Researchers at CAPE Economic Research and Consulting firm have projected that Nigeria’s economic growth is expected to strengthen more sustainably next year, supported by continued policy credibility, improved investor confidence, and gradual recovery in investment.
The experts, who made the projection in the firm’s Economic Newsletter, Volume 5, Issue 5, released in May 2026, however, maintained that the growth will depend on how the Federal Government addresses the persistent structural constraints, including infrastructure gaps, energy supply limitations, logistics costs, and security challenges as well as election related concerns.
The analysts forecasted: “Overall, Nigeria’s outlook reflects a gradual and phased recovery, with stabilisation in early 2026, moderate strengthening in the second half, and a more durable expansion path emerging into 2027, conditional on sustained reforms and manageable external conditions.”
They noted that the nation’s Economic Policy Uncertainty (EPU) Index, which measures policy-related economic uncertainty in any country, remained elevated in April 2026, with a slight uptick relative to March, signalling persistent uncertainty following the earlier escalation of geopolitical tensions in the Middle East.
- Advertisement -
The experts pointed out that while the sharp increase observed in February–March began to stabilise, the April reading indicated that uncertainty has not yet normalised and continues to be shaped by external risk factors rather than domestic shocks.
According to the firm’s researchers, the marginal increase in April reflects ongoing investor caution, driven by sustained global risk aversion, oil market volatility, and concerns around capital flow stability.
They further maintained that the absence of a meaningful decline suggested that markets remain sensitive to evolving geopolitical developments, particularly around energy supply risks and global financial conditions.
In addition, the CAPE Research and Consulting analysts stated that this sustained level of uncertainty implied continued risk off positioning by investors, with preference for shorter duration exposures, Cautious portfolio flows, limiting a full recovery in foreign capital inflows and Elevated risk premia on Nigeria related assets.
Similarly, they maintained that the sustained high level of uncertainty had important macroeconomic implications for the country.
The experts clarified: “First, it suggests continued caution in portfolio flows, with investors maintaining shorter investment horizons and higher required returns on Nigeria related assets. This environment is likely to moderate foreign exchange inflows, increasing the risk of intermittent pressure on the naira despite support from oil receipts. As a result, FX conditions are expected to remain sensitive and liquidity management dependent.
“Second, elevated uncertainty reinforces upside risks to inflation. Persistent external volatility could transmit through higher imported energy and logistics costs, as well as potential exchange rate pass through effects if FX pressures re-emerge. While earlier disinflation gains remain in place, the April EPU trend suggests that inflation risks have shifted back to the upside margin.
“Additionally, the April EPU dynamics support expectations of a cautious and relatively tight monetary policy stance. With uncertainty still elevated and external conditions fragile, the Central Bank is likely to prioritise price and exchange rate stability, delaying any aggressive easing cycle. Policy will likely remain data dependent, with liquidity management playing a central role in stabilising market conditions and preserving confidence.
“Overall, the April movement in the EPU index points to a plateauing at high uncertainty levels rather than a reversal, reinforcing a near term environment of cautious investor sentiment and continued sensitivity to external shocks and the need for sustained policy credibility to anchor expectations and maintain stability”, they added.
The researchers recalled that Nigeria entered the second quarter of 2026 with clear signs of macroeconomic stabilisation, supported by earlier reforms, resilient services activity, improved FX liquidity, and a modest recovery in oil output as growth remaining moderate but stable, with underlying resilience expected to persist in the near term.
The experts predicted: “In the second half of 2026, growth is expected to strengthen gradually but remain uneven. Activity in Q3 should improve modestly, supported by better FX availability and seasonal gains in agriculture, while Q4 is likely to see firmer momentum, aided by year end fiscal spending, easing price pressures, and continued normalisation in foreign exchange markets. However, expansion will remain measured, constrained by high financing costs, consumption, and structural bottlenecks.
“External risks remain elevated. Heightened geopolitical tensions and associated oil price volatility present both opportunities (stronger revenues) and risks (capital flow volatility, exchange rate and price pressures). As a result, private investment and overall growth may remain sensitive to shifts in global financial conditions”, they added.
