PwC has projected that Nigeria’s economy will expand by 4.2% in the second half of 2026, reflecting expectations of stronger economic activity during the period.

Nigeria’s economy is projected to grow by 4.2 per cent in the second half of 2026, supported by higher crude oil production and continued expansion in key sectors, even as fiscal pressures, weak household purchasing power and tight credit conditions continue to weigh on the economy.

This is contained in PwC’s H2 2026 Nigeria Economic Outlook, which said recent reforms had improved macroeconomic stability, but had yet to translate fully into broad-based improvements in household welfare and business conditions.

The report noted that Nigeria’s real Gross Domestic Product grew by 3.89 per cent year-on-year in the first quarter of 2026, compared with 3.13 per cent in Q1 2025.

Growth was driven largely by ICT, Finance and Insurance, Construction and Agriculture, which recorded growth rates of 10.98 per cent, 8.54 per cent, 6.38 per cent and 3.15 per cent respectively.

However, PwC warned that the recovery remained concentrated in a relatively narrow group of sectors.

Electricity contracted by 15.30 per cent, while Trade and Real Estate grew by only 2.08 per cent and 2.29 per cent respectively, reflecting persistent operating, logistics, financing and construction costs.

Naira Stability, Reserves Strengthen

The report identified significant improvement in the foreign exchange market during the first half of the year.

The naira closed June at ₦1,379.68/$ at the official market, while the parallel-market rate stood at about ₦1,385/$, 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 the stronger reserves and increased FX liquidity had supported exchange-rate stability, although the gains remained vulnerable to oil-price volatility, portfolio-flow reversals and pressure on dollar supply.

The report also showed that 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, while 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, but food costs remain high
Headline inflation moderated marginally to 15.91 per cent in June, from 15.93 per cent in May.

However, 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 the mixed inflation trend showed that pressure remained concentrated in essential household expenditure categories.

It added that the cost of a healthy diet rose 4.68 per cent year-on-year to ₦1,589 per adult per day in April 2026, placing additional pressure on household budgets.

Energy costs are also expected to remain a major concern for households and businesses.

PwC reported that 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.
For businesses, particularly micro, small and medium enterprises, access to affordable credit remains a major constraint.

PwC said 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.

At the same time, monetary conditions remained tight, with the Monetary Policy Rate at 26.5 per cent and Cash Reserve Requirement at 45 per cent.

The report identified a major “missing middle” in MSME financing, with businesses seeking facilities between ₦500,000 and ₦30 million underserved by existing lending structures.

It recommended targeted credit windows, partial credit guarantees and blended financing to expand access to affordable, longer-tenor funding.
PwC also noted that 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, highlighting the need to redirect more financing towards productive economic activity.

The outlook further identified insecurity, multiple taxes, high interest rates and bank charges as major constraints facing businesses.

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.
PwC also highlighted Nigeria’s infrastructure deficit as a major drag on competitiveness.

Nigeria ranked 68th out of 70 economies in the 2026 IMD competitiveness ranking, while it ranked 70th on the infrastructure pillar, with a score of 5.21.

The report called for greater investment in power, transport, broadband and security to reduce business costs and improve productivity.

Despite stronger revenue mobilisation, PwC warned that fiscal pressures would remain elevated in H2 2026 because of continued spending needs, the budget deficit and government financing requirements.

It noted that distributable FAAC revenue rose to ₦2.55 trillion in June 2026, up 10.9 per cent month-on-month and 40.1 per cent year-on-year, supported by stronger statutory revenue and VAT collections.

However, debt service remained a key vulnerability, absorbing 49.2 per cent of government revenue in 2025, despite the debt-to-GDP ratio falling to 38.7 per cent from 42.9 per cent in 2024.

PwC said the key challenge for the second half of the year would be to transform macroeconomic stabilisation into higher household purchasing power, stronger MSMEs, greater productivity and productive investment.

The report therefore urged policymakers to accelerate investment execution, improve regulatory predictability, reduce approval and financing bottlenecks, strengthen domestic energy supply and create a stronger pipeline of bankable projects capable of converting investor interest into jobs and productive capacity.