The first five months of the year were shaped by domestic macroeconomic adjustments, global shocks, and fiscal pressures.
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As the country nears H2, these factors are likely to present opportunities as well as risks. But first let us look at what really happened in the first five months of the year.
January–May 2026: What really happened
The first five months of 2026 present a nuanced account.
Real GDP grew 3.89% in Q1, ahead of 3.13% in Q1 2025 and slightly above full-year 2025’s 3.87%. Growth was primarily non-oil driven, reflecting structural resilience.
- Agriculture rebounded 3.15%, improving crop output and rural incomes.
- Manufacturing grew 3.29%, while construction surged 6.38%, reflecting ongoing infrastructure activity.
- The technology sector excelled: ICT expanded 10.98%, and telecommunications 12.24%, underscoring the rising role of digital services.
- Financial and insurance services grew 8.54%, showing gradual recovery in banking.
- Oil and gas were subdued, with crude petroleum up 2.57% and mining 1.89%, highlighting Nigeria’s continued fiscal reliance on oil despite structural shifts.
- Services accounted for 57.73% of GDP, agriculture 23.16%, and industries 19.11%.
- Non-oil activities made up 96.08%, while oil contributed 3.92%, reflecting a mismatch between growth drivers and fiscal revenue sources.
Outside the GDP, capital importation rebounded to $10.37 billion in Q1 2026, up 83.83% YoY and 60.97% above Q4 2025, concentrated in portfolio investments.
- Foreign Direct Investment remained modest at $135.08 million, down 62.25% QoQ, highlighting the dominance of short-term financial inflows.
Foreign reserves
Foreign reserves approached $50 billion, supporting naira stability, while gross non-oil revenue exceeded projections at N6.52 trillion, signaling improved fiscal mobilization.
FX
From mid-2024, the rate stabilised between N1,480–N1,650/$, before gradually improving to about N1,363/$ by April 2026.
- This reflects improved FX inflows and policy adjustments.
Global shocks
The Iran–US conflict sent Brent crude prices from $60.75 to $118 per barrel, increasing oil earnings but also contributing to domestic fuel cost pressures.
- Headline inflation rose to 15.69% by April, the highest in 2026 so far.
- High interest rates (MPR at 26.5%) continued to constrain credit.
Domestically, insecurity disrupted agriculture, trade, and mining, while electricity supply contracted 15.30%, adding to production bottlenecks.
These macros and developments are still very much around and will definitely shape H1 2026, either as risks or opportunities.
The risks
The risk from the Israeli/US-Iran war, led to rise in energy prices, particularly, which stoked inflation, reduced purchasing power, and sustained policy tightness (high MPR).
The war is likely to continue shaping oil and energy sector in H1, especially energy price
- A Reuters survey of 33 analysts now expects Brent crude to average about $90.44 per barrel in 2026, a significant upgrade from earlier forecasts, largely due to ongoing Middle East supply disruption.
- Some market commentators and regional analysts believe Brent could remain near $90 by Q4 2026, with risks skewed to the upside (toward $110–$120) if the conflict continues and supply remains constrained.
- Morgan Stanley Research expects oil to average $80–$90 per barrel for 2026, reflecting the impact of supply disruptions but also acknowledging that longer‑term fundamentals matter
Higher prices benefit revenue but also increase domestic energy costs, inflating fuel prices and contributing to inflationary pressures.
- Unless tensions ease, geopolitical uncertainty will continue to shape fiscal outcomes and private investment decisions.
Insecurity: Persistent insurgency, banditry, and communal clashes disrupted agriculture and mining in H1.
Experts warn that insecurity is likely to remain elevated into H2, especially as pre-election tensions may exacerbate communal conflicts.
- A PwC analysis notes that ongoing conflict could push up to 34.7 million Nigerians into acute food insecurity, highlighting broader economic consequences beyond GDP figures.
Threat of global market bubbles:
H1 2026 saw strong portfolio inflows into Nigeria’s financial markets, with $10.37 billion in capital importation. These short-term speculative inflows remain dominant over FDI, increasing vulnerability to external shocks.
Analysts caution that a sudden correction in global equities or a shift in international liquidity could reverse these gains, pressuring the naira and local asset prices.
Fiscal deficits:
Despite non-oil revenue gains, fiscal deficits remain substantial due to underperforming oil receipts and debt service costs.
Persistent deficits could crowd out private investment. Sustaining non-oil revenue reforms and leveraging higher oil prices can reduce gaps and finance growth-enhancing projects.
Weak purchasing power:
Unless prices moderate, weak purchasing power will continue to slow recovery in retail and informal sectors.
- Analysts caution that H2 may see continued pressure if global energy prices remain elevated. Improved agricultural output and FX inflows provide a chance for gradual moderation.
Opportunities in H2 2026
Higher oil prices:
Brent crude spikes in H1 boosted oil revenues despite production below OPEC+ quota. According to Reviewed 2025 Third Quarter Macroeconomics & Financial Analysis, average daily production from January to April was 1.39 million barrels per day, below quota.
Still, oil earnings contributed to fiscal revenues and FX inflows, supporting reserves and providing space for strategic spending in H2.
Strengthened external reserves:
Near $50 billion in reserves gives the CBN flexibility to stabilize the naira, manage FX volatility, and support trade and investment.
Resilient non-oil sectors:
Services, ICT, and financial activities drove growth in H1 2026, with ICT growing 10.98% and telecommunications 12.24%.
Experts highlight that this momentum is likely to continue into H2, providing stable growth and investment opportunities even amid oil sector volatility.
Overall, the first five months of 2026 reveal an economy gaining momentum in non-oil sectors, services, and agriculture, with stronger fiscal mobilization and capital inflows.
But the factors and variables (internal and external) that shaped H1 2026 are still very much around.
For the internal controllable factors, effectively addressing them; through prudent deploying of oil and non-oil revenues, enhancing security and supply chain resilience, stabilizing the naira, and maintaining fiscal discipline will support growth.
Combined with mitigate exposure to external shocks, will determine whether H2 2026 growth is sustainable, inclusive, and capable of cushioning the economy against domestic and global risks.
