Nigeria's improving crude oil production and ongoing economic reforms may not be enough to sustain stronger economic growth if high borrowing costs and persistent inflation continue to weigh on businesses and households, the Organization of the Petroleum Exporting Countries (OPEC) has warned.
In its July 2026 Monthly Oil Market Report, OPEC said the country's near-term outlook remains positive, supported by higher oil production, macroeconomic reforms, infrastructure investment and improving private sector activity. However, it cautioned that elevated interest rates, inflationary pressures and the need to preserve exchange rate stability continue to pose significant risks to the economy.
The organisation noted that Nigeria's economy expanded by 3.9 percent year-on-year in the first quarter of 2026, compared with 4.0 percent recorded in the fourth quarter of 2025, indicating that economic growth has remained close to recent highs.
According to OPEC, increased crude oil production has strengthened government revenue, boosted foreign exchange inflows and improved the country's external buffers, while reform measures have contributed to greater macroeconomic stability.
Despite these gains, the organisation said inflation and borrowing costs remain key constraints that could undermine economic momentum.
"Overall, Nigeria's near-term outlook remains positive, supported by oil production, reform progress, infrastructure investment and stronger business activity, but high inflation, elevated borrowing costs and the need to preserve exchange rate stability remain important challenges," OPEC said.
The report highlighted the continued resilience of Nigeria's non-oil economy, identifying agriculture, manufacturing, construction, trade, finance and insurance as the principal drivers of growth.
It also cited the latest Stanbic IBTC Bank Nigeria Purchasing Managers' Index (PMI), which remained in expansion territory despite easing slightly to 53.4 in June from 54.1 in May. OPEC said the reading reflected continued increases in output, new orders and customer demand, although manufacturing activity moderated during the period.
The oil-producing group further stated that expanding domestic refining capacity, particularly improved fuel supply from Dangote Petroleum Refinery, is expected to strengthen energy availability and ease the country's dependence on imported petroleum products.
"At the same time, manufacturing activity was slightly softer. Higher domestic refining capacity, including improved fuel supply from the Dangote refinery, should continue to support energy availability and reduce some import-related pressures," the report stated.
On inflation, OPEC noted that consumer prices continued to edge higher, with the annual inflation rate rising to 15.9 percent in May from 15.7 percent in April. It attributed the increase largely to sustained food price pressures, which continue to weaken household purchasing power.
According to the report, the inflation outlook suggests monetary authorities are likely to maintain a cautious policy stance despite improvements in exchange rate stability and stronger oil-related foreign exchange earnings.
"Inflation rose further to 15.9 percent year-on-year in May, up from 15.7 percent year-on-year in April, with food prices still putting pressure on household purchasing power. This means that monetary policy is likely to remain cautious, despite improved exchange rate stability and stronger oil-related inflows," OPEC added.