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LAGOS – Nigeria’s economy has been projected to record stronger performance in the second half of 2026 with higher economic growth, a relatively stable naira and a cautious monetary policy stance despite persistent inflationary pressures and global geopolitical uncertainties.
In its H2 2026 Economic Outlook titled, ‘Resilience in a Fragile External Environment’, analysts at Quest Merchant Bank Research team said Nigeria’s macroeconomic fundamentals are expected to remain resilient, supported by stronger activity in key sectors, improved foreign exchange inflows and continued policy discipline.
According to the bank’s Research Team, Nigeria’s Gross Domestic Product (GDP) is projected to grow by 4.3 percent in 2026, up from an estimated 4.0 percent in 2025, driven by sustained expansion in the services sector, gradual improvements in crude oil production and increased fiscal spending.
The analysts noted that the country’s solid first-quarter economic performance has reinforced confidence in the outlook for the rest of the year despite uncertainties in the global economy.
“The economy is expected to maintain its growth momentum through the second half of the year, supported by continued expansion across key sectors and improving macroeconomic conditions,” the report stated.
However, Quest Merchant Bank cautioned that inflation remains the biggest threat to the recovery, projecting headline inflation to close the year at 16.4 percent.
According to the report, renewed geopolitical tensions in the Middle East and the resulting increase in global energy prices are expected to exert fresh pressure on domestic prices through higher transportation and food costs.
The bank warned that while underlying inflationary pressures had begun to moderate earlier in the year, imported inflation arising from higher energy prices could slow the pace of disinflation and weaken household purchasing power.
Despite the inflation risks, the report expressed optimism over the outlook for the foreign exchange market, citing improved liquidity and sustained foreign capital inflows.
Quest Merchant Bank noted that the naira traded within a relatively stable band of N1,337 and N1,431 to the dollar during the first half of 2026, supported by resilient foreign portfolio investment inflows, increased foreign exchange supply from exporters and corporates, and reduced intervention by the Central Bank of Nigeria (CBN).
The analysts projected that the local currency would remain broadly stable within the N1,350 to N1,390 per dollar range through the end of the year. According to the report, continued offshore investor participation, stronger export receipts, the Federal Government’s planned Eurobond issuance and sustained accretion to external reserves are expected to provide further support for exchange rate stability.
On monetary policy, Quest Merchant Bank expects the Central Bank of Nigeria to maintain its cautious stance as it balances inflation control with the need to sustain economic growth.
The report noted that although the Monetary Policy Committee (MPC) briefly adopted an easing posture earlier in the year, renewed inflationary pressures linked to rising energy prices have prompted policymakers to remain vigilant.
Consequently, the bank expects the Monetary Policy Rate (MPR) to remain unchanged at 26.5 percent through the end of 2026.
However, it added that should inflation resume a sustained downward trajectory in the second half of the year, the CBN could consider modest interest rate cuts of between 50 and 100 basis points before year-end.
For investors, the research team recommended maintaining a short-to-medium duration strategy in the fixed income market, arguing that elevated yields continue to present attractive opportunities while positioning investors to benefit from any future decline in interest rates.
Overall, Quest Merchant Bank maintained that although Nigeria faces external risks from geopolitical tensions, volatile energy prices and inflation, the economy remains on course for stronger growth in 2026, supported by resilient foreign exchange inflows, improving oil production, expanding services sector activity and prudent macroeconomic management.
