PwC projects Nigeria's economy to grow 4.2% in H2 2026

Nigeria's economy is projected to grow by 4.2 per cent in the second half of 2026, driven by higher crude oil production and continued expansion in key sectors. PwC's H2 2026 Nigeria Economic Outlook says recent reforms improved macroeconomic stability, but they have yet to translate fully into broad-based improvements in household welfare and business conditions.

The report shows Nigeria's real Gross Domestic Product grew by 3.89 per cent year-on-year in Q1 2026, compared with 3.13 per cent in Q1 2025. Growth was led by ICT at 10.98 per cent, Finance and Insurance at 8.54 per cent, Construction at 6.38 per cent and Agriculture at 3.15 per cent.

Recovery still narrow

PwC warned that the recovery remains concentrated in a relatively narrow group of sectors. Electricity contracted by 15.30 per cent, while Trade grew by only 2.08 per cent and Real Estate by 2.29 per cent, reflecting persistent operating, logistics, financing and construction costs.

The report identified significant improvement in the foreign exchange market during the first half of the year. The naira closed June at N1,379.68/$ at the official market, while the parallel-market rate stood at about N1,385/$, narrowing the gap between the two markets. FX-market turnover increased by 43.6 per cent month-on-month to $12.92 billion in June, while foreign reserves climbed 38.3 per cent year-on-year to $51.46 billion.

PwC said stronger reserves and increased FX liquidity supported exchange-rate stability, but gains remain vulnerable to oil-price volatility, portfolio-flow reversals and pressure on dollar supply.

Capital inflows rise, FDI lags

Total capital inflows increased 83.8 per cent year-on-year to $10.37 billion in Q1 2026. However, foreign direct investment remained weak at only $135.1 million, representing 1.3 per cent of total inflows. Foreign portfolio investment accounted for 95.1 per cent.

PwC said Nigeria would need to convert the strong portfolio interest into long-term investment in businesses, infrastructure and productive capacity.

Inflation eases, food costs stay high

Headline inflation moderated marginally to 15.91 per cent in June, from 15.93 per cent in May. Food inflation rose to 17.52 per cent from 16.96 per cent, while housing inflation increased to 14.81 per cent from 12.12 per cent. The report said pressure remains concentrated in essential household expenditure categories.

The cost of a healthy diet rose 4.68 per cent year-on-year to N1,589 per adult per day in April 2026. Diesel prices rose 43.67 per cent year-on-year in April, while kerosene, PMS and LPG prices increased by 34.12 per cent, 23.69 per cent and 10.43 per cent respectively.

Credit squeeze and business constraints

Private-sector credit stood at only 21.3 per cent of GDP, below the Sub-Saharan African average of 33 per cent and the lower-middle-income average of 47 per cent. The Monetary Policy Rate remained at 26.5 per cent, with Cash Reserve Requirement at 45 per cent.

PwC identified a major "missing middle" in MSME financing, with businesses seeking facilities between N500,000 and N30 million underserved. It recommended targeted credit windows, partial credit guarantees and blended financing to expand access to affordable, longer-tenor funding.

Credit to government increased by 18 per cent between December 2025 and May 2026, compared with 6.9 per cent growth in private-sector credit. Private-sector credit subsequently declined 14.3 per cent between February and May.

Insecurity ranked as the highest business constraint with a score of 72.9 in May 2026, followed by high or multiple taxes at 70.3, high interest rates at 67.7 and bank charges at 64.1.

Fiscal pressures remain

Nigeria ranked 68th out of 70 economies in the 2026 IMD competitiveness ranking, and 70th on the infrastructure pillar with a score of 5.21. PwC called for greater investment in power, transport, broadband and security to reduce business costs and improve productivity.

Distributable FAAC revenue rose to N2.55 trillion in June 2026, up 10.9 per cent month-on-month and 40.1 per cent year-on-year. Debt service absorbed 49.2 per cent of government revenue in 2025, even as the debt-to-GDP ratio fell to 38.7 per cent from 42.9 per cent in 2024.

For businesses and households, the key challenge in H2 2026 is whether macroeconomic stabilisation can translate into higher purchasing power, stronger MSMEs and productive investment. PwC urged policymakers to accelerate investment execution, improve regulatory predictability, reduce bottlenecks, strengthen domestic energy supply and build a stronger pipeline of bankable projects.