July 14, 2026/CSL Report
Our H2 2026 outlook remains constructive despite heightened geopolitical uncertainty and a more challenging global macroeconomic environment. While the escalation of tensions in the Middle East has temporarily disrupted the global disinflation process and increased energy prices, we believe Nigeria is relatively well positioned to benefit from higher crude oil prices, stronger external balances, and improving macroeconomic fundamentals. Against this backdrop, we maintain a positive medium-term outlook for the Nigerian economy and domestic financial markets.
Global growth is expected to moderate to around 3.0% in 2026, as the adverse spillover effects of tensions in the Middle East continue to weigh on the global economic outlook. Although diplomatic engagement between the United States and Iran initially helped ease oil prices, uncertainty remains elevated following renewed military airstrikes. Consequently, crude oil prices are expected to remain above pre-conflict levels, averaging approximately US$85 per barrel over the course of the year.
For Nigeria, this higher oil price environment represents a meaningful macroeconomic tailwind. We have consequently revised upward our external sector outlook, with the current account surplus projected to reach US$21.5 billion (5.8% of GDP), supported by stronger hydrocarbon exports, resilient remittance inflows and declining refined petroleum imports following the continued ramp-up of domestic refining capacity. These favourable balance of payments dynamics are expected to lift gross external reserves above US$53 billion, providing the Central Bank of Nigeria (CBN) with sufficient buffers to preserve exchange rate stability. Accordingly, we expect the Naira to trade broadly within the ₦1,350–₦1,370/US$ range during H2 2026.
Domestic macroeconomic conditions remain supportive. We project real GDP growth of 4.2% in 2026, reflecting broad-based expansion across both oil and non-oil sectors. Services, led by ICT, remain the primary engine of growth, while manufacturing and agriculture continue to benefit from improved macroeconomic stability and government support programmes. Inflation is expected to average 16.2%, as easing domestic price pressures gradually offset temporary energy-related cost shocks. While inflation risks remain skewed to the upside, particularly from food supply disruptions and renewed geopolitical tensions, the underlying disinflation trend remains intact. Consequently, we expect the CBN to maintain its current restrictive monetary policy stance in the near term before cautiously considering policy easing later in the year, conditional on continued inflation moderation and exchange rate stability.
Fiscal conditions are expected to improve modestly but remain constrained by ambitious expenditure plans and persistent revenue shortfalls. We estimate fiscal revenue at approximately ₦28.8 trillion, resulting in a wider fiscal deficit of about ₦26.7 trillion (5.3% of GDP) and continued elevated government borrowing requirements. Against this backdrop, domestic fixed income yields are expected to remain relatively high throughout H2 2026 as sizeable sovereign issuance coincides with a cautious monetary policy environment. We therefore continue to recommend positioning at the short to medium-end of the yield curve.
Nigeria’s equity market ranked among the world’s best-performing equity markets in H1 2026, with the NGX All-Share Index advancing 47.4%, significantly outperforming frontier and emerging markets peers. The rally was underpinned by robust corporate earnings, improving foreign exchange stability, sustained domestic institutional participation and renewed investor confidence in macroeconomic reforms. Despite this strong appreciation, market valuations remain attractive relative to regional and global peers, suggesting further upside for fundamentally strong companies.
Looking ahead, we remain constructive on Nigerian equities. Continued earnings resilience, stable macroeconomic conditions, the potential listing of Dangote Refinery, ongoing capital market reforms and eventual progress towards Nigeria’s reclassification into the FTSE Frontier Market Index represent important catalysts capable of supporting further market expansion. While geopolitical developments, inflation dynamics, election-related uncertainties and global financial conditions remain key downside risks, we believe these are more than offset by Nigeria’s improving economic fundamentals and compelling valuation profile.
Accordingly, we revise our base-case forecast for the NGX All-Share Index to a 45.2% full-year return, with a bull-case scenario of 64.7% should macroeconomic conditions improve further and foreign investor participation recover. Our preferred investment themes remain concentrated in high- quality financial institutions, telecommunications, industrial goods, upstream energy and selected consumer companies, where resilient earnings growth, strong balance sheets and attractive valuations continue to provide superior risk-adjusted return opportunities. Within our coverage universe, we maintain BUY recommendations on UBA, Access Bank, Zenith Bank, Guaranty Trust Bank, HBM Nigeria Plc (HBMNG), Dangote Cement, UAC of Nigeria (UACN), Dangote Sugar, Cadbury Nigeria, MTN Nigeria, and Airtel Africa.