Nigeria’s economy sustained its growth trajectory in the first quarter of 2026, recording a 3.89 percent year-on-year expansion, but cracks are beginning to emerge beneath the headline numbers as slowing oil sector performance, infrastructure bottlenecks and seasonal economic pressures threaten to moderate momentum in the months ahead.
The latest Gross Domestic Product (GDP) assessment released by Lead Capital Plc showed that while Africa’s largest economy remained firmly in positive territory, growth eased slightly from the 4.07 percent recorded in the fourth quarter of 2025, reflecting mounting pressures within the country’s critical petroleum industry and uneven sectoral performance across the broader economy.
According to the report, the slowdown was driven primarily by weaker growth in the oil sector, which expanded by only 2.57 percent in Q1 2026 compared with a significantly stronger 6.79 percent growth rate in the preceding quarter.
The development underscores the continued fragility of Nigeria’s hydrocarbon-dependent economy despite government efforts to ramp up production, improve energy infrastructure and stabilise foreign exchange earnings.
Lead Capital noted that average daily crude oil production declined to 1.55 million barrels per day during the period, lower than the 1.62 million barrels per day recorded in the corresponding period of last year and also below the 1.58 million barrels achieved in Q4 2025.
The report attributed the decline to a combination of ageing production facilities, persistent crude theft, pipeline vandalism and operational inefficiencies that continue to undermine output recovery efforts across the oil and gas sector.
“The average daily crude oil production reached 1.55 million barrels per day in Q1 2026, lower than 1.62 million bpd in the same period last year and 1.58 million bpd in Q4 2025, attributed to several factors including aged facilities and oil theft,” the report stated.
Despite the moderation in oil growth, Nigeria’s non-oil economy remained relatively resilient, expanding by 3.94 percent year-on-year, only marginally lower than the 3.99 percent growth recorded in the previous quarter.
Analysts say the sustained resilience of the non-oil economy reinforces growing evidence that services, manufacturing, telecommunications and financial activities are increasingly carrying the weight of economic expansion as the contribution of crude petroleum to GDP continues to shrink.
Data from the report showed that the services sector remained the dominant growth engine of the economy, recording 4.31 percent growth and contributing 57.73 percent to overall GDP during the quarter.
Particularly strong momentum was recorded in arts, entertainment and recreation, which emerged as the fastest-growing segment with an 11.25 percent expansion, highlighting the increasing commercial significance of Nigeria’s creative economy.
The information and communication sector also posted robust growth of 10.98 percent, further confirming the central role of telecommunications, digital platforms and technology-driven services in sustaining economic activity amid broader structural constraints.
Financial and insurance services expanded by 8.54 percent, while transportation and storage grew by 7.41 percent, suggesting stronger commercial activity and improved financial intermediation during the period.
Trade grew by 2.08 percent, while real estate recorded a 2.29 percent increase, reflecting moderate recovery in consumer and property-related activities despite high inflationary conditions and elevated borrowing costs.
The industrial sector expanded by 3.50 percent, supported largely by a rebound in manufacturing activity and continued gains in construction-related output.
Within manufacturing, oil refining recorded a remarkable 37.46 percent surge, signalling improving domestic refining activity and possible early benefits from ongoing investments in refining infrastructure and downstream petroleum operations.
Cement production also rose sharply by 11.53 percent, reflecting continued demand from infrastructure projects, housing development and construction activities across the country.
Lead Capital’s sectoral analysis showed that 17 out of Nigeria’s 19 major economic sectors recorded positive growth in the first quarter, underscoring the broad-based nature of the expansion despite macroeconomic headwinds.
Beyond arts and ICT, water supply, sewerage, waste management and remediation activities grew by 10.32 percent, positioning it among the fastest-growing sectors in the economy.
Construction recorded 6.38 percent growth, accommodation and food services expanded by 4.36 percent, while professional and scientific services rose by 2.66 percent.
Agriculture, which remains Nigeria’s largest employer and a critical pillar of food security, expanded by 3.15 percent compared with 2.92 percent growth in Q4 2025.
Although the sector maintained positive momentum, analysts noted that the pace of growth remains constrained by insecurity in farming regions, climate variability, rising input costs and infrastructure deficits affecting food supply chains.
Crop production, livestock and forestry activities all contributed positively to agricultural performance during the quarter.
However, not all sectors performed positively.
The electricity, gas, steam and air conditioning supply sector contracted sharply by 15.30 percent, making it the weakest-performing segment of the economy during the quarter.
The decline highlights persistent challenges in Nigeria’s power sector, including inadequate generation capacity, transmission bottlenecks, gas supply disruptions and liquidity constraints that continue to weigh on industrial productivity and investor confidence.
The “other services” category also contracted by 1.96 percent.
Economic analysts say the continued weakness in electricity supply remains one of the biggest structural obstacles to Nigeria’s long-term growth ambitions, particularly for manufacturing and industrial expansion.
The latest GDP data also revealed deeper structural shifts within the Nigerian economy.
While agriculture contributed 23.16 percent to GDP in Q1 2026, services accounted for 57.73 percent and industry contributed 19.11 percent.
Most notably, the oil sector’s contribution to GDP stood at only 3.92 percent during the period, underscoring the economy’s gradual transition away from direct oil dependency, even though government revenues and foreign exchange earnings remain heavily tied to crude exports.
The non-oil sector accounted for 96.08 percent of GDP in the quarter.
Lead Capital described the broader GDP trend as evidence of “positive growth momentum,” although it warned that several downside risks could moderate economic expansion in the second quarter of the year.
According to the report, seasonal factors including the peak dry season and the end of the harvesting cycle could weigh on agricultural productivity and consumer spending patterns in the months ahead.
“We expect the current positive growth momentum to continue for Q2’26. However overall growth may be muted by seasonal factors such as the effects of the dry season and the end of the harvesting period,” the firm stated.
At the same time, the investment house noted that geopolitical tensions in the Middle East could provide temporary support for Nigeria’s oil sector if elevated crude prices improve export earnings and fiscal revenues.
Lead Capital pointed specifically to rising tensions linked to the ongoing conflict involving the United States and Iran as a factor that could influence global oil market dynamics in the near term.
“Oil sector growth momentum is expected to pick up due to geopolitical tensions aggravated by the current war in the Middle East between the US and Iran,” the report added.
Despite the positive annual growth reading, quarter-on-quarter figures painted a far weaker picture of underlying economic momentum.
Nigeria’s GDP contracted by 19.87 percent in Q1 2026 compared with the previous quarter, representing one of the steepest quarterly declines on record.
Lead Capital noted that Nigeria’s GDP growth rate has averaged just 0.69 percent between 2010 and 2026, highlighting the country’s long-standing struggle to achieve stable and inclusive economic expansion despite periods of strong headline growth.
The report showed that the economy reached an all-time quarterly growth high of 13.11 percent in the third quarter of 2024 before falling to a record low of negative 19.87 percent in the first quarter of 2026 on a quarter-on-quarter basis.
