into 2027 if food prices remain high.

Uncertain Second Half

Taken together, these factors represent an economy where growth is real but narrow. Although stable, the naira is brittle. The public debt is still substantial and keeps growing. Although headline inflation has decreased, it is still rising in areas where families are most affected, such as food prices and excessive borrowing costs.

The second half of 2026 will also coincide with the early phases of Nigeria’s 2027 election cycle, bringing another layer of uncertainty. Historically, election seasons have tended to move the attention of policymakers away from economic changes onto political calculations and campaign activities, often reducing the pace of policy implementation and delaying difficult fiscal decisions.

Another area to keep a careful eye on is fiscal execution. Over the past three years, the government's ability to convert ambitious expenditure intentions into real economic activity has been hampered by poor budget implementation.

limiting the government’s capacity to translate ambitious expenditure intentions into meaningful economic activity. The recent extension of the 2025 budget raises concerns about how quickly capital projects and economic stimulus will reach the real economy, even if official implementation data for the 2026 budget has not yet been released.

Therefore, no single event will characterize the second half of 2026. It will depend on how quickly manufacturing, oil, and agriculture can boost GDP growth to levels that regular Nigerians can experience; whether the naira's pillars hold up in the face of outside pressure; and whether government borrowing slows down enough to allow credit for the private sector. and whether policymakers can maintain economic reform momentum as political activity gathers pace ahead of the 2027 elections.