OPEC raises alarm, says borrowing costs threaten Nigeria’s economic recovery

By Adebayo Obajemu

Nigeria’s economic recovery could come under renewed pressure from persistently high borrowing costs and inflation despite stronger crude oil production and ongoing economic reforms, the Organisation of the Petroleum Exporting Countries (OPEC) has warned.

In its July Monthly Oil Market Report, OPEC said Nigeria’s near-term economic outlook remains positive, supported by higher oil production, improving macroeconomic stability, stronger business activity and continued reform efforts. However, it cautioned that inflationary pressures and expensive credit continue to pose significant risks to sustained growth.

According to the report, Nigeria’s economy expanded by 3.9 per cent year-on-year in the first quarter of 2026, marginally below the 4.0 per cent recorded in the final quarter of 2025, indicating that growth has remained close to recent highs.

“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.
The organisation noted that the non-oil sector remained the principal driver of economic expansion, with agriculture, manufacturing, construction, trade, finance and insurance contributing significantly to growth. It added that improved crude oil production had strengthened government revenues, boosted foreign exchange inflows and reinforced the country’s external reserves.

“The non-oil economy continues to provide the main support, with activity driven by agriculture, manufacturing, construction, trade, and finance and insurance, while higher oil output has improved fiscal revenues, foreign-exchange inflows and external buffers. Survey indicators also point to continued near-term momentum,” the report added.

OPEC also pointed to private sector data showing continued expansion in business activity. It said the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) moderated slightly to 53.4 in June from 54.1 in May but remained above the 50-point threshold, indicating sustained growth in economic activity.

According to the report, stronger output, increased new orders and resilient consumer demand continued to support business expansion, although manufacturing activity softened slightly during the review period.
The oil producers’ group further noted that increased domestic refining capacity, particularly the improved fuel supply from the Dangote Refinery, is expected to strengthen energy availability and ease pressure on imports.

“Higher domestic refining capacity, including improved fuel supply from the Dangote refinery, should continue to support energy availability and reduce some import-related pressures,” OPEC said.

Despite the positive outlook, the organisation expressed concern over rising consumer prices, noting that Nigeria’s inflation rate increased to 15.9 per cent in May from 15.7 per cent in April as food prices continued to weaken household purchasing power.
“Inflation rose further to 15.9 per cent year-on-year in May, up from 15.7 per cent 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,” the report stated.