The Centre for the Promotion of Private Enterprise (CPPE) has projected relative stability for the Naira exchange rate in the second quarter of the year, supported by improved foreign reserves and liquidity, but cautioned that volatility risks remain.
In its Q1 2026 Economic Review and Q2 Outlook: Macro Stability Gains Amid Persistent Cost Pressures and Rising Geopolitical Risks report released on Sunday, the think-tank’s chief executive, Mr Muda Yusuf, said exchange rate conditions also improved significantly as the Naira, which experienced substantial volatility during the reform transition period, stabilised within a relatively narrow band of about N1,340–N1,430 per Dollar in the official market during Q1 2026.
“This stability has helped to moderate imported inflation and restore a measure of business confidence. External reserves strengthened considerably, rising above $50 billion in early 2026,” he stated.
The group said that the Nigerian economy in the first quarter of 2026 reflected a blend of improving macroeconomic stability and persistent structural constraints.
It said that proof of a more stable macroeconomic environment is increasingly evident, underpinned by the cumulative gains from foreign exchange reforms, a sustained period of monetary tightening, and the gradual normalisation of key economic indicators.
However, it noted that these improvements continue to coexist with significant headwinds, adding that the country’s economic growth will remain positive in the next three months, but the pace of expansion may slow due to mounting downside risk
The report also warned of a growing risk of stagflation, as persistent cost pressures combine with fragile growth conditions. It added that rising political activities ahead of the 2027 general elections could weaken reform momentum and distract from economic management.
The CPPE noted that rising global crude oil prices, triggered by the ongoing Middle East conflict, pose a major threat to Nigeria’s fragile disinflation process. While higher oil prices could boost export earnings and government revenue, the think tank stressed that the domestic impact would be adverse.
“The cost pass-through effect poses a significant threat to the fragile disinflation process, potentially reversing recent gains in price stability, weakening real incomes, and further exacerbating the cost-of-living pressures facing households and businesses,” the organisation said.
Highlighting monetary policy concerns, CPPE said the current inflationary trend is largely driven by structural and cost-related factors rather than excess demand, observing that, “Additional monetary tightening would have limited effectiveness in addressing the underlying drivers of inflation, while potentially exacerbating constraints on investment, credit expansion, and overall economic growth.”
The CPPE further raised concerns over the implementation of the proposed N68 trillion 2026 budget, citing weak revenue performance, delays in capital releases, and growing political influence on spending priorities.
“As political pressures intensify, there is a risk of weakening fiscal discipline, with greater emphasis on recurrent and politically expedient spending,” the group stated, advising businesses to shift focus towards resilience and efficiency, urging firms to prioritise cost containment, adopt alternative energy sources, and strengthen foreign exchange risk management strategies.
It also called on policymakers to take urgent steps to safeguard economic stability and protect vulnerable groups.
“Policy priorities should therefore focus on consolidating macroeconomic stability, addressing structural bottlenecks, and implementing targeted measures to protect vulnerable populations,” it noted.
The CPPE concluded that while macroeconomic stability gains recorded in the first quarter of 2026 are notable, the outlook for the second quarter remains cautiously positive but increasingly uncertain due to geopolitical tensions, fiscal risks, and domestic political dynamics.