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Economy

Expert chart path for economy in Q2, as Q1 ends on a high

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Economic and financial experts at the weekend submitted that the second quarter economic outlook for the country’s economy remains cautiously positive but increasingly uncertain, as it will be shaped by geopolitical developments, political cycle dynamics, and fiscal execution risks.

 

To this end, they admonish that policy priorities should focus on consolidating macroeconomic stability, addressing structural bottlenecks, and implementing targeted measures to protect vulnerable populations.
They drew their position from the performance of the economy on the first quarter (Q1) which they claim represents a significant inflection point for the Nigerian economy, marked by notable gains in macroeconomic stability.

 

They however noted that these gains are tempered by persistent structural challenges and mounting welfare pressures. For instance, the ongoing Middle East conflict, they argued, presents a credible risk of stagflation, particularly if the crisis is prolonged or intensifies. Besides, the rising global energy prices, it is believed, are likely to amplify inflationary pressures while simultaneously constraining output growth through higher production and logistics costs. Therefore, for businesses and investors, success in this environment will depend on resilience, operational efficiency, and strategic positioning.

 

This dual impact, elevated inflation alongside weakened growth, analysts warns, poses a significant macroeconomic risk, with adverse implications for business profitability, investment decisions, and overall economic stability.

The Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, in a policy brief obtained by The Trust News, noted that the economy in the first quarter, reflected a blend of improving macroeconomic stability and persistent structural constraints. He maintained that evidence of a more stable macroeconomic environment is increasingly evident, underpinned by the cumulative gains from foreign exchange reforms, a sustained period of monetary tightening, and the gradual normalisation of key economic indicators.

 

However, Yusuf said these improvements continue to coexist with significant headwinds. “The cost-of-living crisis remains pronounced, energy costs are still elevated, concerns around insecurity persist, and deep-seated structural rigidities continue to constrain productivity and investment,” the CPPE boss said.

 

According to him, as the economy transitions into the second quarter, the outlook remains cautiously optimistic but not without considerable risks as the trajectory of macroeconomic stability is vulnerable to external shocks, particularly the evolving geopolitical tensions, while the intensifying political cycle ahead of the 2027 elections could pose risks to policy focus and reform momentum. Additionally, fiscal execution constraints remain a critical concern, with implications for budget implementation, infrastructure delivery, and overall economic performance.

 

Yusuf, an economist, looking into his crystal ball, maintained that the outlook for Q2 2026 reflects a combination of sustained macroeconomic momentum and rising downside risks.

For instance, he said the current disinflation trajectory remains fragile and susceptible to reversal. He argued that the ongoing Middle East conflict has precipitated a sharp escalation in global crude oil prices, with benchmarks crossing the $100 per barrel threshold in recent weeks-developments with significant inflationary implications.

According to him, the development in the Middle East situation presents a classic dual-edged dynamic for the country. Yusuf explained that on the upside, elevated crude oil prices are expected to bolster export earnings, strengthen foreign exchange inflows, and improve government revenue. However, he warned of the downside risks which are immediate and far-reaching.

 

“Higher crude prices transmit quickly into domestic fuel costs, with consequential increases in logistics, production, and operating expenses across the economy. This cost pass-through effect poses a significant threat to the fragile disinflation process, potentially reversing recent gains in price stability, weakening real incomes, and further exacerbating the cost-of-living pressures facing households and businesses,” he said.
Although the economist pointed at the exchange rate which he said is expected to remain relatively stable in Q2, as it would be supported by improved reserves and forex liquidity, he nonetheless warns of persistent risks of volatility, particularly in the event of prolonged geopolitical tensions or shifts in investor sentiment.

 

“Economic growth is expected to remain positive in the near term, but the momentum is likely to moderate amid a confluence of downside risks. Elevated energy costs continue to exert significant pressure on production and operating expenses, while weak consumer demand—driven by eroded purchasing power—remains a binding constraint on output expansion.

 

“Additionally, the risk of a stagflationary environment is becoming more pronounced, as cost pressures persist alongside fragile growth dynamics. Compounding these challenges are potential policy distractions associated with intensifying pre-election political activities ahead of the 2027 general elections, which could dampen reform momentum and weaken macroeconomic management,” Yusuf said.

Still, the CPPE helmsman maintained that the scope for further monetary easing in the near term appears constrained by renewed inflationary pressures, particularly those linked to rising global energy prices. In this context, he argued, monetary policy is expected to remain cautious and strongly data-driven, with limited headroom for aggressive rate cuts.

 

“There is, however, a risk that the Central Bank of Nigeria (CBN) may be inclined toward further tightening in response to prevailing geopolitical and inflationary pressures. Such a stance would be counterproductive, given the fragility of current growth dynamics.
“Notably, the present inflationary episode is largely cost-push in nature—driven by energy prices, exchange rate pass-through, and structural inefficiencies—rather than excess aggregate demand. Consequently, additional monetary tightening would have limited effectiveness in addressing the underlying drivers of inflation, while potentially exacerbating constraints on investment, credit expansion, and overall economic growth,” Yusuf warned.

 

He warned of a key emerging risk which centers around the increasing tempo of political activities ahead of the 2027 general elections. With political realignments, defections, and early campaign positioning already intensifying, he argued, it raises concerns about policy distraction, as economic management may increasingly compete with electoral considerations. This, he opines, may lead to a growing risk of deceleration in reform momentum, as politically sensitive but necessary reforms become more difficult to sustain in a pre-election environment.

 

Yet, the CPPE, and economic and think-tank group, noted that the 2026 budget, estimated at about ₦68 trillion, presents both opportunities and risks.
It noted that while the scale of the budget has the potential to stimulate economic activity, its effectiveness will depend largely on implementation quality. The CPPE expressed key concerns to include weak revenue performance; delays in capital releases; limited project execution capacity and increasing political influence on expenditure priorities

 

“As political pressures intensify, there is a risk of weakening fiscal discipline, with greater emphasis on recurrent and politically expedient spending,” the CPPE warned.
For businesses and investors, therefore, the current environment calls for a strategic shift from expansion-driven models to resilience, efficiency, and risk management.

Yusuf urged businesses to embrace cost containment as a top priority, particularly through energy efficiency and logistics optimisation.

“There is also a compelling case for investment in alternative energy solutions, including solar and gas-powered systems, to reduce dependence on costly diesel and petrol. Foreign exchange risk management is critical. Firms should deepen local sourcing strategies, promote backward integration, and carefully manage currency exposure.
“Liquidity management remains essential. Businesses should maintain strong cash buffers and avoid excessive leverage in a still high-interest-rate environment,” he said.

Yusuf advised investors to adopt a selective approach, focusing on sectors with strong and inelastic demand; pricing power; export potential or forex earnings capacity; policy support and structural growth prospects and close monitoring of the political environment given the likelihood of policy shifts as the election cycle intensifies,” he said.

According to the CPPE, the most notable development in Q1 2026 was the consolidation of macroeconomic stability. He noted that inflation continued on a downward trajectory, as headline inflation, which exceeded 24 per cent in early 2025, moderated to 15.15 per cent in December 2025 and further eased to approximately 15.06 per cent by February 2026. This, he said, is a reflection of the combined effects of tighter monetary conditions, improved exchange rate stability and some easing in supply-side pressures.

“Exchange rate conditions also improved significantly. The naira, which experienced substantial volatility during the reform transition period, stabilised within a relatively narrow band of about ₦1,340 – ₦1,430 per dollar in the official market during Q1 2026. This stability has helped to moderate imported inflation and restore a measure of business confidence.

“External reserves strengthened considerably, rising above $50 billion in early 2026. This improvement reflects stronger oil earnings, enhanced foreign exchange liquidity, and improved market confidence, thereby strengthening the capacity of monetary authorities to manage exchange rate volatility.

“Growth momentum remained positive. Real GDP growth stood at 4.07% year-on-year in Q4 2025, with full-year growth at 3.87 per cent, supported by recovery in the oil sector and sustained expansion in the non-oil economy. Business activity indicators also remained positive, with Purchasing Managers’ Index (PMI) readings consistently above the 50-point expansion threshold.

“Monetary policy has begun to reflect these improvements. In February 2026, the Monetary Policy Committee reduced the policy rate by 50 basis points to 26.5 per cent, signaling the start of a cautious easing cycle.
“Overall, these developments point to a transition towards relative macroeconomic stability—an essential foundation for restoring investor confidence and improving economic growth outlook,” he explained.

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Economy

Fed govt revenue grows faster than interest payments

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The Federal Government’s revenue rose by 72 per cent to N6.2 trillion in the first half of 2026 from N3.6 trillion in the corresponding period of 2025, while interest payments increased by 38 per cent to N7.7 trillion from N5.6 trillion.

The Federal Ministry of Finance disclosed this on Sunday while responding to public commentary on the World Bank’s October 2026 Nigeria Development Update, which put federal interest payments at 124 per cent of revenue in the first half of this year.

The ministry said the growth in revenue had outpaced the increase in interest payments, reducing the interest-to-revenue ratio from 156 per cent in the first half of 2025 to 124 per cent in the corresponding period of 2026.
It added that the difference between interest payments and revenue narrowed from N2 trillion to N1.5 trillion within the period.

In a statement issued in Abuja, the ministry said the 124 per cent ratio did not present a complete picture of the government’s revenue position because some earnings were excluded from the calculation, while the interest figure covered obligations beyond the Federal Government alone.

According to the ministry, the interest payments include external loans obtained by state governments but serviced by the Federal Government.
It said comparing these obligations with federal revenue alone could overstate the ratio because the debt and revenue figures did not cover the same levels of government.

 

The ministry also said the revenue figure excluded independent income earned by government agencies and enterprises but not yet remitted to the Treasury.
It added that the timing of statutory tax payments affected the half-year figures, as some payments typically generate more revenue in the second half of the year.
The ministry cited the 2025 figures, saying the interest-to-revenue ratio stood at 156 per cent in the first half of that year but fell below 60 per cent for the full year. It also put the ratio at 97 per cent before the current administration’s reforms.
On the 2026 outlook, the ministry referred to the World Bank’s projection that Nigeria’s full-year debt service, covering both interest and principal repayments, would amount to 46 per cent of revenue.

The ministry said the full-year figure was a more appropriate measure for assessing the country’s debt-service position than a six-month comparison.
It maintained that all Federal Government borrowing was within the limits approved by the National Assembly under the 2026 Appropriation Act and the approved borrowing plan.

The statement added that the government’s borrowing complied with the Fiscal Responsibility Act 2007 and the Debt Management Office (Establishment) Act 2003.
It said the Debt Management Office regularly published information on government borrowing.

The ministry welcomed public scrutiny of government finances and urged analysts to compare revenue and debt figures covering the same levels of government and to consider the periods covered by the data.
It said the government remained open to requests for clarification on public finance figures.

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Economy

FAAC: Fed. Govt, States, LGs Share N2.428tr September Revenue

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The three tiers of government have shared N2.428 trillion revenue generated by the Federation in September 2026, according to the Federation Account Allocation Committee (FAAC).

The amount was shared at the committee’s October meeting in Abuja, with the Federal Government receiving N832.242 billion, state governments getting N799.872 billion and local government councils receiving N560.660 billion. The beneficiary states of the 13 percent derivative also received N236.049 billion as derivation revenue from mineral resources.

The Director of Press and Public Relations in the Office of the Accountant-General of the Federation (OAGF), Bawa Mokwa, disclosed this in a statement on the outcome of the meeting yesterday in Abuja.

The total distributable revenue comprised N1.672 trillion from statutory revenue and N756.587 billion from Value Added Tax (VAT).

 

According to the communiqué issued by FAAC, the Federation generated gross revenue of N3.913 trillion in September. However, N131.758 billion was deducted as the cost of collecting the revenue, while N1.352 trillion went into transfers, refunds and savings.
The figures show that the amount shared among the three tiers of government was lower than the gross revenue available for the month after the various deductions and other obligations were taken into account.

 

A breakdown of the statutory revenue showed that the Federal Government received N756.583 billion, while the state governments got N383.749 billion. The local government councils received N295.855 billion, while N236.049 billion was paid to the benefiting states as their 13 per cent derivation share of mineral revenue.

From the N756.587 billion distributable VAT revenue, the Federal Government received N75.659 billion, state governments got N416.123 billion and local government councils received N264.805 billion.

The allocation figures show that state governments and local government councils received the larger shares of the distributable VAT revenue, while the Federal Government received a smaller portion.
The communiqué also showed that gross statutory revenue rose in September, while VAT revenue declined during the period.

Gross statutory revenue stood at N3.096 trillion in September, compared with N2.850 trillion recorded in August. The increase of N246.384 billion represented a rise in revenue available from statutory sources.
In contrast, gross VAT revenue fell to N816.872 billion in September from N834.843 billion in August, representing a decline of N17.972 billion.

The difference in the performance of the two revenue sources means that the increase in statutory revenue was accompanied by a reduction in VAT receipts during the month.

FAAC attributed the changes in revenue performance to increases in some tax and petroleum-related revenue sources, alongside declines in others.

Petroleum Profit Tax, Hydrocarbon Tax, petroleum royalties, import duty, Common External Tariff (CET) levies and excise duty recorded significant increases in September.

However, Companies Income Tax (CIT), Capital Gains Tax (CGT), Stamp Duties Tax (SDT), VAT, mineral royalties, gas-flaring penalties, rental gas-flaring fees and miscellaneous oil revenue declined during the period.

 

 

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Economy

Temporary fuel price relief is not subsidy, says Dr. Yusuf

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By Oluwayanmife Lucas

Economic policy group and economist yesterday lent their support to the federal government’s decision to implement a temporary fuel price relief. They warned that this relief should not be misconstrued as return of subsidy on petroleum products, but be seen as a priority by government to protect vulnerable citizens, preserve the sustainability of public finances and maintain the integrity of ongoing economic reforms.

Besides, they warned that the commercial status of the Nigerian National Petroleum Company Limited (NNPC) Limited does not eliminate the government’s responsibility to respond to exceptional public-interest considerations.

NNPC Ltd., the group maintained, remains a government-owned commercial enterprise with a diversified portfolio of petroleum-related businesses, whose commercial mandate should ordinarily guide its operations. However, the policy group argued, temporary and clearly defined public-interest interventions can be accommodated within an appropriate governance framework.

The Group, Center for the promotion of Private Enterprise (CPPE), a policy and economic think-tank group, in a chat with The Nation yesterday, argued that the critical consideration is that such interventions must be transparent, proportionate, time-bound and financially sustainable.

The CPPE further noted that the current global energy crisis demands pragmatic policy responses, not ideological rigidity. It further argued that although economic reforms must remain sustainable, but they must also be responsive to the welfare of the people.

Therefore, it explained, Nigeria does not need a return to the “fiscally destructive” subsidy regime, but a credible framework for temporary, targeted and transparent social protection during exceptional economic shocks.

Speaking with exclusively The Trust News, the Chief Executive Officer, CPPE, Dr. Muda Yusuf, explained that economic policies are instruments for promoting citizens’ welfare; hence, they should not become rigid doctrines that prevent governments from responding to exceptional social and economic difficulties.

He noted that the current escalation in petroleum product prices is driven principally by developments in the global energy market, particularly geopolitical tensions that have pushed crude oil prices above $100 per barrel. He described this as an “external shock affecting both oil-producing and oil-importing economies; it is neither a consequence of Nigeria’s subsidy removal policy nor peculiar to the Nigerian economy.”

Dr. Yusuf warned against the misconception that the Federal Government’s recent fuel price relief initiative through the NNPC is a reversal of the petroleum subsidy removal policy. Such an interpretation, he argued, is misleading and fails to distinguish between a fundamental policy reversal and a temporary intervention in response to an extraordinary economic shock.

“Extraordinary economic circumstances sometimes require exceptional policy responses. Governments across the world have historically intervened to cushion households and businesses against severe external shocks without abandoning their underlying economic policy frameworks. The COVID-19 pandemic provided compelling evidence of this approach, even in advanced market economies.

“The intervention is substantially different in scale, design and potential fiscal implications from the previous subsidy regime. Its temporary character and limited market coverage are important distinctions,” Dr. Yusuf said.

According to him, the removal of the previous petroleum subsidy was a necessary structural reform, therefore, reinstating a broad-based consumption subsidy would recreate serious fiscal vulnerabilities and undermine the gains from economic reforms.

He explained further: “For illustration, a subsidy of ₦1,000 per litre on national consumption of 50 million litres daily would create a fiscal exposure of approximately ₦50 billion daily; ₦1.5 trillion monthly and ₦18.25 trillion annually. Such an obligation would be fiscally unsustainable, especially in an economy facing substantial infrastructure deficits, debt-service commitments and competing development priorities. However, a limited and temporary intervention should not automatically be interpreted as a deterioration in policy credibility.”

Dr. Yusuf, an economist, explained that investors are principally concerned about policy predictability, market access, commercial viability, fiscal sustainability and the protection of legitimate investments. These fundamentals, he said, need not be compromised by a narrowly targeted emergency relief measure.

In this regard, the CPPE argued that there is a need to have a critical distinction between the previous subsidy regime and the current intervention. Under the former subsidy arrangement, Dr. Yusuf said, government effectively carried a substantial fiscal burden on nationwide petrol consumption, estimated at various times at between 50 million and 80 million litres daily. This arrangement created enormous fiscal pressures, weakened public finances, crowded out development spending and contributed to macroeconomic instability.

Citing an illustrative calculation based on the volumes contained in the ministerial commentary; by contrast, he said, the current intervention covers approximately 70 million litres of NNPC fuel supply monthly, compared with estimated national petrol consumption of 50 million litres daily and an estimated national monthly consumption of 1.5 billion litres; while NNPC monthly volume under the intervention will be 70 million litres, translating to an estimated national consumption of 4.7 per cent

“Arising from these figures, an intervention covering less than five per cent of estimated national consumption cannot reasonably be equated with a nationwide subsidy regime. More importantly, the intervention does not reinstate an administered national petrol price, impose a general subsidy obligation on private operators or dismantle the market-oriented framework for petroleum product pricing.

“The appropriate questions should therefore concern the fiscal cost, transparency, duration, beneficiaries and effectiveness of the intervention, rather than an inaccurate characterisation of it as a wholesale policy reversal,” Dr. Yusuf argued.

But beyond fuel discounts, the CPPE said there is a need to addressing the wider social costs. It said that while the proposed fuel price relief is a welcome development, its limited coverage means that its aggregate impact on household welfare will also be limited.

Government, the group further highlighted, should pursue broader interventions that address the principal channels through which the energy price shock affects citizens.

In a four-point agenda, the CPPE said the government should scale up affordable mass transit, because transportation is one of the most immediate transmission channels of higher energy prices to household expenditure and business operating costs. To this end, the group said the federal and state governments should prioritise high-capacity buses, including CNG, electric and other economically viable alternatives.

Support for agricultural productivity and food supply, strengthening state and local government interventions by way of states designating discounted fuel outlets, limited emergency fuel allocations for essential services, like subsidised public transport and targeted support for vulnerable households, should be considered, as well as protecting the integrity of petroleum market reforms.

“Government should sustain market-based pricing, fair competition, transparent regulation and a trade policy framework that supports domestic refining investment. Emergency interventions should not become a pretext for arbitrary price controls or the reintroduction of opaque fiscal obligations,” Dr. Yusuf submitted.

 

 

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