By Merit Ibe
Nigeria’s improving macroeconomic outlook is offering little comfort to households and businesses, as stubbornly high costs, weak incomes and structural inefficiencies continue to deepen economic hardship.
This is the assessment from the Centre for the Promotion of Private Enterprise (CPPE) in its Q1 2026 economic review and Q2 outlook, which highlights a widening gap between stabilising headline indicators and the harsh realities of daily economic life.
According to the report, the first quarter of 2026 delivered notable gains in macroeconomic stability. Inflation eased, the exchange rate stabilised, external reserves strengthened and economic growth remained positive, signalling that recent reforms are beginning to take effect.
Inflation, which had soared above 24 per cent in early 2025, moderated to about 15 per cent by February 2026. The decline reflects tighter monetary policy, improved foreign exchange conditions and some relief on the supply side.
The naira also showed signs of stability, trading within a narrower band of N1,340 to N1,430 per dollar in the official market. This reduced volatility has helped to moderate imported inflation and improve investor sentiment.
External reserves climbed above $50 billion, supported by stronger oil earnings and increased foreign exchange inflows, while GDP growth remained resilient at 3.87 per cent for 2025, with a stronger 4.07 per cent expansion recorded in the final quarter.
The Monetary Policy Committee responded to these improvements with a modest rate cut to 26.5 per cent in February, signalling a cautious shift toward easing.
Yet, for most Nigerians, these gains remain largely invisible.
The CPPE stressed that the cost-of-living crisis is still severe, driven by persistently high energy and transportation costs. While food inflation has shown some moderation, it has not been enough to offset broader price pressures.
Households continue to grapple with shrinking purchasing power, as wages fail to keep pace with inflation. For many, basic expenses—transport, energy and food—now consume a disproportionate share of income.
Businesses are equally under strain. The high cost of energy remains a critical challenge, as unreliable grid electricity forces firms to rely heavily on diesel, petrol and gas-powered generators. With fuel prices elevated, energy costs have become a major drag on profitability and competitiveness.
The situation is further compounded by insecurity, which continues to disrupt agricultural production and supply chains. This not only sustains inflationary pressures but also weakens rural livelihoods and investor confidence.
Access to credit remains tight despite the slight easing in monetary policy. Lending rates are still high, limiting the ability of businesses—especially small and medium enterprises—to expand operations or invest in growth.
Weak consumer demand is another major constraint. With real incomes eroded, spending on non-essential goods and services has declined, affecting sectors dependent on discretionary consumption.
The CPPE noted that these pressures expose a critical imbalance: while macroeconomic stability is improving, the microeconomic environment remains deeply fragile and, in many cases, worsening.
Looking ahead to the second quarter of 2026, the report warns that the fragile gains recorded so far could come under renewed pressure.
A major risk is the resurgence of inflation driven by rising global oil prices. Ongoing geopolitical tensions in the Middle East have pushed crude prices above $100 per barrel, creating a new wave of cost pressures.
For Nigeria, this presents a double-edged scenario. Higher oil prices could boost export earnings and government revenues, but they also drive up domestic fuel costs, with immediate consequences for transportation, production and logistics.
This pass-through effect threatens to reverse recent progress in curbing inflation and could intensify the hardship facing households and businesses.
While the exchange rate is expected to remain relatively stable due to improved reserves and foreign exchange liquidity, the CPPE warned that volatility risks persist, particularly in the face of external shocks or shifts in investor confidence.
Economic growth is projected to remain positive but may slow as rising costs and weak demand constrain output. The report also flagged an increasing risk of stagflation, where inflation remains elevated even as growth weakens.
Monetary policy is expected to remain cautious, with limited room for aggressive rate cuts. The CPPE cautioned against further tightening, noting that current inflationary pressures are largely driven by structural and cost-related factors rather than excessive demand.
Additional rate hikes, it argued, would do little to address the root causes of inflation while further restricting access to credit and slowing economic activity.
Political developments are also emerging as a significant risk. With the 2027 general elections approaching, early political activities—including alignments and campaign positioning—are intensifying. This could divert attention from economic management and slow the pace of reforms.
Fiscal challenges add another layer of concern. Although the ₦68 trillion 2026 budget has the potential to stimulate the economy, its success will depend on effective implementation. Weak revenue generation, delays in capital expenditure and political pressures on spending priorities could limit its impact.
In light of these challenges, the CPPE urged businesses to adopt survival-driven strategies focused on cost efficiency, energy diversification and risk management. Investment in alternative energy sources, particularly solar and gas, was highlighted as critical to reducing operating costs.
Firms were also advised to strengthen local sourcing, manage foreign exchange exposure carefully and maintain strong liquidity positions in a high-interest-rate environment.
For investors, the report recommended a selective approach, focusing on sectors with stable demand, pricing power and export potential.
Ultimately, the CPPE concluded that while Nigeria has made meaningful progress in stabilising its macroeconomic environment, the benefits have yet to translate into real relief for citizens.
Without targeted interventions to address structural constraints and ease cost pressures, the current trajectory risks entrenching hardship even in the face of improving economic fundamentals.
The challenge ahead, it noted, is not just to sustain stability—but to make it felt.
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