Nigeria GDP Growth Slows to 2.98% in Q1 2026
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
nigeria-gdpafrican-economymacroeconomic-data
Fazen Markets Editorial Desk
Collective editorial team · methodology
Trades XAUUSD 24/5 on autopilot. Verified Myfxbook performance. Free forever.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The majority of retail investor accounts lose money when trading CFDs. Vortex HFT is informational software — not investment advice. Past performance does not guarantee future results.
Nigeria's economic expansion decelerated in the first quarter of 2026, according to data released on 25 May 2026. Gross domestic product grew at an annual rate of 2.98%, a sequential slowdown from the revised 3.46% growth recorded in the fourth quarter of 2025. The services sector remained the primary driver of activity, expanding by 4.32%, while the non-oil sector grew 2.80%. The agriculture sector contracted by 0.90%, representing a significant headwind to broader growth.
The slowdown arrives as Nigeria's Central Bank maintains a hawkish posture to combat persistent inflation. In April 2026, headline inflation was reported at 33.69%, remaining near multi-decade highs despite aggressive monetary tightening. The GDP data provides the first comprehensive snapshot of economic resilience under these high-interest-rate conditions, where the Monetary Policy Rate stands at 24.75%. The deceleration from Q4 2025 reflects the lagged impact of tighter financial conditions and continued foreign exchange volatility pressuring import-dependent industries. A key historical comparable is Q1 2023, when GDP growth was 2.31% amid the initial aftermath of a currency redesign policy that crippled liquidity.
The current macro backdrop is defined by the Central Bank of Nigeria's focus on price stability over growth, a policy pivot initiated in mid-2023. The International Monetary Fund in its April 2026 World Economic Outlook projected Nigeria's full-year 2026 growth at 3.3%, implying expectations for a re-acceleration later in the year. The Q1 print, therefore, sets a lower-than-expected baseline, increasing pressure on fiscal authorities to stimulate non-inflationary growth. The catalyst for the slowdown is a combination of monetary policy transmission and ongoing structural constraints in the oil sector, where production averaged 1.57 million barrels per day in Q1, below the government's budget benchmark.
The National Bureau of Statistics reported a 2.98% year-on-year GDP increase for Q1 2026. This compares to the 3.46% growth in Q4 2025 and 2.31% growth in Q1 2023. Sectoral performance was highly divergent.
| Sector | Q1 2026 Growth Rate | Q4 2025 Growth Rate |
|---|---|---|
| Services | 4.32% | 4.23% |
| Non-Oil Sector | 2.80% | 3.07% |
| Agriculture | -0.90% | 0.18% |
| Industry | 2.19% | 3.86% |
The oil sector, a critical component of government revenue and exports, grew by 5.70% year-on-year, though this was a deceleration from 12.11% in the prior quarter. In nominal terms, GDP stood at 58.25 trillion Naira for the quarter. The agriculture sector's contraction of 0.90% marks its worst performance since Q3 2021 and contrasts sharply with the Central Bank's efforts to boost food security. The services sector growth of 4.32% slightly outpaced its Q4 rate, illustrating the Nigerian economy's continued pivot towards consumption-driven activity.
The GDP composition signals ongoing challenges for consumer-facing and agricultural equities. Listed conglomerates and food producers with significant local sourcing, such as Flour Mills of Nigeria (FLOURMILL) and Nigerian Breweries (NB), face margin compression from high input costs and weak rural demand. Conversely, telecommunications giants like MTN Nigeria (MTNN) and Airtel Africa (AIRTELAFRI) may demonstrate relative resilience, benefiting from the essential nature of their services which grew 4.32%. Banking sector performance is bifurcated; high interest rates boost net interest margins but also increase non-performing loan risks as the real economy slows.
A key limitation of the data is its year-on-year format, which can obscure sharper quarterly sequential contractions when annualized. The reported growth may overstate current economic momentum. Positioning data from the Nigerian Exchange shows foreign portfolio investment outflow of $143 million in April 2026, continuing a trend of external caution. Domestic institutional flow is rotating towards fixed income, where OMO bill yields exceed 20%, crowding out equity investment. The local bourse's All-Share Index is down 4.2% year-to-date in Naira terms, underperforming the MSCI Frontier Markets Africa Index's 1.8% gain.
The next major catalyst is the Central Bank of Nigeria's Monetary Policy Committee meeting scheduled for 24 July 2026. Market participants will scrutinize any shift in rhetoric regarding the trade-off between growth and inflation. Secondly, the Q2 2026 GDP release, due in late August, will confirm if the Q1 slowdown is a trend or a temporary moderation. Third, the full implementation of the 2026 budget, with its projected 4.78% deficit, will test debt market absorption capacity and influence yields.
Levels to watch include the USD/NGN exchange rate at the official NAFEM window, where sustained moves above 1,450 could reignite inflationary pressures. For the NGX All-Share Index, the 98,500 level represents a key technical support; a decisive break lower could signal deepening growth concerns. In the bond market, the yield on the 10-year FGN bond holding above 18.5% would indicate sustained investor skepticism about fiscal sustainability amidst slower growth.
A slower-growing economy reduces the attraction of Naira-denominated assets for foreign investors, potentially exacerbating currency pressure. The Central Bank's high-interest-rate policy aims to support the Naira by attracting portfolio inflows, but this becomes less effective if growth fears dominate. The Naira's stability will increasingly depend on oil export earnings and the pace of foreign direct investment into non-oil sectors, rather than hot money flows seeking yield.
Nigeria's Q1 2026 growth of 2.98% lags behind regional peers. Kenya's economy grew an estimated 5.6% in 2025, Ghana projected 3.5% growth for 2026, and Egypt targeted 4.2% in its latest budget. Nigeria's slower pace reflects its larger population base, deeper structural issues in power and logistics, and a more aggressive inflation fight. However, Nigeria's nominal GDP size remains roughly three times that of South Africa, the continent's next largest economy.
The agriculture sector's 0.90% contraction is its first quarterly decline since Q3 2021. The sector employs over one-third of Nigeria's workforce and contributes about 23% to GDP. A contraction signals severe stress from farmer-herder conflicts, flooding in key crop-producing regions, and high costs of fertilizers and transportation. Historically, sustained agricultural contraction has preceded broader social unrest and necessitated costly food import subsidies, straining the federal budget.
Nigeria’s Q1 growth slowdown confirms the high cost of taming inflation, with tight monetary policy beginning to bite the real economy.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
Vortex HFT is our free MT4/MT5 Expert Advisor. Verified Myfxbook performance. No subscription. No fees. Trades 24/5.
Position yourself for the macro moves discussed above
Start TradingSponsored
Open a demo account in 30 seconds. No deposit required.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.