Nigeria’s GDP Growth Shows Promising Signs Amid Structural Challenges
The Nigerian economy experienced a real GDP growth rate of 3.89% in the first quarter of 2026, showcasing a trend of macroeconomic stabilization and the resilience of significant non-oil sectors. However, economists caution that these encouraging figures mask underlying structural weaknesses that could hinder long-term economic progress.
Insights from the CPPE’s Policy Brief
This analysis stems from a policy brief released by the Center for the Promotion of Private Enterprise (CPPE) coinciding with the National Bureau of Statistics’ (NBS) first-quarter GDP report for 2026. CPPE CEO Muda Yusuf noted an improvement from the 3.13% growth seen in the first quarter of 2025. Nonetheless, he emphasized that the economy continues to grapple with critical structural obstacles, particularly in the realms of electricity supply, manufacturing productivity, and export competitiveness.
Impact on Business Operations
The implications for businesses are significant. Yusuf pointed out that companies are already contending with escalating interest rates, rising logistics costs, and declining consumer purchasing power. A further deterioration in power supply could exacerbate production costs and diminish competitiveness across various sectors.
Sector Performance Highlights
Drawing attention to performance trends, Yusuf remarked that reliance on in-house power generation from diesel and gasoline is adversely affecting profitability, especially within manufacturing, small and medium-sized enterprises, the services sector, agro-processing, and digital industries. Despite a slight decrease from the 4.0% growth recorded in the fourth quarter of 2025, this decline is not unexpected due to seasonal and cyclical factors inherent to the first quarter.
Services Sector Drives Growth
The services sector emerged as the primary growth driver, with significant contributions from ICT, financial services, entertainment, trade, and construction, totaling 57.73% of GDP and marking a 4.31% expansion. The CPPE highlighted remarkable growth figures: the ICT sector surged by 10.98%, financial services increased by 8.54%, and entertainment rose by 11.25%, underscoring the resilience of the digital and services economy amid ongoing macroeconomic challenges.
Manufacturing Sector’s Modest Recovery
Meanwhile, the manufacturing sector displayed moderate growth of 3.29%, up from just 1.13% in the previous quarter, driven primarily by oil refining, food and beverages, cement, chemicals, and pharmaceuticals. However, Yusuf pointed out that manufacturing’s contribution to GDP remains below 10%. This statistic highlights ongoing structural issues, including high energy costs, escalating interest rates, inadequate infrastructure, logistics constraints, and policy uncertainties.
Transitional Needs for Sustainable Growth
CPPE has identified the electricity and gas sector as the poorest performer, contracting by 15.30% during this quarter. Yusuf expressed concern, labeling this trend a significant red flag for economic sustainability. Given that electricity is crucial for productivity and industrialization, the contraction raises urgent questions about the resilience of Nigeria’s economic growth and industrial capabilities. Companies bear increasing burdens from heightened production costs stemming from power shortages and reliance on costly diesel and gasoline generators.
Addressing Structural Vulnerabilities
The non-oil sector now represents 96.08% of GDP, with the oil sector contributing a mere 3.92%. Nonetheless, Yusuf lamented that the non-oil economy accounts for less than 15% of foreign exchange earnings, which points to weak export competitiveness and limited integration into global value chains. The report noted robust performances in oil refining, construction, and mineral quarrying, with the oil refining sector leading with a remarkable growth rate of 37.46%, largely attributed to the operations of the Dangote refinery.
Call for Comprehensive Reforms
While current GDP statistics suggest a gradual economic recovery, significant concerns remain regarding the quality and inclusiveness of growth. The report advocates for an acceleration of reforms in the power sector, the establishment of stronger industrial policies, enhanced infrastructure, improved export competitiveness, and a productivity-driven growth strategy. These measures are essential for delivering broad economic benefits and enhancing the welfare of Nigerians.
The first quarter of 2026’s GDP report indicates an economy supported by robust services, digital activities, trade, construction, and expanded domestic refining capacity. Nonetheless, it also exposes structural vulnerabilities in electricity supply, industrial productivity, and export competitiveness, suggesting that future economic reforms must prioritize productivity growth, industrialization, and inclusive development.
