Nigeria’s GDP Rises To 3.89% In Q1 On Non-oil Sector Growth

…Growth still too weak, analysts say

BY MARK ITSIBOR, Abuja, YUSUF BABALOLA AND OLUSHOLA BELLO, Lagos

Nigeria’s economy expanded at an annual rate of 3.89 per cent in the first quarter, driven largely by growth in the non-oil sectors, even as crude production weakened, latest data from the National Bureau of Statistics (NBS) showed.

The NBS data released on Monday showed that Nigeria’s economic expansion in the first quarter was largely driven by strong growth in telecommunications, financial services, agriculture, and trade, underscoring the non-oil sector’s increasing resilience amid declining crude oil production.

However, despite the modest 3.89 per cent expansion in the first quarter, experts warned that Nigeria’s recovery falls short of what’s needed to lift living standards and tackle rising socio-economic pressures.

While reforms and a resilient non-oil sector have helped stabilise macroeconomic conditions, forecasters argue growth must accelerate well above current rates to meaningfully reduce poverty, absorb the country’s growing labour force and sustain stronger private‑sector investment.

Data showed that the country’s Gross Domestic Product (GDP) grew by 3.89 per cent year-on-year in real terms in Q1 2026, compared with 3.13 per cent recorded in the corresponding period of 2025.

The report indicated that the services sector remained the biggest driver of economic activity, contributing 57.73 per cent to aggregate GDP during the period under review, slightly higher than the 57.50 per cent contribution recorded a year earlier.

The statistics office said the non-oil sector continued to dominate the economy, accounting for 96.08 per cent of real GDP, while the oil sector accounted for only 3.92 per cent.

According to the NBS, the growth recorded during the quarter was supported mainly by Information and Communication, agriculture, trade, cement manufacturing, financial institutions, real estate, construction, and transportation activities.

The information and communication sector emerged as one of the strongest growth drivers, posting a real growth rate of 10.98 per cent year-on-year in Q1 2026, compared with 7.40 per cent in the same period of 2025.

The sector contributed 11.31 per cent to real GDP during the quarter, higher than the 10.59 per cent contribution recorded in the corresponding quarter of last year.

Within the sector, telecommunications and information services remained the dominant component, reinforcing the growing importance of the digital economy to Nigeria’s overall output performance.

According to the NBS data, finance and insurance sector also recorded robust growth during the review period. In nominal terms, the sector expanded by 46.91 per cent year-on-year, while real growth stood at 8.54 per cent.

Its contribution to real GDP increased to 3.76 per cent from 3.60 per cent recorded in the first quarter of 2025.

The NBS stated that financial institutions accounted for 90.62 per cent of the sector’s output, while insurance contributed 9.38 per cent.

Agriculture, which has remained critical to food supply and rural livelihoods, rebounded strongly with a growth rate of 3.15 per cent in Q1 2026, compared with a marginal 0.07 per cent growth recorded in the same period of 2025.

However, the sector’s contribution to nominal GDP declined to 18.11 per cent from 19.40 per cent in the corresponding quarter of last year.

Trade activities also improved modestly, recording a real growth rate of 2.08 per cent, up from 1.78 per cent in Q1 2025.

The sector contributed 17.89 per cent to GDP during the period.

Despite the broader economic improvement, crude oil production weakened during the quarter. Average daily oil output declined to 1.55 million barrels per day, lower than the 1.62 million barrels per day recorded in the same quarter of 2025.

Although the oil sector recorded a real growth rate of 2.57 per cent year-on-year, the figure represented a slowdown from the 6.79 per cent growth posted in the fourth quarter of 2025.

The oil sector’s contribution to total real GDP also declined marginally to 3.92 per cent from 3.97 per cent in the corresponding quarter of 2025.

The Manufacturing sector recorded nominal growth of 10.22 per cent during the review period, although this was significantly below the 42.40 per cent growth recorded a year earlier. Its contribution to nominal GDP stood at 10.08 per cent.

Overall, aggregate GDP at basic prices rose to N110.79 trillion in nominal terms in Q1 2026, representing a 17.79 per cent increase from N94.05 trillion recorded in the corresponding quarter of 2025.

Experts Comment:

Economic analysts said the latest GDP figures highlight the growing influence of technology-driven services and financial activities in supporting Nigeria’s economic expansion, even as the country continues to grapple with oil production constraints and broader macroeconomic pressures.

The analysts said the latest GDP figures highlight the growing influence of technology-driven services and financial activities in supporting Nigeria’s economic expansion, even as the country continues to grapple with oil production constraints and broader macroeconomic pressures.

Speaking on the figures, development economic analyst, Dr Justin Amase, said the modest growth in agriculture reflects the severe impact of insecurity on farming activities across major food-producing states. According to him, persistent attacks on farming communities, displacement of farmers and rising logistics costs have weakened food production and worsened food inflation nationwide.

He noted that the economy remains largely service-driven, warning that sustainable growth cannot be achieved without stronger productivity in agriculture and manufacturing.

Like Amase, a Professor of Economics, Hassan Ebhozele Oaikhenan said the GDP data exposes structural weaknesses in the economy and the failure of authorities to implement policies capable of driving real sector production.

According to Professor Oaikhenan, high interest rates, rising energy costs, poor electricity supply, and the overall cost of doing business continue to constrain productive activities, particularly manufacturing and agriculture.

He said that while growth in telecommunications and financial services demonstrates resilience in the services sector, the weak performance of production-oriented sectors shows that Nigeria’s economic growth remains fragile and insufficient to address challenges of inflation, unemployment, and poverty.

Also commenting on the GDP figures, the Head of Financial Institutions Ratings at Agusto & Co, Ayokunle Olubunmi, has said Nigeria’s current economic growth remains insufficient to deliver meaningful development, stressing that the country needs to expand at a much faster pace to achieve real impact on living standards.

Speaking on the state of the economy, Olubunmi noted that while Nigeria’s growth rate is currently slightly above population growth, estimated at 3 per cent, the pace remains too weak to significantly improve welfare outcomes.

“So, it depends on how you look at it. There is some good news and some bad news. The good news is that we are at least keeping pace with the population growth rate, which is approximately 3 per cent. But the sad part is that for us to get significant improvement, we need to be growing about 5 or 6 per cent,” he said.

He explained that Nigeria’s current growth rate is barely enough to keep up with population growth, warning that anything below a higher threshold limits per capita economic progress.

“As it is now, we are just barely covering the population growth rate. For us to grow significantly, we should be growing at least 2 or 3 per cent above the population growth rate,” he added.

Olubunmi further said that recent fiscal reforms by the government have largely focused on addressing long-standing weaknesses in public finances, which he described as previously being in a “shambles.”

According to him, key policy actions such as subsidy removal have helped reduce government expenditure pressures, even though they have increased the financial burden on consumers.

“The focus of a lot of reforms is to solve the fiscal issue that the government has. If you look at subsidy removal, the amount the government is spending has reduced, but what the consumer is paying has gone up,” he said.

He, however, warned that while these reforms may improve fiscal stability, they could also suppress consumer spending if not balanced with measures that boost household income and demand.

The analyst stressed that stronger consumer spending is essential for attracting investment and sustaining higher growth, noting that private consumption remains a critical driver of GDP expansion.

“For you to have significant GDP growth, you need to ensure consumer consumption is high. That is when you see corporate activity and investment coming into the country,” he said.

Olubunmi concluded that policymakers must strike a balance between maintaining fiscal discipline and stimulating demand to accelerate economic growth and achieve broader development outcomes.

Also speaking, the director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf expressed a positive outlook on the first quarter GDP growth of 3.89 per cent, noting that it represents a commendable performance considering the typically low economic activity during this period.

“When comparing Q1 2026 to the first quarters of 2025 and 2024, it is clear that the current figure reflects significant improvement over previous years,” he stated.

According to him, while this growth is slightly lower than Q4’s 4.07 per cent, there is optimism for the second quarter. It is common to experience a lull in economic activities in the first quarter due to uncertainties surrounding budgets and policy announcements, which often leads investors to adopt a wait-and-see approach.

“One particularly encouraging highlight from the GDP report is the notable contribution of the trade sector, which stands at 17.9 per cent. This indicates that the trade sector is gaining momentum, suggesting a more stable macroeconomic environment that has fostered increased international trade, facilitated by currency stability.”

Yusuf added that “crop production has shown a surprising strength, contributing 17.38 per cent despite challenges such as security issues. This demonstrates resilience in the agricultural sector, an essential component of the economy.

“The real estate and construction sectors also appear to be thriving, with increased investments from both state and federal governments in infrastructure. Real estate continues to attract both domestic and international investors, highlighting its appeal as a robust asset class.”

He noted that “there are areas that require attention. The electricity sector experienced a concerning contraction of 15.3 per cent, which raises alarms given its critical role in economic growth. Similarly, the air transport sector faced a decline of 7.62 per cent, signifying the need for focused policy intervention to revitalize these vital industries.

“The service sector remains a dominant force in the GDP, contributing an impressive 57 per cent. Moreover, the non-oil sector continues to stand as a pillar of the economy, accounting for 96 per cent of GDP. While this sector is vital, it is worth noting that it currently has limited impact on foreign exchange earnings, highlighting a need for enhancements in productivity and global competitiveness.”

Yusuf pointed out that while several sectors show promising growth and resilience, addressing the challenges in the electricity and air transport sectors will be vital for sustaining overall economic development moving forward.

The managing director of ECL Asset Management Limited, Fakrogha Charles Oyinmiebi, said Nigeria’s latest Gross Domestic Product (GDP) report has signalled improving macroeconomic stability, although deep-rooted structural weaknesses continue to pose risks to sustainable growth.

Fakrogha noted that the economy expanded by 3.89 per cent in the first quarter of 2026, compared to 3.13 per cent recorded in the corresponding period of 2025, although slightly lower than the 4.07 per cent growth achieved in Q4 2025.

He described the figures as evidence that Nigeria’s ongoing economic reforms are beginning to stabilise macroeconomic conditions, particularly through the resilience of non-oil sectors.

According to him, the latest GDP report suggests that economic momentum remains positive, but growth is moderating.

“The slowdown from 4.07 per cent to 3.89 per cent suggests that economic momentum is still positive, but growth is becoming softer,” Fakrogha said.

He explained that while businesses may continue to expand, they are likely to do so cautiously as inflation and high living costs continue to weaken consumer purchasing power.

Fakrogha observed that the services sector remained the major driver of the economy, contributing about 57.73 per cent of GDP during the quarter.

He said sectors such as banking, telecommunications, fintech, insurance, ICT, and professional services continue to offer strong investment opportunities, reinforcing Nigeria’s transition to a service-led economy.

“The Nigerian economy is increasingly becoming service-led rather than manufacturing-led,” he stated, adding that capital market operators may continue to record stronger earnings from financial and telecom stocks.

The investment expert also identified agriculture as a bright spot in the report, noting that the sector grew by 3.15 per cent compared to near-flat growth recorded in the previous year.

According to him, the improvement in agriculture could gradually support food production and moderate food inflation later in the year if insecurity and logistics challenges ease.

He added that the performance may also stimulate renewed investor interest in agribusiness and agro-processing.

Despite the positive indicators, Fakrogha warned that the oil sector remains a major structural concern for the economy.

He pointed out that average crude oil production declined to about 1.55 million barrels per day in Q1 2026, a development he said could continue to pressure government revenue and foreign exchange earnings.

“Nigeria still depends heavily on non-oil growth for economic stability. Fiscal deficits and borrowing pressures could persist,” he warned.

Fakrogha further stated that moderate GDP growth could support investor confidence, the corporate earnings outlook, and stability in the Nigerian capital market, particularly in banking and telecommunications.

However, he noted that consumer goods companies may continue to face pressure due to weak household purchasing power.

On monetary policy, he said the Central Bank of Nigeria may interpret the GDP data as supportive of maintaining a cautious monetary stance, while gradual interest rate moderation may be possible if inflation continues to ease.

He added that stronger GDP growth combined with moderating inflation could improve foreign exchange stability, attract foreign portfolio inflows and strengthen investor sentiment toward Nigeria.

Nevertheless, Fakrogha stressed that the current growth level remains below what is required to significantly reduce unemployment and poverty or absorb Nigeria’s rapidly growing population.

“Nigeria likely requires sustained growth above six to seven per cent annually for broad-based economic transformation,” he said.

He maintained that while the latest GDP figures reflect cautious optimism, structural weaknesses in oil production, inflation, power supply and productivity remain key constraints to long-term economic growth.