By Onu Okorie
A renowned capital market economist, Prof Uche Uwaleke has reacted to the latest Gross Domestic Product GDP report released by the National Bureau of Statistics, NBS saying, “inflation remained the single biggest drag on economic activity during the quarter, adding, “Nigerian economy is still expanding, but under increasingly difficult conditions.”
Nigeria’s economy expanded by 3.89 per cent in the first quarter of 2026, reflecting resilience in key sectors despite mounting inflationary pressures, weak consumer purchasing power and growing global uncertainty, according to the latest GDP report released by the NBS.
The growth rate, though higher than the 3.13 per cent recorded in Q1 2025, marked a slight slowdown from the 4.07 per cent achieved in the final quarter of 2025, underscoring concerns that economic momentum remains fragile.
According to him, “while nominal GDP rose strongly by 17.79 per cent, real GDP growth remained under four per cent, which means a significant portion of the apparent expansion was price-driven rather than output-driven,” Uwaleke said.
He noted that soaring prices weakened household purchasing power, dampened consumer demand, increased operating costs for businesses and discouraged investment across several sectors.
The NBS report showed that Nigeria’s nominal GDP stood at N110.78 trillion in Q1 2026, compared with N94 trillion in the corresponding period of 2025.
The non-oil sector continued to dominate the economy, contributing 96.08 per cent to GDP and growing by 3.94 per cent in real terms. Telecommunications, financial services, construction, trade, crop production and transportation emerged as major drivers of growth.
The Information and Communication sector recorded one of the strongest performances, growing by 10.98 per cent, while Financial and Insurance services expanded by 8.54 per cent despite tighter monetary conditions.
Uwaleke described the digital economy as one of Nigeria’s strongest growth anchors, citing increased fintech activity, telecoms expansion and rising data consumption.
However, he warned that inflationary pressures were beginning to undermine broader economic gains.
Trade growth slowed to 2.08 per cent as consumers cut spending amid rising living costs, while manufacturers battled elevated energy prices, exchange rate volatility, high import costs and expensive credit.
“The economy is growing, but not yet accelerating in a broad-based or fully sustainable way,” he said.
The Central Bank’s aggressive monetary tightening also weighed heavily on credit-dependent sectors, according to the economist.
Higher interest rates, introduced to curb inflation and stabilize the financial system, raised borrowing costs for businesses and households, slowing activity in manufacturing, real estate and small enterprises.
The real estate sector, for instance, posted modest growth of 2.29 per cent during the quarter.
Agriculture, which remains critical to food supply and employment, rebounded to 3.15 per cent growth from near stagnation a year earlier. Uwaleke attributed the improvement partly to relative stability in some food-producing regions and higher food prices incentivizing production.
Nevertheless, he noted that insecurity in farming communities, logistics bottlenecks and rising input costs continued to constrain the sector’s full potential.
On the oil front, Nigeria’s average daily crude production declined to 1.55 million barrels per day, lower than both Q1 2025 and Q4 2025 levels.
Although the oil sector recorded 2.57 per cent year-on-year growth, its contribution to real GDP remained low at 3.92 per cent.
Uwaleke said the figures reinforce the reality that Nigeria’s economy is increasingly non-oil driven, while persistent challenges such as oil theft, underinvestment and operational inefficiencies continue to limit the sector’s contribution to fiscal stability.
He also pointed to the escalating Middle East crisis, which intensified in late February 2026, as a potential risk to Nigeria’s economic outlook.
According to him, global oil price volatility, shipping disruptions and uncertainty in international financial markets may exert additional pressure on the economy in the coming months.
While higher crude prices could support government revenues and foreign exchange earnings, he warned that Nigeria may not fully benefit because of weak domestic oil production.
Uwaleke further noted that the ongoing banking sector recapitalization programme may have contributed to slower lending growth, as banks became more cautious in extending credit while strengthening their balance sheets.
Despite the pressures, he said the economy had shown resilience by avoiding a sharper slowdown.
“Strong performances in telecoms, finance and construction contrast with weaker consumer demand, soft oil production and slowing momentum in sectors tied closely to household spending,” he said.
He warned, however, that unless inflation moderates significantly, oil production improves and economic reforms begin translating into stronger real incomes, Nigeria’s growth may remain insufficient to reduce poverty, create jobs or deliver broad-based prosperity.
“The key message from the report is that Nigeria’s economy is still growing, but growth is fragile and increasingly carried by a narrow set of sectors while inflation continues to erode the benefits for ordinary Nigerians,” he added.