Investment firm CardinalStone has revised its forecast for Nigeria’s economic growth in 2026 to 4.2%, a reduction from its earlier projection of 4.4%. This adjustment is detailed in the firm’s report, “2026 Mid-Year Economic Outlook: Steady Hands on Shifting Grounds,” and is attributed to weaker-than-expected performance in key sectors, coupled with the ongoing impact of elevated inflation and interest rates.
The downward revision primarily reflects disappointing first-quarter performance in 2026 within the services sector, particularly trade and real estate. These sectors were significantly affected by high borrowing costs and persistent inflationary pressures.
CardinalStone noted that while Nigeria’s macroeconomic fundamentals remain relatively strong, the economy faces risks from external shocks and the slow transmission of economic gains to households. Despite recent improvements in macroeconomic indicators, stronger output growth has yet to translate into significant gains in jobs and household incomes.
The report highlighted an employment elasticity of 0.74 and labour productivity of just $0.94 per hour, underscoring the lag between output growth and improvements in employment and income.
Inflation and Monetary Policy Stance
CardinalStone anticipates a moderation in inflationary pressures during the second half of 2026, projecting an average month-on-month inflation rate of 1.1%, down from 1.5% in the first half of the year. This expected moderation is supported by easing global geopolitical tensions and the Federal Government’s decision to reduce import duties on rice and crude palm oil.
However, the firm warned that a low-base effect would keep annual inflation elevated, projecting average year-on-year inflation of 16.3% in the second half of 2026, compared with 15.5% in the first half.
The Central Bank of Nigeria (CBN) is expected to maintain its aggressive liquidity-tightening strategy and current monetary policy stance through the 2027 general elections. This suggests a delay in any meaningful easing cycle until after the elections.
CardinalStone forecasts cumulative interest rate cuts of between 500 and 700 basis points between 2027 and 2028. The CBN has already withdrawn an estimated N59.3 trillion from the financial system since January 2026, contributing to a sharp slowdown in money supply growth.
Broad money supply (M3) expanded by just 8.4% year-on-year in May 2026, significantly below the five-year average of 28%. CardinalStone noted that the current pace of money supply growth is slightly below its estimated optimal level of 8.6%, which it believes is consistent with supporting economic growth without reigniting inflation.
Oil Sector and External Balances
Despite oil prices averaging $101.89 per barrel between March and May 2026 due to geopolitical tensions, CardinalStone estimates that Nigeria’s fiscal gains have been constrained by lower-than-budgeted crude oil production. The government’s oil revenue windfall was estimated at N256 billion, as average production of 1.60 million barrels per day fell short of the budget benchmark of 1.84 million barrels per day.
For the full year, crude oil production is projected to average 1.67 million barrels per day, slightly higher than the 1.64 million barrels per day recorded in 2025, supported by improved security conditions and additional export volumes.
CardinalStone maintained a positive outlook for Nigeria’s external sector, noting that the naira has largely traded within its projected range of N1,350 to N1,450 per dollar. The firm reported a current account surplus of approximately $5 billion in the first quarter of 2026 and expects the surplus to reach $22.7 billion for the full year, equivalent to 5.9% of GDP. Improvements in fiscal stability, external balances, and monetary policy credibility have strengthened the outlook.
