Nigeria faces a potential stagflationary threat in the second quarter of 2026 as global energy price surges, domestic cost pressures, and political risks endanger recent macroeconomic gains. The Centre for the Promotion of Private Enterprise (CPPE) issued the warning in its Q1 2026 economic review and Q2 outlook, released on Sunday. Crude oil prices have climbed above $100 per barrel due to escalating geopolitical tensions in the Middle East, creating a dual impact: higher export revenues and foreign exchange inflows, but also rising fuel, transport, and production costs. The CPPE cautioned that these cost increases could reverse disinflation progress, noting, "The current disinflation trajectory is fragile and vulnerable to reversal."
Inflation declined from over 24 per cent in early 2025 to 15.06 per cent by February 2026, supported by tighter monetary policy and improved exchange rate stability. The naira traded between N1,340 and N1,430 per dollar in the official market, while external reserves surpassed $50 billion. Real GDP grew by 4.07 per cent year-on-year in Q4 2025, lifting full-year growth to 3.87 per cent. The Monetary Policy Committee responded by cutting the benchmark interest rate by 50 basis points to 26.5 per cent in February. However, the CPPE highlighted persistent challenges, including high energy costs, unreliable electricity, insecurity in farming zones, and limited credit access, especially for SMEs. The 2026 budget, set at ₦68 trillion, faces risks from weak revenue collection and political interference in spending.
The CPPE's projection of stagflation risk in Q2 2026 exposes the fragility of Nigeria's recent economic gains, despite the drop in inflation to 15.06 per cent and GDP growth of 3.87 per cent in 2025. Rising oil prices above $100 per barrel may boost government revenue, but the resulting surge in energy and transport costs threatens to erode household purchasing power and stall business expansion. For Nigerians, this means relief from high prices could be short-lived, particularly if domestic production remains tied to expensive alternative power sources. The real test lies in whether economic management can withstand political pressures and avoid a backslide into broader instability.
