• Warns high food, energy costs may weaken reform gains
•Says growth hinges on turning reforms into jobs, investment
Emmanuel Addeh in Abuja
Global professional services firm, PwC, has predicted that Nigeria’s economic growth is will reach 4.2 per cent in the second half of 2026, driven largely by the sustained rebound in domestic crude oil production and a gradual expansion in non-oil commercial activities.
According to its latest macroeconomic projections titled: “Unlocking Nigeria’s Reform Dividend: From Macroeconomic Stabilisation to Inclusive Growth,” the firm observed that while top-line indicators are stabilising after months of volatility, persistent inflationary pressures on food and energy prices threaten to significantly erode the broader socioeconomic benefits of recent policy adjustments.
“Higher crude prices could support Nigeria’s oil revenues and FX inflows, provided production gains are sustained and fiscal leakages are contained. However, higher refined-fuel, freight, fertiliser and transport costs may increase imported inflation and weaken household purchasing power, partly offsetting the fiscal benefits of higher oil prices,” it explained.
The detailed report highlighted that the nation’s Gross Domestic Product (GDP) expanded by 3.89 per cent in the first quarter of 2026, representing a notable improvement from the 3.13 per cent growth rate recorded in the corresponding period of the previous year.
This upward trajectory, PwC stated, reflects the early dividends of structural reforms, enhanced foreign exchange liquidity in official windows, and rising domestic crude oil production, which peaked at 1.56 million barrels per day (mbpd) in June.
However, despite these positive top-line growth indicators and the steady recovery in hydrocarbon output, PwC strongly cautioned that the elevated cost of living remains a severe and immediate headwind to household consumption, wage purchasing power, and general business operations across the country.
According to the firm’s analysis, while headline inflation eased marginally to 15.91 per cent in June 2026, the core reality for citizens remains harsh. Prices for essential foodstuffs, daily transportation, and domestic power supply remain disproportionately high, it pointed out.
This inflationary environment is severely affecting vulnerable populations, exacerbating poverty levels, and squeezing commercial profit margins across primary, secondary, and tertiary market sectors as operating costs continue to soar, PwC explained.
The report warned in stark terms that unless these high food and energy costs are decisively addressed through targeted supply-side interventions, robust agricultural protection mechanisms, and substantial local production incentives, the macroeconomic gains achieved under recent economic stabilisation policies could be completely undermined.
“Sustaining disinflation and easing food and other household essential costs will provide greater relief to household budgets. This will strengthen purchasing power, support consumer spending and contribute to broader economic growth.
“Government should strengthen food supply through support for higher farm productivity, better storage and logistics, and selective temporary imports to ease shortages,” PWC added.
Transforming this fragile macroeconomic stability into deeply inclusive growth, the publication argued, requires a deliberate pivot from mere policy formulation to turning structural reforms into direct job creation, poverty alleviation, and the attraction of long-term domestic and foreign direct investment.
Examining the nation’s investment climate, PwC observed a concerning imbalance in capital flows. While total capital importation rose significantly to an impressive $10.37 billion in the first quarter of 2026, the overwhelming bulk of these financial inflows consisted of short-term Foreign Portfolio Investment (FPI).
FPI, it pointed out, accounted for a massive 95.1 per cent of total capital imports. In stark contrast, Foreign Direct Investment (FDI), the type of capital necessary for building factories and creating jobs, accounted for a dismal 1.3 per cent, representing just $135.1 million during the same period.
The report stressed that these portfolio flows, while highly beneficial for boosting immediate foreign exchange reserves and providing short-term currency defense for the Naira, remain highly volatile.
According to the firm, they can easily reverse course during global market shocks and, critically, they do not build physical infrastructure, enhance technological capacity, or create widespread, sustainable employment for Nigeria’s booming youth population.
To achieve sustained domestic economic progress, the document emphasised, the federal government must urgently foster a predictable, secure, and transparent policy environment capable of attracting patient capital into labour-intensive and highly productive sectors such as manufacturing, commercial-scale agriculture, and robust power generation.
On the monetary and currency front, the firm noted positive developments, highlighting that official foreign exchange reserves stood at 51.46 billion as of June 2026. This marks a robust 38.3 per cent increase year-on-year, providing the Central Bank of Nigeria (CBN) with a stronger buffer to defend the local currency.
Furthermore, parallel and official exchange market rates have largely converged around N1,379.68/ and N1,385/$, respectively. This convergence, it stressed, has significantly reduced speculative arbitrage opportunities, minimised round-tripping, and stabilised foreign trade transactions for industrial importers who previously struggled with severe currency volatility.
Nevertheless, the monetary environment, it said, remains exceptionally tight. The high interest rate environment anchored by the apex bank’s Monetary Policy Rate (MPR) currently sitting at 26.50 per cent, it explained continues to severely constrain private sector access to affordable credit.
While aggressive monetary tightening has been the CBN’s primary weapon for moderating runaway inflation and stabilising the Naira, PwC emphasised that these soaring borrowing costs pose a major structural challenge to Small and Medium Enterprises (SMEs).
To bridge this critical gap between macroeconomic stabilisation and inclusive socio-economic growth, PwC recommended a multi-pronged approach. The firm advised the government to prioritise national food security through direct agricultural support and the reduction of insecurity in farming belts.
It also called for urgent improvements in domestic gas supply to facilitate industrial power generation, alongside the streamlining of overlapping regulatory frameworks to boost investor confidence and working on high energy prices.
“In April 2026, energy prices rose significantly y/y, led by diesel (+43.67 per cent) and kerosene (+34.12 per cent), followed by PMS (+23.69 per cent) and LPG (+10.43 per cent). Higher diesel and PMS prices raise transport, logistics and business operating costs, while increases in kerosene and LPG place more direct pressure on household energy spending.
“Expanding domestic refined-product supply and reducing distribution bottlenecks will help moderate energy costs, while sustained FX stability will limit imported cost pressures,” it stated.
Analysing the vital energy sector, the report emphasised that sustained crude oil production gains must be matched by immediate structural improvements in midstream and downstream infrastructure.
While crude output reaching 1.56 million bpd is commendable, long-term economic stability, it argued, depends heavily on securing key pipeline corridors against entrenched vandalism, drastically reducing industrial-scale crude theft, and rapidly expanding domestic refining capacity.