Nigeria’s economy is projected to gather stronger momentum in the second half of 2026, with growth expected to rise to 4.5 percent and full-year Gross Domestic Product (GDP) expansion reaching approximately 4.2 percent, the Nigerian Economic Summit Group (NESG) has said.

In its H1 2026 State of the Economy report released this week and titled “Turning Potential into Progress,” the think-tank said the outlook rests on improved performance across the oil, manufacturing, agricultural and services sectors, even as structural challenges continue to limit the pace of expansion.

The oil sector is expected to sustain growth, supported by higher domestic crude production amid improved security conditions and the gradual rollout of upstream reforms. Increased domestic refining activity should also boost industrial output, cut reliance on imported refined petroleum products and strengthen the country’s external position.

Manufacturing is forecast to maintain its growth momentum as lower inflation, continued exchange-rate stability and better foreign-exchange liquidity ease production constraints and lift business confidence. However, the NESG cautioned that unreliable electricity supply, high borrowing costs, elevated logistics expenses and weak domestic demand will remain significant constraints.

In agriculture, improved rainfall and favourable harvest conditions are expected to support crop production and ease food supply pressures. Persistent insecurity in key food-producing regions and climate-related shocks, particularly flooding, could nevertheless undermine these gains.

The services sector is projected to remain the primary engine of growth. Financial services will benefit from recent bank recapitalisation, stronger credit intermediation and improved investor confidence, while information and communications technology is expected to record robust expansion driven by rising digital adoption, higher data consumption and ongoing investment in telecommunications infrastructure.

On the external front, the NESG said the sector should remain resilient in the second half of the year, with the naira broadly stable and external reserves projected to climb to about US$53 billion by year-end. Higher crude oil production, favourable oil prices, stronger non-oil exports and sustained current-account surpluses are expected to boost foreign-exchange earnings and support reserve accumulation.

Improved investor confidence, higher foreign portfolio inflows, stronger diaspora remittances through formal channels and continued foreign-exchange market reforms are also expected to enhance liquidity and reinforce exchange-rate stability. Continued monetary policy discipline, together with a narrower parallel-market premium, should reduce speculative demand and foster a more transparent and resilient foreign-exchange market.

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These developments come as Central Bank of Nigeria Governor Yemi Cardoso reported that gross external reserves had already risen to US$52.52 billion as of 17 July, up from US$50.47 billion at the end of May. He attributed the increase mainly to receipts from crude oil-related taxes and third-party inflows.

Inflation, however, is expected to remain elevated, averaging 15.5 percent in the second half of 2026 and for the full year. The NESG linked the projection to persistent insecurity in major farming communities, climate-related disruptions such as flooding, high transportation costs, election-related spending, seasonal festive demand and relatively high energy costs. These pressures could be partly offset by exchange-rate stability, the lagged effects of tight monetary policy and favourable base effects.

Overall, the NESG’s assessment points to a cautiously optimistic outlook in which macroeconomic stability is reinforced even as structural bottlenecks continue to temper the speed of recovery.