Economists warn that weak electricity supply, fragile manufacturing growth and slowing oil output could threaten Nigeria’s economic recovery despite strong gains in trade, ICT and refining…..
The Centre for the Promotion of Private Enterprise (CPPE) has reacted to Nigeria’s first quarter 2026 Gross Domestic Product (GDP) report with cautious optimism, describing the latest growth figures as evidence of improving macroeconomic stability but warning that deep structural weaknesses still threaten sustainable economic transformation.
According to data released by the National Bureau of Statistics (NBS), Nigeria’s economy expanded by 3.89 percent year-on-year in Q1 2026, an improvement from the 3.13 percent growth recorded in the same period of 2025.
In its assessment of the report, CPPE said although the growth was slightly lower than the 4 percent recorded in the fourth quarter of 2025, the performance still reflects improving business confidence, relative macroeconomic stability and resilience across major non-oil sectors of the economy.
The economic policy advocacy group explained that slower first-quarter growth compared to the preceding quarter was not unusual because economic activities are typically softer at the beginning of the year due to seasonal business patterns.
The Chief Executive Officer of CPPE, Dr. Muda Yusuf, noted that the services sector remained the strongest pillar of the economy, contributing 57.73 percent to GDP while growing by 4.31 percent.
He highlighted the strong performance recorded in information and communication technology, financial services, trade, entertainment and construction, describing them as evidence of the increasing importance of the digital and services economy in Nigeria’s growth trajectory.
According to the report, the ICT sector grew by 10.98 percent, financial services expanded by 8.54 percent, while the entertainment industry posted an impressive 11.25 percent growth despite persistent macroeconomic challenges.
One of the most notable developments in the GDP report was the emergence of the trade sector as Nigeria’s single largest contributor to GDP at 17.89 percent.
CPPE attributed this to improved exchange rate stability, better foreign exchange liquidity, easing inflationary pressures and recovering confidence among businesses and investors.
However, the group warned that long-term economic transformation cannot rely heavily on commerce alone, stressing that stronger productive capacity, industrialisation and local value addition remain critical for sustainable growth.
The manufacturing sector also recorded modest improvement, growing by 3.29 percent compared to 1.13 percent in the previous quarter.
The growth was driven mainly by activities in petroleum refining, food and beverages, cement, chemicals and pharmaceuticals.
Despite the improvement, CPPE expressed concern that manufacturing still contributes less than 10 percent to GDP, blaming the weak performance on high energy costs, elevated interest rates, poor infrastructure, logistics bottlenecks and policy uncertainties.
Yusuf stressed that Nigeria cannot achieve meaningful structural transformation without a stronger industrial base capable of supporting large-scale employment, export competitiveness and inclusive growth.
The report also highlighted strong performances from the construction, real estate, quarrying and refining sectors.
According to CPPE, construction and real estate jointly contributed nearly 18 percent to GDP, supported by sustained infrastructure investments and increasing investor interest in property-related assets.
The oil refining sector emerged as the best-performing segment of the economy after recording an exceptional 37.46 percent growth during the quarter.
CPPE described the development as a major indication of the transformative impact of domestic refining on Nigeria’s economy, particularly in strengthening energy security, reducing import dependence, conserving foreign exchange and deepening industrialisation.
The organisation noted that the impressive performance was largely driven by operations at the Dangote Refinery, which it said is gradually reshaping Nigeria’s energy ecosystem and boosting domestic value addition.
It added that heightened regional and global demand for refined petroleum products amid geopolitical tensions in the Middle East also contributed to the sector’s rapid growth.
Similarly, quarrying and minerals grew by 23.41 percent while the cement sector expanded by 11.53 percent, reflecting sustained construction activities nationwide.
Although the non-oil sector contributed 96.08 percent of GDP compared to the oil sector’s 3.92 percent, CPPE pointed out that a major structural imbalance still exists because the non-oil economy contributes less than 15 percent of Nigeria’s foreign exchange earnings.
The group said this reflects weak export competitiveness, low productivity and poor integration into global value chains.
CPPE, however, identified the sharp contraction in the electricity and gas sector as the most worrying aspect of the GDP report.
The sector declined by 15.30 percent, making it the worst-performing segment of the economy in the first quarter and one of the sharpest declines recorded in recent years.
Yusuf warned that the decline exposes the deep fragility of Nigeria’s power sector and raises serious concerns about the sustainability of economic growth, industrial productivity and business competitiveness.
He noted that electricity remains the foundation of productivity, industrialisation and economic competitiveness, stressing that worsening power supply will continue to increase production costs and weaken businesses already struggling with high interest rates, logistics challenges and weak consumer demand.
According to CPPE, the heavy dependence on diesel and petrol-powered self-generation is eroding profitability across manufacturing, SMEs, agro-processing, hospitality and even the digital economy.
The organisation called for urgent reforms across the electricity value chain, including stronger investments in transmission infrastructure, improved market liquidity, accelerated metering and governance reforms capable of restoring investor confidence.
The aviation sector also recorded a contraction of 7.62 percent, reflecting the difficult operating environment facing domestic airlines.
CPPE blamed the downturn on high aviation fuel prices, exchange rate pressures, multiple taxation, regulatory charges and rising maintenance costs.
The group warned that the aviation sector’s struggles could have broader economic consequences because air transport remains critical for trade, tourism, investment and business connectivity.
The textile industry was equally described as being trapped in a prolonged recessionary cycle, which CPPE linked to Nigeria’s wider deindustrialisation challenge and declining domestic productive capacity.
According to the organisation, the collapse of labour-intensive industries such as textiles continues to worsen unemployment, weaken industrial linkages and deepen poverty levels.
Meanwhile, the oil and gas sector slowed significantly from 6.79 percent growth in Q4 2025 to 2.57 percent in Q1 2026.
CPPE described the slowdown as concerning given the sector’s importance to government revenues, foreign exchange earnings and overall macroeconomic stability.
While acknowledging that the GDP figures are encouraging from a macroeconomic perspective, the organisation insisted that the quality and inclusiveness of growth remain critical concerns.
It stressed that weak electricity supply, fragile industrial productivity, high operating costs and modest manufacturing contributions continue to limit employment generation and weaken household welfare.
Yusuf concluded that economic growth must ultimately translate into improved living standards, stronger purchasing power and better welfare outcomes for Nigerians.
He added that the next phase of economic reforms should focus more aggressively on industrialisation, productivity growth, export competitiveness, electricity reforms and inclusive economic development.
