PwC projects 4.2% H2 growth for Nigeria, warns food and energy costs may undermine gains

PwC projected Nigeria’s real GDP growth at 4.2% in the second half of 2026, according to its Nigeria Economic Outlook 2026 report released this month. The forecast was based on a sustained rebound in crude oil production and gradual expansion in non-oil sectors, but PwC warned that rising food and energy costs could undermine these gains.

The forecast assumes a relatively stable macroeconomic environment, including contained fiscal leakages, improved foreign exchange availability, and ongoing reform policies, PwC said.

PwC’s projection of 4.2% real GDP growth for Nigeria in the second half of 2026 is anchored on a sustained rebound in crude oil production and gradual expansion in non-oil sectors, particularly services and trade, according to the firm’s Nigeria Economic Outlook 2026 report released this month.

The report, titled “Unlocking Nigeria’s Reform Dividend: From Macroeconomic Stabilisation to Inclusive Growth,” links higher crude oil production to improved security in oil-producing areas and reduced crude theft as critical factors supporting growth. PwC’s analysis includes scenarios benchmarked around an oil price of roughly $55 per barrel in 2026, which would sustain government revenue and foreign exchange inflows. In addition to oil, the firm highlighted stronger performance in dominant services sectors such as telecommunications, financial services, and trade as key non-oil growth drivers.

PwC also pointed to ongoing structural and macroeconomic reforms, including foreign exchange market adjustments, removal of fuel subsidies, and tighter monetary policies aimed at stabilizing inflation and the exchange rate, as essential to supporting the projected growth. Improved investor confidence, better fiscal management, and enhanced capital market activities are expected to bolster investment and output during the second half of 2026, the report said.

Despite the broadly positive outlook, PwC warned that persistently high food prices could significantly erode welfare gains from higher growth and recent stabilization efforts. The firm noted that the cost of a healthy diet in Nigeria rose to about ₦1,589 per adult per day in April 2026, up approximately 4.7% from ₦1,518 a year earlier, underscoring ongoing challenges in food access. Elevated food inflation is linked to low agricultural productivity, poor logistics, and insecurity in key food-producing regions, which disrupt supply chains and push up prices.

Food inflation accounts for around half of Nigeria’s overall inflation rate, magnifying its impact on real incomes and poverty levels, PwC said. Without targeted interventions in agriculture, storage, and distribution, the firm cautioned that high food costs would continue to undermine household welfare and dampen the transmission of GDP growth into inclusive, broad-based gains.

Energy and transport costs were identified as a key risk to growth in the report. PwC flagged high prices for diesel, petrol, kerosene, and liquefied petroleum gas as factors that could offset fiscal and foreign exchange gains from higher crude oil prices. Since the removal of fuel subsidies, domestic pump prices have tracked global oil prices more closely, transmitting global energy shocks into local transport, logistics, and food distribution costs. This dynamic could increase imported inflation, squeeze household purchasing power, and weaken consumer demand during the second half of 2026.

The firm emphasized that unless domestic energy supply and distribution improve, persistent power outages and high fuel prices will continue to raise production costs for businesses and constrain growth. PwC called for policies to expand local energy supply, improve grid reliability, and rationalize fuel pricing, warning that unmanaged energy-price pressures could completely undermine recent macroeconomic stabilization gains.

PwC expects headline inflation to moderate gradually into 2026, supported by tight monetary policy, foreign exchange stabilization efforts, and improved agricultural output, but noted the presence of “upside risks.” Residual price shocks from food and energy could erode real incomes and weaken the poverty impact of the projected 4.2% growth in the second half of the year. Earlier PwC projections for 2024 indicated inflation could hover near 29–30%, with food, utilities, and transport inflation running even higher, severely compressing disposable incomes.

The report underscored that macroeconomic stabilization—covering exchange rates, inflation, and fiscal balances—is necessary but not sufficient to ensure inclusive growth, given the persistent pressures from high food and energy prices. PwC outlined baseline, downside, and upside scenarios for Nigeria’s 2026 growth, with outcomes ranging roughly from below 3% to above 4.5%, depending on oil output, exchange-rate stability, and inflation trajectory. The 4.2% second-half projection represents a baseline scenario assuming continued reform implementation, improved oil production, and gradual easing of inflationary pressures.

Key risks that could lower growth below the baseline include insecurity, pricing pressures, global energy shocks, geopolitical tensions, and pre-election fiscal and spending pressures ahead of the 2027 electoral cycle, which could spur demand-side price increases and complicate inflation management. PwC stressed that policy inconsistency, weak reform implementation, or deterioration in the security environment could quickly reverse stabilization gains and drag growth below the projected level.

To safeguard the growth forecast, PwC urged targeted supply-side interventions in agriculture, including improved access to inputs, irrigation, extension services, and storage, as well as strengthening agricultural protection mechanisms and rural security in key food-producing regions. For energy-related risks, the firm recommended measures to expand domestic energy supply, enhance grid infrastructure, and improve fuel distribution to lower production and transport costs. PwC also advised complementing macroeconomic stabilization with social and targeted relief measures for vulnerable households facing high food and energy costs to ensure more inclusive growth.

The reports emphasized that locking in the 4.2% growth dividend for the second half of 2026 requires coherent reform implementation, disciplined fiscal management, and a coordinated strategy to tackle the structural drivers of high food and energy prices.