H2 2026: Economy on fragile recovery as inflation eases, N4trn bond plan looms

…GDP growth forecast at 4.0–4.3% 

…As services sector leads recovery

Nigeria has stepped into the second half of 2026 with cautious signals of macroeconomic stabilisation, as policymakers track modest growth improvements, easing price pressures in selected markets, and a substantial fourth-quarter borrowing programme expected to test investor appetite and fiscal resilience.

Real GDP is projected to expand between 4.0 and 4.3 per cent for the year, driven largely by the services sector, gradual recovery in crude oil production, and improved agricultural output following years of disruption linked to insecurity across key producing regions. The outlook reflects a continuation of post-reform adjustments that followed the oil price shock of 2016 and the economic contraction triggered by the COVID-19 pandemic, both of which exposed long-standing structural weaknesses in revenue mobilisation and external buffers.

The Debt Management Office is preparing a bond issuance programme of about N4 trillion for the final quarter of the year, underscoring the Federal Government’s continued reliance on domestic borrowing to finance budget operations. The development comes as debt servicing continues to take a significant share of federally generated revenue, raising fresh scrutiny over fiscal sustainability and borrowing costs.

On the fiscal reform front, corporate Nigeria has commenced full compliance with the federal e-invoicing regime following Tuesday’s implementation deadline. The policy is expected to strengthen tax administration, reduce leakages, and widen the non-oil revenue base as government seeks to improve fiscal space without further compounding borrowing pressures.

Relief has emerged in pockets of the consumer market, with cooking gas prices easing in Abuja to about N1,498 per kilogramme from previous highs near N2,000. Traders attribute the decline to improved supply flows and more stable import arrivals, offering modest respite to households and small businesses dependent on liquefied petroleum gas.

In the foreign exchange market, the naira traded within a relatively tight range on Tuesday, closing around N1,379 to N1,380 per US dollar at the official window. Parallel market rates hovered between N1,385 and N1,400, reflecting reduced volatility compared with earlier periods of sharp swings. The improved stability has coincided with a gradual build-up in external reserves, supported by higher export receipts, remittance inflows, and tighter monetary conditions.

Inflation is projected to continue its gradual moderation into the teens if improvements in food supply chains are sustained and global commodity pressures remain contained. However, food inflation remains the most sensitive component of the price index, shaped by insecurity in farming communities, transport costs, and climate-related disruptions.

Growth expectations remain anchored on the services sector, particularly telecommunications, financial services, and digital economy activities, while oil production gains and agricultural recovery are expected to provide additional but uneven support. The current account is projected to remain in surplus, underpinned by crude oil exports and diaspora remittances, although exposure to global oil price volatility and domestic insecurity continues to present downside risks.

Attention in the coming months will focus on key macroeconomic indicators, including quarterly GDP releases, monthly inflation data, oil output volumes, debt-to-GDP ratios, fiscal deficit trends estimated at about 2.3 per cent of GDP, and labour market statistics, all of which will determine whether headline stability translates into broader economic welfare gains.

Financial markets are also monitoring capital inflows, equity market performance, and ongoing banking sector consolidation, including recent merger activity that signals continued recapitalisation pressures. In the oil and gas sector, companies such as Aradel and Seplat continue to record strong cash flows, though leverage levels and investment commitments remain closely watched.

As Nigeria advances deeper into 2026, analysts say policy coordination between fiscal and monetary authorities will be critical in sustaining macroeconomic stability. The durability of current gains will depend on the pace of non-oil revenue growth, exchange rate management, and structural reforms in productivity-critical sectors such as manufacturing and agriculture, against a backdrop of persistent security challenges and global economic uncertainty.