The Centre for the Promotion of Private Enterprise (CPPE) says Nigeria’s economy is on a path of gradual recovery, but structural vulnerabilities in key sectors could threaten long-term stability.

This is contained in the think tank’s policy brief on the first quarter (Q1) 2026 gross domestic product (GDP) report, on Thursday.

According to the Nigerian Bureau of Statistics (NBS) report, Nigeria recorded a year-on-year real GDP growth of 3.89 percent in Q1 2026, up from the 3.13 percent recorded in the corresponding period of 2025.

The think tank said with cautious optimism, while the growth is marginally lower than the 4.0 percent recorded in Q4 2025, the performance reflects ongoing macroeconomic stabilisation and improving business confidence.

“The moderation relative to the preceding quarter is not unusual, as first-quarter economic activities are typically softer because of seasonal and business cycle factors,” CPPE said.

‘TRADE IS LARGEST GDP CONTRIBUTOR, DANGOTE REFINERY DRIVES OIL SECTOR’

CPPE said the services sector remained the main driver of economic growth, expanding by 4.31 percent and contributing 57.73 percent to the GDP.

“The information and communications technology (ICT) sector grew by 10.98 percent, financial services expanded by 8.54 percent, while the entertainment sector recorded an 11.25 percent growth,” the enterprise said.

“Crucially, trade emerged as the single largest contributor to the country’s GDP at 17.89 percent.”

The organisation attributed this to improved exchange rate stability, better foreign exchange (FX) liquidity conditions, and easing inflationary pressures.

The CPPE also highlighted the exceptional performance of the oil refining sector, which expanded by 37.46 percent — the highest growth recorded by any sector in the quarter.

It noted that the surge was driven largely by the operations of the Dangote refinery, which is reshaping Nigeria’s energy ecosystem, strengthening domestic value addition, and reducing the economy’s dependence on imported petroleum products.

Also, the manufacturing sector recorded a modest growth of 3.29 percent, up from 1.13 percent in Q4 2025, however, CPPE warned that its total contribution to the GDP remains below 10 percent due to high energy costs, elevated interest rates, and logistics bottlenecks.

‘ELECTRICITY CONTRACTION IS A CRITICAL WARNING’

Expressing deep concern over the energy sector, the organisation described the sharp 15.30 percent contraction of the electricity and gas sector as the “most troubling aspect of the report”.

CPPE said the drop marks the steepest contraction recorded by the utility sector in recent years, signaling persistent structural weaknesses across generation, transmission, and distribution.

“This development is concerning because electricity is not merely another economic sector; it is the foundation upon which productivity, industrialization, competitiveness, and inclusive growth depend,” the enterprise said.

“At a time when firms are already burdened by high interest rates, logistics costs, and weak consumer purchasing power, deteriorating electricity supply further escalates production costs and weakens competitiveness.”

The think tank explained that heavy dependence on diesel and petrol-powered self-generation continues to erode the profitability of manufacturers, small businesses, and the agro-processing sectors.

The policy brief also raised concerns over the aviation sector, which contracted by 7.62 percent due to high aviation fuel prices, exchange rate pressures, multiple taxation, and regulatory charges.

Similarly, the textile industry remains trapped in a prolonged recessionary cycle, which the organisation said points to an ongoing challenge of deindustrialisation and loss of domestic jobs.

Furthermore, the CPPE added that a major structural imbalance continues to plague the Nigerian economy, with the non-oil sector accounting for 96.08 percent of the GDP, while generating less than 15 percent of the country’s foreign exchange earnings.

According to the think tank, the oil and gas sector, which slowed significantly from 6.79 percent growth in Q4 2025 to 2.57 percent in Q1 2026, remains the primary source of FX.

The CPPE urged the federal government to focus the next phase of economic reforms on productivity enhancement, power sector grid liquidity, accelerated metering, and industrial support to ensure economic growth translates into improved living conditions for citizens.

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