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By Adewale Sanyaolu
Despite improved crude oil production, stronger government revenues and ongoing economic reforms, the Organisation of the Petroleum Exporting Countries (OPEC) has warned that Nigeria’s economic recovery could face renewed headwinds from persistently high interest rates and inflation.
In its July Monthly Oil Market Report, OPEC said while Nigeria’s economic outlook remains encouraging in the near term, sustained growth would depend on the country’s ability to rein in inflation, reduce borrowing costs and maintain exchange rate stability.
The oil producers’ group noted that Nigeria’s Gross Domestic Product (GDP) grew by 3.9 per cent year-on-year in the first quarter of 2026, only slightly below the 4.0 per cent recorded in the last quarter of 2025, indicating that the economy has continued to expand at one of its strongest rates in recent years.
According to OPEC, higher crude oil production has strengthened public finances by boosting government revenues, increasing foreign exchange earnings and improving the country’s external reserves.
The report also noted that the non-oil sector remained the major driver of economic growth, with agriculture, manufacturing, construction, trade, finance and insurance recording solid performance.
“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 stated.
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The organisation said business activity remained resilient despite the challenging macroeconomic environment. It cited the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI), which stood at 53.4 in June, down slightly from 54.1 in May but comfortably above the 50-point benchmark that signals expansion.
OPEC said stronger production levels, increased new orders and resilient consumer demand continued to support business growth, although manufacturing activity moderated slightly during the month under review.
The report also highlighted the growing impact of domestic refining on the economy, noting that increased local refining capacity, particularly from the Dangote Refinery, is expected to improve fuel availability and reduce Nigeria’s dependence on imported petroleum products.
According to OPEC, improved domestic fuel supply should help ease pressure on foreign exchange demand associated with fuel imports while enhancing energy security.
However, the organisation warned that rising consumer prices remain a major concern. It noted that Nigeria’s inflation rate rose to 15.9 per cent in May from 15.7 per cent in April, driven largely by higher food prices, which continue to erode household purchasing power.
The report said the persistence of inflation would likely compel the Central Bank of Nigeria (CBN) to maintain a tight monetary policy stance, keeping borrowing costs elevated despite improvements in exchange rate stability and stronger oil-related foreign exchange inflows.
OPEC maintained that while rising oil production, economic reforms, infrastructure investments and stronger private sector activity have positioned Nigeria for continued growth, tackling inflation and reducing the cost of credit remain critical to sustaining the country’s economic recovery.
