Key points
- The IMF retained Nigeria’s 2026 growth forecast at 4.1%, despite disruptions from the Middle East conflict and global economic uncertainty.
- Agriculture, trade and manufacturing, which collectively employ 70.3% of Nigeria’s workforce, have recorded average growth of less than 2% over the past three years.
- Oil prices, services and a relatively stable naira are supporting headline GDP growth, but weak job creation and low productivity mean the gains are reaching households slowly.
Main Story
Nigeria’s economy is on course to grow by 4.1% in 2026, according to the International Monetary Fund (IMF), but a closer look at the numbers reveals an uncomfortable reality: the sectors driving growth are not where most Nigerians work.
In its July 2026 World Economic Outlook Update, the IMF retained Nigeria’s growth forecasts at 4.1% for 2026 and 4.3% for 2027 despite disruptions caused by the Middle East conflict.
The Fund projects global economic growth of 3.0% in 2026 and 3.4% in 2027, slightly below the 3.5% average recorded between 2024 and 2025.
Nigeria’s economy expanded by 3.89% in the first quarter of 2026, up from 3.13% in the corresponding period of 2025.
On the surface, the numbers point to an economy gaining momentum. But the composition of that growth tells a more complicated story.
Services, ICT, financial services, construction and oil and gas are among the sectors driving expansion. Agriculture, trade and manufacturing — sectors that collectively account for 70.3% of Nigeria’s workforce — have recorded average growth of less than 2% over the past three years, according to CardinalStone Research.
Meanwhile, ICT, finance, real estate and administrative services are expanding at more than 5%, even though each employs less than 1% of Nigeria’s labour force individually.
The result is an economy where GDP can rise faster than jobs, wages and household purchasing power.
The Issues
- Nigeria may be experiencing growth without enough employment.
- CardinalStone estimates Nigeria’s employment elasticity at 0.74. In simple terms, jobs are responding more slowly than economic output.
- This matters because GDP growth is only as politically and socially meaningful as its ability to improve incomes, create jobs and raise living standards.
- Nigeria’s current growth structure is tilted towards relatively capital-intensive sectors. Banks can expand earnings through higher interest income, telecommunications companies can increase data revenue and oil producers can benefit from higher crude prices without employing workers at the scale of agriculture, manufacturing or trade.
The sectors growing fastest are not necessarily the sectors capable of absorbing Nigeria’s expanding labour force.
Labour productivity presents another problem. CardinalStone estimates Nigeria’s productivity at $0.94 per hour, below the average for low-income sub-Saharan African economies.
Low productivity limits wage growth and makes it harder for businesses to improve employee earnings without increasing costs.
The second problem is that oil’s support may be temporary.
Nigeria has benefited from its position as an energy exporter outside the Middle East conflict zone. Higher crude prices have supported export receipts, government revenue, foreign reserves and the naira.
But higher oil prices have not produced the fiscal windfall the headline numbers might suggest.
Despite crude trading well above the Federal Government’s $64.85 per barrel budget benchmark, Nigeria generated an estimated additional N256 billion between March and May. The reason is production.
Nigeria produced an average of 1.60 million barrels per day, below the budget assumption of 1.84 million barrels per day.
CardinalStone’s regression analysis estimates that a 1% increase in crude oil production is associated with a 2.8% increase in oil revenue, suggesting that production matters significantly more than price.
Had Nigeria met its production target, the windfall could have approached N2 trillion.
In effect, Nigeria is benefiting from an oil price shock without fully monetising it. There is also a hidden cost to the oil rally.
Crude prices briefly moved above $100 per barrel during the Middle East conflict, providing fiscal support to Nigeria. But petrol and diesel prices increased by more than 45%, while aviation fuel prices more than doubled.
The government gains additional oil revenue while households and businesses face higher transport, logistics and energy costs. For an economy already battling weak consumer purchasing power, the net benefit is less straightforward than rising crude prices suggest. Then there is the naira — stable, but at a cost.
The naira’s relative stability reflects a combination of oil receipts, foreign capital inflows and Central Bank of Nigeria intervention. At the height of the Middle East conflict, the CBN reportedly increased monthly foreign exchange intervention to about $900 million to keep the currency within a relatively stable range.
Egypt, facing similar external pressures, recorded nearly 10% currency depreciation following about $10 billion in capital flight. Nigeria, by comparison, saw foreign portfolio flows turn positive after an initial sell-off.
But the composition of those inflows raises another question.
Foreign participation in Nigerian equities has fallen sharply, while foreign portfolio holdings in CBN Open Market Operation instruments are estimated at $18.5 billion.
Foreign investors are not necessarily making long-term bets on Nigeria’s productivity story. A significant amount of capital is moving into short-duration, high-yield instruments that can be exited quickly if oil prices fall, the naira weakens or global risk sentiment changes.
Nigeria’s currency stability, therefore, remains heavily dependent on maintaining investor confidence and attractive yields.
What’s Being Said
Coronation Research interprets the IMF’s unchanged forecast as evidence that Nigeria’s economy has remained resilient despite the global oil-market shock.
Nigeria is classified among energy exporters outside the Middle East conflict zone, placing the country in a position to benefit from elevated oil prices through improved export receipts, foreign reserves and government allocations.
CardinalStone expects services, trade, real estate, telecommunications and financial services to remain Nigeria’s major growth drivers in 2026, supported by a more stable foreign exchange market and ongoing bank recapitalisation.
However, the investment firm lowered its own 2026 GDP growth forecast from 4.4% to 4.2% following weaker-than-expected services growth in the first quarter.
High inflation and interest rates have weighed on trade and real estate, limiting the pace of expansion.
Another concern is Nigeria’s limited participation in the global artificial intelligence investment boom.
The United States, South Korea, Taiwan and Japan are recording stronger investment and productivity gains linked to AI, semiconductor and data-centre development.
South Korea’s 2026 growth forecast was upgraded by 0.7 percentage points largely on the back of technology investment.
Coronation Research argues that technology represents a more durable economic shock than higher oil prices because investment in technology can permanently raise productivity, while an oil windfall disappears when crude prices fall.
Nigeria has growing fintech and telecommunications sectors, but unreliable power, limited broadband infrastructure and skills shortages continue to constrain its participation in the global technology investment cycle.
What’s Next
Nigeria’s ability to sustain growth near 4% will depend on three major factors: crude oil production, the performance of the services sector and the government’s ability to maintain foreign exchange stability.
Oil prices are expected to moderate to between $72 and $77 per barrel in the second half of 2026 as Middle East tensions ease.
Lower oil prices could reduce Nigeria’s fiscal and external buffers, making increased production even more critical.
For financial markets, analysts expect a selective rather than broad-based recovery.
Oil and gas companies could benefit where production volumes continue to rise, but investors will need to assess operating costs, debt and dividend sustainability rather than crude prices alone.
Banks may continue to benefit from elevated interest rates through higher returns on loans and government securities, although non-performing loans and asset quality remain key risks.
Manufacturers and consumer companies could benefit from sustained foreign exchange stability, but weak household spending may limit revenue growth.
In fixed income, persistent global inflation could delay monetary policy easing by the CBN, keeping Treasury bills, OMO instruments and short-to-medium-term bonds attractive.
Bottom Line
Nigeria’s 4.1% growth forecast is not the problem. The composition of the growth is.
An economy driven by oil, financial services, telecommunications and other relatively low-employment sectors can post stronger GDP figures while millions of households continue to struggle with weak wages and high living costs.
The real economic test is whether growth moves into agriculture, manufacturing and trade — the sectors employing more than 70% of Nigerians.
Oil is currently giving Nigeria breathing room. A steadier naira is providing some stability, while services continue to support output. But breathing room is not structural transformation.
Whether Nigeria uses the current window to improve electricity, expand domestic production, increase oil output, deepen digital infrastructure and raise workforce productivity will determine whether future GDP growth finally translates into jobs and better living standards.
For now, Nigeria’s economy is growing. The bigger question is: who is the growth actually working for?
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