[UPDATED] Nigeria’s economy picks up pace to 3.89% in Q1 2026, but oil drag and weak services cap momentum

Contrary to our earlier report about a slowdown, Nigeria’s real GDP actually grew 3.89% year-on-year in Q1 2026, accelerating from 3.13% in Q1 2025, according to a report by the National Bureau of Statistics,  NBS.

The expansion was driven by a rebound in agriculture and stronger non-oil activity, while oil output and electricity supply contracted.

Nominal GDP hit ₦110.79 trillion, up 17.79% YoY, reflecting both real growth and inflation pass-through.

THE CONCLAVE reports that the story is one of resilient non-oil sectors carrying the economy as oil continues to underperform.

Services remain dominant but lost slight momentum, raising questions about the sustainability of growth without stronger industrial and power sector support.

—-Sector Breakdown: What Drove Growth—

Services remain the engine, but growth eased
– Contributed 57.73% of real GDP, up from 57.50% in Q1 2025.
– Grew 4.31% YoY, marginally slower than 4.33% a year earlier.
– Key drivers: ICT/Telecoms at 10.98%, Finance & Insurance at 8.54%, and Arts, Entertainment & Recreation at 11.25%.
– Weak spots: Electricity, Gas, Steam & AC contracted 15.30%* in real terms, the steepest decline across all sectors. Accommodation & Food Services grew 4.36%, but far below the 60.33% nominal surge in Q1 2025.

—Non-oil sector stays dominant—

– Grew 3.94% YoY, up from 3.19% in Q1 2025.
– Accounted for 96.08% of GDP, with crop production, trade, manufacturing, real estate, construction, and road transport as top contributors.
– Agriculture rebounded sharply to 3.15% from 0.07% in Q1 2025, though it contracted 35.24% QoQ due to seasonality. Crop production remains 66.76% of the sector’s nominal value.

—Industry growth stayed flat—

– Expanded 3.50% YoY vs 3.42% in Q1 2025.
– Manufacturing improved to 3.29% from 1.69% a year earlier, led by cement and food/beverages.
– Construction accelerated to 6.38%, its strongest YoY pace in recent quarters, supported by public and private projects.

—Oil sector remains a drag on output volume—

– Average production fell to 1.55 mbpd from 1.62 mbpd in Q1 2025.
– Real growth was 2.57%, up from 1.87% YoY but down sharply from 6.79% in Q4 2025.
– Oil’s share of GDP slipped to 3.92% from 3.97% a year ago. Mining & Quarrying as a whole grew just 1.89% in real terms, despite a 16.37% nominal rise in crude oil activity, indicating price effects masked weak volumes.

—Structural Shifts in Q1 2026—

1. Non-oil reliance deepened: Non-oil contributed 96.08% of GDP, the highest Q1 share since at least 2025. The economy is less dependent on crude volumes but still exposed to oil price and FX swings via fiscal revenues.
2. Agriculture’s recovery is fragile: The 3.15% growth is a positive break from near-stagnation, but the -35.24% QoQ drop shows heavy seasonal dependence and limited dry-season irrigation capacity.
3. Power sector remains a bottleneck: The 15.30% real contraction in electricity supply directly constrains manufacturing and services productivity. It’s the only major sector in negative territory.
4. Finance and ICT continue to outperform: Finance & Insurance grew 8.54% YoY, with financial institutions driving 90.6% of that. ICT at 10.98% confirms telecoms and digital services as the most dynamic part of the economy.

—Implications—

For growth outlook:
The 3.89% outturn puts Nigeria on track to exceed 2025’s 3.13%, but hitting 4%+ for the year requires oil production tostabilise above 1.6 mbpd and electricity supply to recover. Without that, growth will remain consumption and services-led, with limited job creation in tradables.

For inflation and FX:
Nominal GDP growth of 17.79% far outpaces real growth, implying high inflation persistence. Trade grew 38.15% nominally but only 2.08% in real terms, a sign that exchange rate passthrough is still feeding into prices.

For policy:
– Power sector reform is urgent: The collapse in electricity output undermines gains in manufacturing and ICT.
– Agriculture needs irrigation and input support to smooth seasonal volatility.
– Oil sector governance and security remain critical to unlock the 1.7-1.8 mbpd target in the 2026 budget.

—Risks and Watchpoints for Q2-Q4 2026—
– Oil production security: Any further drop below 1.5 mbpd will pull headline growth below 3.5%.
– Fiscal pressure: Lower oil volumes mean tighter fiscal space, even if prices hold.
– Base effects in services: The high growth in ICT and finance may moderate as the base normalises.
– Seasonality in agriculture: Q2 and Q3 will determine if the Q1 rebound translates into full-year gains.

—Bottom Line–

Q1 2026 shows an economy growing faster but on a narrow base. Non-oil sectors, especially ICT, finance, agriculture, and construction, are carrying the load. Until oil production stabilises and the power sector recovers, Nigeria’s growth will remain below potential and heavily exposed to external shocks.