By Abubakar Yunusa
The Nigerian Economic Summit Group (NESG) has projected Nigeria’s economy to grow by 4.2 percent in 2026, citing improved performance in the oil, manufacturing, agricultural and services sectors.
In its outlook, the NESG said economic growth is expected to strengthen to 4.5 percent in the second half of 2026, bringing full-year gross domestic product (GDP) growth to approximately 4.2 percent.
The outlook was announced in the group’s first half (H1) 2026 State of the Economy report titled ‘Turning Potential into Progress,’ and released on Wednesday.
NESG said the oil sector is expected to sustain its growth, supported by improved domestic crude oil production, reflecting better security conditions and the gradual implementation of upstream reforms.
The group said increased domestic refining activity would also strengthen industrial output, reduce dependence on imported refined petroleum products and improve Nigeria’s external position.
“Moreover, manufacturing activity is expected to sustain growth momentum as lower inflation, continued exchange rate stability, and improved foreign exchange liquidity ease production constraints and strengthen business confidence,” the NESG said.
However, the group said manufacturing growth would remain constrained by structural bottlenecks, including unreliable electricity supply, high borrowing costs, elevated logistics costs and weak domestic demand.
The think tank said the agricultural sector is also expected to benefit from improved rainfall and favourable harvest conditions, which could support crop production and ease food supply pressures.
However, the NESG warned that persistent insecurity in key food-producing regions and climate-related shocks, particularly flooding, could undermine expected output gains.
The services sector, it said, would remain the primary driver of economic growth, with financial services expected to benefit from recent bank recapitalisation, stronger credit intermediation and improved investor confidence.
ICT sector is also expected to sustain robust growth, supported by rising digital adoption, increased data consumption and continued investment in telecommunications infrastructure.
NESG identified several downside risks to Nigeria’s growth outlook in 2026, including global economic and geopolitical shocks, election-related uncertainty, insecurity and climate-related disruptions.
The report said a sharper-than-expected slowdown in global growth, renewed trade tensions and tighter global financial conditions could weaken Nigeria’s export earnings, reduce foreign exchange inflows, constrain fiscal revenues and increase exchange-rate pressures.
NESG also warned that intensifying political activities ahead of the 2027 general elections could weaken reform momentum and put fiscal discipline under pressure through increased pre-election spending.
Persistent insecurity, particularly in the North-Central and North-West regions, could disrupt agricultural production, according to the group, mining activities and the movement of goods and services, while discouraging domestic and foreign investment.
According to NESG, flooding and other extreme weather events could also adversely affect agricultural production, food supply chains and infrastructure, potentially increasing food inflation and constraining economic growth.
On the upside, the NESG said a stronger-than-expected recovery in the oil sector, higher foreign capital inflows and faster implementation of structural reforms could push economic growth above current projections.
It said higher crude oil production, sustained improvements in pipeline security, reduced oil theft, increased upstream investment and stronger global oil prices could raise export earnings, strengthen fiscal revenues and improve external reserves.
The group added that stronger policy credibility, improved foreign exchange market liquidity, greater exchange-rate stability and favourable sovereign credit-rating actions could attract larger portfolio and foreign direct investment inflows.
Faster implementation of reforms in taxation, power, infrastructure and the business environment could also improve productivity, lower the cost of doing business and stimulate private investment and manufacturing-led growth, according to the NESG.
The NESG projected inflation to remain elevated during the remainder of 2026, averaging 15.5 percent in the second half of the year and for the full year.
It attributed the projection to persistent insecurity in major farming communities, climate-related disruptions, particularly flooding, and high transportation costs arising from logistics challenges.
The group said election-related spending, seasonal demand during the festive period and relatively high energy costs could also generate temporary cost-push inflationary pressures in the second half of the year.
However, NESG said the pressures could be partly offset by continued exchange-rate stability, the lagged effects of tight monetary policy and favourable base effects.
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