Nigeria’s economy is projected to grow by 4.2% in the second half of 2026, according to PwC Nigeria’s latest outlook, “Unlocking Nigeria’s reform dividend: From macroeconomic stabilisation to inclusive growth.” The forecast marks an acceleration from the 3.89% recorded in Q1 2026 and sits well above the country’s five-year average of 3.28%. It is built on expectations of higher crude oil production and continued momentum in ICT, finance and insurance, construction and agriculture, the same sectors that drove the Q1 print. The macro picture is also improving on other fronts. Headline inflation eased to 15.91% in June, gross foreign reserves rose 38.3% year-on-year to $51.46bn, FX market liquidity picked up, and S&P upgraded Nigeria to B in May on the back of a stronger external profile. Fiscal revenue climbed 23.2% to N7.44trn in Q1, and the debt-to-GDP ratio fell to 38.7%. On paper, the stabilisation agenda is gaining traction.
But the stronger numbers are not yet translating into stronger living conditions, and that is where PwC’s report sounds its most urgent warning. Growth remains narrow and credit is getting tighter, not wider. The Q1 expansion was led by ICT at 10.98%, Finance & Insurance at 8.54%, Construction at 6.38% and Agriculture at 3.15%. At the same time, electricity contracted 15.30%, oil and gas grew just 2.57%, and trade and real estate lagged because of high operating, logistics and financing costs. The Composite PMI fell below 50 in April and May before barely recovering to 50.1 in June, with 17 of 36 subsectors in contraction. This is growth without breadth, and without breadth it cannot absorb labour or lift incomes at scale.
The credit channel tells the same story. Private-sector credit stands at only 21.3% of GDP, far below the Sub-Saharan African average of 33% and the lower-middle-income average of 47%. Between February and May 2026, lending to the private sector fell 14.3% while credit to government rose 2.6%. With the monetary policy rate at 26.5%, prime lending at 19.1% and maximum lending at 34.78%, borrowing is expensive and out of reach for most firms. MSMEs are especially squeezed. Most need loans under N2.5m, but banks concentrate on N30m and above, while microfinance caps at N500,000. That leaves a “missing middle” between N500,000 and N30m where most job-creating businesses sit, with no affordable financing. PwC notes that tight monetary policy may be supporting price and FX stability, but it is also absorbing liquidity into government securities and away from households and productive businesses.
Households are feeling the squeeze most directly. While headline and core inflation have moderated, food inflation rose to 17.52% in June and month-on-month food prices accelerated to 3.75% on staples like tomatoes, pepper, garri, yam and beef. Housing inflation also climbed. The cost of a healthy diet reached N1,589 per adult per day in April, and energy costs added to the pressure with diesel up 43.67% year-on-year, kerosene 34.12% and PMS 23.69%. Consumer buying conditions for durables, vehicles and property remain weak, which means families are cutting back on everything beyond essentials. The human impact is reflected in poverty and nutrition data. Poverty is projected at 63% in 2026, unchanged from 2025 and up from 40% in 2019. Undernourishment has nearly doubled since 2015-2017. Nigeria also ranked last out of 70 economies on infrastructure in the 2026 IMD competitiveness ranking. In power, only 7.32m of 12.39m customers are metered, aggregate losses are above 37%, and collections are poor, forcing the government to subsidise more than half of GenCo invoices.
The external position reinforces the theme of stronger buffers but weaker quality. Capital importation rose 83.8% to $10.37bn in Q1 2026, but $9.86bn of that, or 95.1%, was portfolio investment in money markets and bonds. Foreign direct investment was only $135.08m, or 1.3% of total inflows. The trade surplus widened, but mainly because imports fell 18.2% rather than because exports grew strongly. Crude oil still accounts for 52.9% of exports. In fiscal terms, revenue is up but debt service still consumes 49.2% of government income, which PwC calls the key fiscal vulnerability. Budget execution risks are also rising, with the 2026 appropriation signed in April overlapping with an extended 2025 capital budget, raising the possibility of delayed releases and slower project delivery.
PwC argues that the gap between stabilisation and inclusion comes down to transmission. Tight policy is helping anchor prices and the exchange rate, but it is also raising borrowing costs and crowding out the private sector. High public borrowing and reform-related price adjustments are shifting income away from households and firms. Beyond policy, productivity bottlenecks in power, transport, logistics, security and skills are limiting output, and delays in approvals, land access and FX are slowing the conversion of investment into operating capacity. Insecurity was ranked the top business constraint in May, followed by multiple taxes and high interest rates. On human capital, 10.2 million children are out of school, most children aged 7 to 14 lack foundational literacy and numeracy, and 40% of children under five are stunted. These constraints mean that even when macro indicators improve, they do not automatically feed into jobs, wages or consumption.
To close the gap, PwC outlines four priorities. First, scale up targeted support to protect purchasing power and bring down food costs through higher farm productivity, better storage and logistics, and expanded domestic energy supply. Second, intervene for MSMEs by closing the N500,000 to N30m financing gap with guarantees and blended finance, expanding longer-tenor credit, and reducing operating costs from taxes and insecurity. Third, unlock productivity by prioritizing power, transport, broadband and security, and by improving metering and collections in electricity. Fourth, convert investor interest into productive investment by building bankable projects and ensuring regulatory predictability so that inflows shift from portfolio assets to FDI.
The bottom line is that Nigeria now has a more resilient macroeconomy, but a fragile micro-economy. The 4.2% growth projection is meaningful because it shows that reforms around FX, subsidies and revenue are stabilizing the framework. However, stability alone is not enough. Until credit becomes affordable, food becomes cheaper, power becomes more reliable, and investment shifts from short-term portfolio flows to long-term productive capacity, the benefits of reform will remain trapped at the macro level. For policymakers and investors, the test in H2 2026 and beyond will not be whether GDP prints higher, but whether households can feel the difference.
